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....I think there is a lot of truth in what the foreign manufacturers say. Steep incentives or cheap lease deals boost depreciation, and for the captive financing companies that already have leased cars out there, the increased depreciation makes all the leases that haven't expires bad deals for them (because the lease-end purchase price is higher than retail value). Which makes the captive financing companies lose money, and since they're owned by the manufacturer, the manufacturer loses money.
I also think that profits should be poured back into the product, for more refinement, better quality materials, new technology, etc. Honda and Toyota have good, functional hybrids out there, while the Big Two have zippy and DC is relying on the D part for advanced technology.
Bad resale kills your customer base. What Chevy owner is going to buy another Chevy Impala at $20K when three years later it will be worth $8K? Cars are bad investments regardless of the brand, but consumers do pay attention to minimizing the depreciation hit.
Also, being the value leader isn't exactly great for your brand image. Walmart has lots of cool stuff, but they sure have a rednecky, cheap image -- why would GM want to make Saab, one of two luxury brands it owns, into a value leader? It cheapens the car;s image. BMW has an aura about it, whether supported by facts or not, that is invaluable to its success. People buy BMW *because* it's BMW. RThey happen to also make terrific (if uglier and uglier) performance cars as well, but it's the image that gets people there. You can't go from being a value leader to being a prestige brand in the kind of time Saab has left on its ticker.
Then again, companies like Saab need to hit the critical mass where sales are good enough that they can start dropping the incentives, and right now, in this competitive a market, the only way they can do that is through value, incentives, getting people into the showroom to drive cars and having them drive out in a new car.
Catch 22. Value pricing is bad for the brand and the image, but you need to value price to boost sales to get to the point where your brand and image can get out to more people.
posted by 208.200.185...
, Tue, 27 May 2003 11:33:32, Tue, 27 May 2003 12:44:21
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