Thanksgiving is still several weeks away, but automakers are already ramping up their Black Friday sales events—Black Friday refers to the day after Thanksgiving, one of the biggest days of the year for retailers as holiday shopping kicks off. Car makers’ participation in the frenzy is an extension of the recent trend toward holiday or year-end sales and it seems as if these heavily incentivized programs now stretch from Labor Day to New Year’s Day.
General Motors kicked off its Black Friday programs with 20-percent off MSRP savings at Chevrolet, Buick and GMC. Cadillac has its own holiday program modeled after efforts from its more direct competitors at Audi, Lexus and Mercedes-Benz. Some of the discounts are significant. Chevrolet is offering as much as $10,000 in combined incentives (the $4,630 MSRP discount, $3,500 bonus cash, a $1,500 cash allowance and a $500 option package discount) on the 2017 Tahoe. Buick is offering as much as $8,000 on 2016 LaCrosse models, $6,500 on Regal and $5,300 on Verano.
Fiat Chrysler Automobiles calls its sale a Bonus Tag event, but also makes reference to Black Friday in its promotion. Like GM, it is offering 20-percent discounts off MSRP plus bonus cash on select Chrysler and Dodge models. Dodge Charger is eligible for up to $8,000 in discounts, while the Dodge Journey crossover has a $6,400 price break.
Ford also announced its Black Friday sales event with a straight $1,000 discount above and beyond current national and local incentives on select models. Word also came out that the company, as a result of labor negotiations in Canada, may be halting production of the Ford Flex by 2020. That model is current being offered with a $2,000 rebate. The Ford Taurus has a $4,000 discount plus the $1,000 Black Friday cash, while the Expedition has a rebate of $6,500.
October sales drop
Trying to read the tea leaves in the latest sales figures is a daunting task. While year-over-year volume is down by nearly 6 percent, the Seasonally Adjusted Annual Rate of sales (SAAR) is one of the strongest for the calendar year. The reason for the former is that last October’s numbers were particularly strong, while in the latter case, it underscores the fact that sales have plateaued since early this year at a fairly high level. But that doesn’t mean that the market won’t see a correction by year’s end or that the current spate of incentives and sales programs are going to end—a good sign for those shoppers about to get into the new car market.
Only four makes managed to eke out gains in October: Subaru, Mitsubishi, Jaguar Land Rover and Hyundai-Kia. The rest of the industry was down across the board, even in the popular crossover, SUV and truck segments. Ford posted the largest decline, some 12 percent, which illuminates the reasoning behind the company’s recent move to temporarily idle some assembly plants to adjust its inventories.
Fiat Chrysler Automobiles sales were off about 10 percent, its biggest surprise was a 6.6 percent drop in Jeep, which has been the hottest division in the company. Even though its sales are down for the month, year-to-date, Jeep is up 10 percent. Volkswagen, still reeling from its diesel emission woes, saw its sales decline 19 percent during October. Mazda also suffered a double digit decline coming in 11 percent below its October 2015 numbers.
Overall, the decline in traditional cars continued, with sales down 17 percent, while sales of SUVs rose 2 percent. According to Kelley Blue Book analyst Tim Fleming, “Total share of the market for cars was just 36 percent, the lowest on record.”
Also: Kelley Blue Book Best Buy Awards of 2016
Fiat Chrysler’s new game plan
Part of Fiat Chrysler’s overall 12-percent drop in sales may be attributed to its new game plan to back off of fleet sales in an effort to concentrate more on higher-margin retail deals. During the month, the company’s deliveries to rental fleets dropped 23 percent. Part of that decline is also attributed to FCA’s decision to halt production of the compact Dodge Dart and midsize Chrysler 200 as it changes over the plants producing those vehicles to trucks and crossover SUVs. Both sedans have traditionally been rental fleet stalwarts.
“FCA has been on the higher side of rental fleet as a share of total sale, so I think it is a significant move given the flattening of real demand,” analyst Jeff Shuster from LMC Automotive told Automotive News. “It suggests that the unhealthy habits of chasing share and volume growth are not the path forward.” This also means that if FCA backs away from fleets, resale value of its products should improve if it is able to minimize steep discounts and trim volume. “The fleet release valve has been opened this year,” Shuster told the trade paper. “If you leave the fleet valve open too long, you can really do some damage” to resale value.
GM has been successful in trimming fleet deliveries and boosting its bottom line in the process. Even though its sales were down about 2 percent in October, most of the decline came from its decision to curtail daily rental fleet sales, which are down nearly 20 percent.
Also: Class of 2017 – New Cars Ready to Roll
Prices, incentives rise
If you’re wondering how manufacturers can be so generous with 20-percent discounts in their Black Friday offers, you need to look no further than rising average transaction prices, which continue to hit record highs. Kelley Blue Book estimates the average vehicle transaction price for October was $34,663, an increase of $783 or 2.3 percent over a year ago. However, the ATP for the month remained flat from September. “Transaction prices continue their upward trajectory in October,” said KBB analyst Tim Fleming, who added, “The Detroit automakers posted gains between 4 and 6 percent, as their strong portfolios of trucks and SUVs align extremely well with current consumer demand.”
As these prices rise, especially on trucks, there is more room to offer better incentives. “Despite the increases in transaction prices, incentive spending across the industry continues to climb as well, offsetting much of the transaction price gains,” Fleming observed. “With industry sales reaching a potential plateau, automakers should adjust production to better match demand, which should reduce the need for such high incentives.”
The rundown
Check out the This Week in Car Buying Podcast here.
Volkswagen continues to push forward with its North American product initiative by revealing is new, North American-sourced three-row SUV in the 2017 VW Atlas.
Getting sporty with it recently redesigned compact, Hyundai has launched the spirited 2017 Elantra Sport, which we sampled in this First Review.
Originally slated as a Scion, the 2018 Toyota C-HR, which rivals subcompact SUVs like the Honda HR-V, will make its U.S. debut at the Los Angeles Auto Show.
In the market for a new car? Explore these useful tips on how to get the best deal:
Kelley Blue Book’s Complete Guide to Incentives
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