P&A Providers & Administrators
MenuMENU
SearchSEARCH

Incentives on Autos Wither as Demand Rises, Supply Falls

May 16, 2011
4 min to read


Vehicle inventories are tight, especially for hot-selling fuel-efficient models, and prices are climbing, reported The Detroit News.


Two main reasons: volatility in gas prices and continuing fallout from the March 11 earthquake and tsunami in Japan, which has forced some automakers to cut production.

Ad Loading...


"It's going to be a collision this summer between deal-seekers and higher prices," said Jeremy Anwyl, CEO of Edmunds.com, a Santa Monica, Calif.-based automotive research website.


Discounts and sales incentives last month were at their lowest in the United States in more than five years — about $2,320 per vehicle, a $370 reduction over April 2010, according to analyst reports. Some dealers are holding off on yearly sales events until inventories improve.


With demand for cars and trucks continuing to climb, auto retailers are feeling little pressure to heap on discounts typical of the summer to make room for newer inventory. On top of that, automakers are paying more for raw materials, passing the cost on to buyers in price increases.


Buyers also will have fewer vehicles from which to pick, and may have to compromise on color and other features.


In some instances, they are paying hundreds of dollars more for top-selling fuel-efficient models than they were three months ago.

Ad Loading...


According to Edmunds.com, the average price for a Honda Civic has jumped $1,615 from February to May; on the Toyota Corolla, prices were up $2,147 over the same period.


"The deals aren't going to be as favorable as in years past," said Jeff Schuster, director of global forecasting at California-based J.D. Power and Associates. "And they're going to be more difficult to find."


South Korean automakers Hyundai Motor Co. and Kia Motors Corp. are having trouble keeping cars in stock, due the run-up in gas prices and high demand for their vehicles, said Doug Fox, owner of Ann Arbor Automotive, a dealer of Hyundai, Acura, Nissan and other foreign brands.


General Motors Co. is tight on the Chevrolet Cruze compact and Chevy Equinox and GMC Terrain crossovers.


Ford Motor Co. is running low on hot-selling cars such as the Fiesta, Focus and Explorer.

Ad Loading...


"We have a very fresh lineup, a lot of hot-selling products," said Ford sales analyst George Pipas. "A lot of summer dealers are driven by excess inventory. Right now, there is not a catalyst for a summer blowout sale."


Ford increased prices twice this year — the latest, in April, averaged $117 per vehicle — and reduced incentive spending last month by $580 per vehicle compared to April 2010, according to research firm AutoData Corp.


GM and Chrysler Group LLC also have pulled back on discounts seeking to improve profitability, and raised prices on certain vehicles to cover higher commodity costs — plans put in motion independent of the disasters in Japan, company officials say.


Chrysler pared its discounts by an average $858 last month compared to April 2010, according to AutoData Corp. GM's average incentives were down $272 over April last year, but its discount spending — an average $3,068 per vehicle — is the highest of the major automakers.


The Japanese automakers, in particular, are suffering from a scarcity of certain models due to parts shortages in Japan, and their dealers are boosting prices — some say too steeply. But the perception stock could soon run out also has kept some car buyers away from Japanese showrooms, and inventories aren't being depleted as fast as some expected, said Anwyl.

Ad Loading...


"Consumers are reading headlines and assuming they don't have any cars," he added.


The run-up in prices is likely to be short-lived, Anwyl said. Japanese production levels are recovering, and dealers will realize soon they have enough stock.


Toyota Motor Corp., Japan's largest automaker, said last week it would tack new incentives onto core U.S. models, including the Camry, Corolla and Avalon. Toyota officials said production at its North American plants is rebounding faster than expected.


Nissan Motor Co. will have its annual spring sales event this year, but has pushed it back, to June, when it will have had time to replenish inventories, said Fox, of Ann Arbor Automotive.


Nor have deals completely vanished. For bargain-hunters, dealers are offering cash rebates and low-interest financing. But they're generally on fewer models, and less sought after ones.

Ad Loading...


"We still feel we need to be aggressive in the marketplace," said Richard Genthe, owner of Dick Genthe Chevrolet in Southgate.


The dealership is offering $1,500 in consumer cash on the 2011 Aveo, which Chevy is retiring from the lineup, and $2,500 on the 2011 Impala, according to its website.

More Industry

Kia Niro SUV in gold color parked outdoors
Industryby Hannah MitchellSeptember 1, 2026

Kia Closes Out Summer With a Bang

Its U.S. subsidiary broke multiple records in August, in part due to a surge of demand for hybrids models.

Read More →
Outside of Auto Park Ford dealership
Industryby Lauren LawrenceSeptember 1, 2026

Indiana Dealership Changes Hands

A 30-year-old Ford dealership in Indiana has a new owner and will soon be undergoing renovations to meet manufacturer requirements.

Read More →
Three men standing in front of two classic cars handing off gift.
Industryby Hannah MitchellAugust 25, 2026

Texas Dealership No Longer in the Family

The Ford store, a longtime cornerstone of the Houston market, is now part of one of the fastest-growing U.S. auto groups.

Read More →
Ad Loading...
Outside of modern car dealership “Genesis of San Bruno
Industryby Lauren LawrenceAugust 25, 2026

Genesis Grows California Presence

The Cardinale Automotive Group opened its third Genesis rooftop in the Golden State, Genesis of San Bruno, a stand-alone dealership serving the San Francisco Bay Area.

Read More →
Red Honda Civic hybrid sedan on two lane road with green hills in background
Industryby Hannah MitchellAugust 21, 2026

August Auto Sales a Mixed Bag

An early forecast shows strong business despite consumer hurdles, and hybrids are a big piece of their affordability coping strategy.

Read More →
EV charger inserted into dark-colored car port
Industryby Hannah MitchellAugust 18, 2026

EV Market Humming Along

July sales show steady growth as the segment stabilizes from last year’s artificial surge following pullback of federal support.

Read More →
Ad Loading...
car in background with hand giving a thumbs up in front
Industryby Lauren LawrenceAugust 14, 2026

Auto Loan Delinquency Rates Stabilize

Auto loans are a main driver of nonmortgage consumer debt, but delinquency rates stabilized in the second quarter across all credit risk tiers.

Read More →
blue sky, yellow and orange rollercoaster with riders going up an incline
Industryby Lauren LawrenceAugust 12, 2026

EV Sales Recover in Q2

The EV sales roller coaster continues as numbers show improvement, but industry experts predict a year-over-year third-quarter decline and fourth-quarter jump.

Read More →
Photo of blue Toyota Prius parked next to body of water with city skyline in background
Industryby Hannah MitchellAugust 5, 2026

The Cheapest Hybrids to Fuel

The powertrain is increasing in popularity, in no small part due to its fuel economy. A new report lists the most efficient hybrids on the market.

Read More →
Ad Loading...
white SUV parked in front of a body of water with a gray sky background
Industryby Lauren LawrenceAugust 5, 2026

Hybrids and SUVs Gaining Ground

The most recent Kelley Blue Book Brand Watch found that only two nonluxury brands increased in shopper consideration, buoyed by their hybrid and SUV offerings.

Read More →