Toyota has little wiggle room when it comes to boosting sales with incentives. The automaker lifted its spend on such deals as 0% financing and customer cash considerably, starting in March. While Toyota spent a little less in November versus October, it is still spending much more than it did last year, while others are spending less than they had been.
According to Edmunds.com, average automotive manufacturer incentive in the U.S. was $2,470 per vehicle last month, up 1.3% from the month before. But incentive spend -- which has traditionally been dominated by the domestic automakers -- is actually down $255 or 9.4% from last year, as consumers head back to showrooms and GM, Ford, Chrysler and Hyundai and Kia roll out new vehicles.
Worldwide, automakers spent $2.14 billion on incentives, down 7.4% from October. Chrysler, Ford and General Motors spent an aggregate of $1.3 billion, or 59.3% of the total; Japanese manufacturers spent $570 million, or 26.7%; European manufacturers spent $193 million, or 9%; and Korean manufacturers spent $107 million, or 5%, according to Edmunds.
Although it typically spends more than import brands to lure consumers in with price deals, GM had the biggest cut in incentive spend versus last year among the top six automakers, according to Edmunds.com, which said the automaker reduced spend by 23% from last year.
Toyota and Honda, at the other end of the spectrum, increased incentives by 10% each last month, the biggest increases among the top automakers. Jessica Caldwell, Edmunds.com director of auto industry analysis, says Toyota has historically spent between $1,300 and $1,600 on incentives per vehicle, but spent $2,066 in October on incentives, and $1,948 last month versus $1,777 in November last year.
Last month, Ford spent $3,206 per vehicle on average; GM spent $3,345 and continues to offer 0% for 60 months on several vehicles and customer cash. Chrysler is spending $2,975 on average, while Honda spent $1,422 last month versus $1,296 last year, according to the firm.
Caldwell argues that it won't help much for Toyota to increase spend even more. In November, the Torrance, Calif. automaker posted a 7.3% decline in sales among its three brands, and a 7.6% decline for the Toyota brand.
"The Toyotathon sales event last month didn't do a lot for them," says Caldwell. "In years past, tactical financing deals and clearance sales would bring in waves of people. But since they have been offering deals since March, it has become less effective. They are already offering competitive leases, 0% APR for 15 months and customer cash, so there's not a lot more they can do. They are losing the edge from the days when people would just buy a Toyota, no matter. There's a lot more hesitation."
That hesitation comes from Toyota's own recalls -- which, necessary as they are, have the propensity to raise doubts among consumers about product reliability. "Before, there was never a question in peoples' minds. Now people are asking whether Toyotas come with 100,000-mile warranties," she says.
It doesn't help matters that competitive brands are launching new vehicles seemingly en masse, while Toyota's most recent products are Avalon, competing in the large-car segment, and Sienna in minivans. Meanwhile Ford is launching the new Focus, Kia the Optima, GM the new Chevy Cruze, etc. Says Caldwell: "This is a very bad time for Toyota to be weak."