The car business and football have a lot in common. You can get hurt in both very easily, both live and die by the success of their team, both are reliant on the talent of their team, and both are judged on their performance in four quarters of play. One big difference; the auto industry does not have overtime. At the end of the 4th quarter, which is December 31st, it is over.
The 4th quarter for the auto industry begins on October 1st, which is right around the corner. This has been such an unusual year with the earthquake and tsunami affecting sales of all automakers, but in particular Toyota, Honda, Nissan, and Subaru. The 4th quarter will be anything but normal this year as the imports will try their best to make up lost ground and salvage 2011.
Many industry observers and writers are predicting big consumer incentives for the 4th quarter of this year, and I agree with them. The question is, in what form will they come?
At this point, my guess is we will see a little bit of everything. Some will run some lease specials, others will do 0% financing, and yet other will throw cash rebates out there. We could see some new wrinkle too, that would not come as a surprise.
Now that the production of the popular Japanese vehicles is up and running again, cars will start to hit the dealers hard and fast. They will go from empty lots to overflowing lots in short order. Once those cars are on dealership lots, the factory has to figure out what they need to do to help the dealers move them out. If not, the days’ supply will go through the roof and it will back everything up, and the dealers will stop ordering.
This year, however, days’ supply won’t be the only driver of the incentives. We will see a panic of sorts as the automakers fight for sales records, sales supremacy, and to make sure that 2011 was a better year than 2010. No automaker likes to see headlines of sales being off, it gives people pause and makes them consider competitive brands.
As we speak, the marketing folks at every automaker who sells in the United States is formulating their 4th quarter plans for incentives. They will kick those plans around for countless hours, then once the plan is agreed on, it will go to the accounting folks where they will slice and dice it and send it back. Eventually, one person will make the call and the program will be communicated to the dealerships. There will be many huddles in the locker rooms of the auto industry.
Even with all the planning in the world, hours of meetings, and all the sessions where incentives are batted around, it can change quickly. For instance, if Toyota comes up with a blockbuster incentive that looks like it will work, Honda could quickly shift gears and change their plans overnight. I have seen this no less than 1000 times.
You can bet too, that Honda and Toyota will be keeping an eye on what Hyundai is doing, and don’t think for a minute that Detroit will sit back and idly stand by, they don’t want to go backwards either.
There is a battle brewing right now for who can gain ground in the 4th quarter of 2011 and I happen to think this is going to get bloody.
In the first few days of January 2012, as sales for 2011 are being tallied and the final score posted, there will be winners and losers in the auto industry. One thing is for sure, the consumers that take advantage of these big incentives are going to win.