Back in March, the 2011 Nissan Altima put on one of the year's most surprising performances, selling 32,289 units and becoming the best-selling sedan in America for the first time ever. But a lot of folks discounted those results, primarily because the car itself was the recipient of some pretty notable discounts. That reasoning gained credibility last month, when falling incentives at the automaker coincided with the Altima coming back to earth and reaching 17,232 customers in April'”at which point it trailed cars like the Toyota Camry, Honda Accord, Honda Civic, Chevrolet Cruze, Chevrolet Malibu, Toyota Corolla, Hyundai Elantra, Hyundai Sonata, Ford Fusion, Chevrolet Impala and Ford Focus, along with the usual full-size pickups and smallish crossovers.
Other automakers also have seen discounts have the same sort of effect this year. GM kicked off 2011 with a program of "targeted" incentives that helped Chevy outsell Ford in January, and the Blue Oval later went the tit-for-tat route in March, outselling GM that month for the first time in about a year. Toyota also got into the incentives game in February, when its pricing policies helped the company to a 41.8 percent jump in sales over the same month in 2010. Unsurprisingly, when Toyota turned off the cash, customers were turned off as well, and the automaker reported a 5.7 percent drop in volume in March and a 1.3 percent slip in April.
These results are right in line with my expectations, as I've been on a soapbox about rising vehicle prices for a while now. The simple story is that as formerly mass-market brands like Ford and Chevrolet take their products upscale, the many buyers out there who are looking for affordably priced basic transportation are being squeezed out of the marketplace. The flipside of this is that these same buyers are particularly eager to jump on a nice deal from automakers, making incentives more effective at increasing volume than might normally be the case.
Incentives up as Inventories Slip?
On the face of it, the decisions seem counterintuitive at best. Yes, it now appears that both companies will be at something close to full production much earlier than originally expected. AN says Toyota will "regain nearly full production capacity over the next month," and that "Nissan's Japanese factories also will be back to near-full capacity in June, with North American factories following shortly after." Yet even if that's true, the party line had been that the two automakers (along with the rest of the Japanese companies) would see some big-time supply disruptions this month, causing inventories to fall and, following basic principles of supply and demand, prices to rise.
AN tells a different story, though, at least for Nissan, indicating that the automaker's decision to raise discounts is a response "to a rise in U.S. inventories." But how can that be, especially when you consider that, whether it was through incentives or not, Nissan had its best February ever this year, followed by a March that was its best month?
I guess it's conceivable that Nissan expected similar results in April, and when that didn't happen, dealers were left with an unexpected number of vehicles on their lots. After all, the automaker's April results were relatively weak. Combined sales of Nissan and Infiniti were up 12.2 percent last month, against an industry growth rate of 17.9 percent, with Nissan car sales moving ahead by just 10.7 percent. The Nissan Sentra caught a nice 42.2 percent jump in sales last month, but the subcompact competition seems to have caught up to the Nissan Versa, which had sales fall 2.8 percent, and the Altima underperformed the industry with a 16.7 percent sales increase. It's also worth pointing out that the automaker's other small car, the Nissan Cube, appears to be a failed experiment, attracting 19.2 percent fewer customers last month than in April 2010, on its way to a 23.5 percent decline in sales over the first four months of the year.
In other words, in the face of some very impressive new competition on the car side of the business'”which happens to be experiencing a notable uptick in sales in response to higher fuel prices'”Nissan entries are having a hard time holding their own without some financial assistance.
Cash on the Hood, Customers in the Dealerships
Luckily for Nissan'”and its customers'”the company has plenty of financial assistance to offer after posting a healthy $6.27 billion in operating profits for the recently closed Japanese fiscal year. Compared to Ford and GM on one side, and Hyundai and Kia on the other, Nissan at first glance wouldn't seem to have the new-product firepower needed to for a successful U.S. campaign this year; but if current reports are correct, Nissan will have something even better than redesigned vehicles at its dealerships'”it will have inexpensive ones.