Ireland's dealers and distributors are gearing up for the busiest two months of their year. If they cannot sell at least one-third of their new cars by the end of February 2005, they know will never regain the lost ground during the remainder of the year.
As preparations are finalised for this critical selling period, there is a significant difference in the way some of Ireland's car importers are striving to ensure they shift as many cars as possible. Heavy discounting on some new models to the market is already taking place. Discounts such as these are usually reserved to boost flagging mid-life sales, but are now being used to tempt buyers into of newly launched models.
Citroën is leading the way. Its new C4 comes to the market with some huge discounts, which should prove tempting for buyers in this extremely competitive sector dominated by the Toyota Corolla and Ford Focus. Citroën is offering fixed discounts across its range of cars, but it is the move by the Irish importer to slash up to 10 per cent off its new C4 that is proving most contentious.
Gallic Distributors, the Irish importer of Citroën vehicles, has worked hard to convince the French manufacturer that a discounted C4 was the best option for Ireland. "Our French colleagues were not over the moon about the idea," admitted Gallic's MD, Paul Cregan. The Irish importer says similar discount schemes it ran over the summer temporarily increased its market share to 3 per cent.
Other Irish distributors are also tempted by the short-term gains that discounting offers. Ford has opted to offer a deal on its new Focus, which was launched just last month, with €1,500 worth of extras for just €350. Eddie Murphy, managing director of Ford Ireland, said he wanted to get "cars out on the street", and make an instant impact.
Ford says that most of the 2,400 Focuses it expects to pre-register before the New Year will be these "first edition" models. This is the first time Ford has offered tangible savings on a model it has just launched on to the market and marks a significant shift from its traditional new model launch campaigns that involved the likes of free holidays.
Although cash incentives work, Fiat has announced that it is offering an extended warranty and roadside cover rather than simple cash incentives to models across its range, which includes the new Multipla launched earlier this week. Fiat has scrapped an offer it introduced last year, because it found that customers were opting for instant cash discounts rather than long-term mechanical warranties.
Fiat's 4+ scheme, which includes four years' AA cover and a manufacturer's warranty for the same period, is aimed at improving the brand's image as Michael Howe, Fiat Ireland managing director explained: "We wanted to confirm to customers that we are prepared to back our claims of top quality cars."
In the US, an incentives war has raged since 2001 and has caused serious financial problems for the volume manufacturers. It has also led to greater expectations of savings from showroom buyers.
Deals such as no-interest loans, no down payments and cash rebates have all been used to lure motorists into US showrooms, and have all cost manufacturers dearly. One analyst commented that American consumers can now reasonably expect to get at least 25 per cent off the price of a new car, without a down payment, and then borrowing the remaining 75 per cent with 0 per cent interest.
According to US industry analysts, Autodata Corp, the average discount on US cars is now $3,090 (€2,381), with the US-based manufacturers offering even better deals at an average discount of $4,088 (€3,150) per vehicle. As the incentives war in the US continues, GM has announced it will offer its American customers 0 per cent finance on their next two new vehicles purchased within 10 years.
But the US industry is reeling from years of discounting that have meant increased sales, but decreasing profits. GM's chairman and chief executive, Rick Wagoner, admitted to his shareholders recently that although cash incentives remain an effective tool for generating showroom traffic, they are also a major drag on profits.