Price discounting is an issue that is gaining increasing prominence, and because of this increasing prominence and its implications regarding profitability, price discounting and increasing price pressures have been featured in many of this site’s pricing posts.
Yesterday (February 12, 2014) the Wall Street Journal Journal published an article titled “Rising Auto Inventories Prompt a Bet On Pricing.” The article discusses various issues regarding auto industry pricing and incentives, given that auto inventory levels have recently swelled.
A couple of excerpts from this Wall Street Journal article:
Detroit’s big auto makers are trying to sweeten discounts to clear unsold vehicles from dealer lots, but not so much to start a profit-killing price war.
It is a balancing act making Wall Street investors nervous. Analysts aren’t sure whether the moves to counter a January slowdown in sales—particularly new discounts on large pickup trucks—will undermine the rising prices that have helped General Motors Co., Ford Motor Co. and Chrysler Group LLC rebuild profits during the past three years.
Overall, GM reported 114 days’ worth of unsold vehicles at the start of February meaning it would take the auto maker close to four months before it ran out of vehicles if it stopped production today. Ford had 107 days worth of unsold vehicles while Chrysler had 105 days. U.S. auto makers generally like to keep 60 days’ worth of inventory on hand.
The article also features quotes from various industry executives, and various statistics such as how long it is taking various automakers to sell a vehicle.
Auto industry price discounting was also discussed in the November 6, 2013 post titled “Price Discounting Issues.” In that post, various issues regarding price discounting were discussed.
StratX, LLC offers the above commentary for informational purposes only, and does not necessarily agree with all (or any) of the views expressed by these outside parties.
ProfitabilityIssues.com is published by StratX, LLC (stratxllc.com). StratX, LLC is a management consulting firm and strategic advisory that focuses on the analysis of current and future business conditions, and given these conditions, offers corporations and businesses advice, strategies, and actionable methods on how to optimally increase revenues and profitability.