Price War: Honda and Toyota Get Down and Dirty, helping to boost March auto sales

Price wars and discounting used to be the province of beleaguered companies from Detroit. Now Honda (HMC) and Toyota (TM) are down in the bargain mud, too — and helping to boost March auto sales.

Forecasts for annual U.S. auto sales for the month are around 12.5 million range for theSeasonally Adjusted Annual Rate. That’s a sharp improvement from a 10.8 million SAAR in January 2010 and 10.4 million in February.

“The shape of the U.S. SAAR over the rest of the year will largely depend on how long the industry’s pricing battle goes on,” saidBrian Johnson, auto industry analyst for Barclays Capital.

Toyota kicked off the discounting this month with offers of zero-percent loans, to boost demand in light of the unintended acceleration disaster. Honda responded with cheap, no-money-down lease deals.

Such steep discounts are unusual for the Japanese carmakers, because their cars have typically been in higher demand than U.S. brands. Last month, before the current round of price-cutting kicked in, Edmunds.com said Honda’s incentives averaged about $1,400, less than half the level of Chrysler, Ford and GM. Toyota incentives averaged about $1,800, according to the shopping and research web site.

Meanwhile, ChryslerFord (F) and General Motors are bending over backwards to cut production and try and reduce the need for deep discounts, especially since Chrysler and GM went bankrupt last year. The results have been mixed.

Edmunds.com CEO Jeremy Anwyl said in a written statement the Toyota deals are unlikely to last, because Toyota’s inventories of unsold cars aren’t that high. The Toyota deals are set to expire April 5.

“Although this SAAR sounds promising,”Anwyl concluded, “it’s too early to wave the flag and say that the economy has turned the corner.”

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