Login to your account
Not a member? Register now.
AutoShopperBlog

Subscribe To The Blog:




Follow Us



The Latest News And Reviews
Throughout The Car Industry



Nissan's Price Cuts Annoy Other Auto Manufacturers; Could Spark Price War

Comments: Leave | View
On: Thu, Jun 27, 2013 at 9:55AM | By: Elizabeth Puckett


Nissan's Price Cuts Annoy Other Auto Manufacturers; Could Spark Price War

Nissan made a recent move to cut prices on its models in the United States—and competitors are not amused. This is a test of whether or not the auto industry can avoid a price war, and the head of the U.S. operations at Hyundai Motor Company is calling out Nissan for what they say is a bad move.

It seems as though the Japanese automaker is taking full advantage of the extremely weak Yen. The Japanese currency tanked 15% to the United States dollar—giving Nissan over $1,000 per vehicle to add features and cut prices. Their response has been to cut pricing on seven of the best selling models in their lineup. Even though the sticker prices have been reduced, the automaker also pulled back on a lot of their rebate and discount programs to offset the difference.

In May, Nissan’s sales in the United States soared by 25%—this is three times the average automobile industry gain in the same month. Since this was the first month since initial price cuts, it doesn’t really say anything about the impact of re-pricing by Nissan for now. This seems to be in line with what any good salesman knows—if you cut prices, there will be a knee-jerk reaction by consumers to buy, but that's usually short term.

The question is, how long are people going keep flocking to Nissan at an increased rate? Competitors of Nissan are now watching closely to see if they will stand by their promise to keep prices low, as well as if the new pricing will be effective in keeping sales high.

The big underlying layer to this story is how Toyota and General Motors are going to react to Nissan’s price cuts. If the two biggest auto manufacturers in the world decide to slash prices to compete with Nissan, a full-blown new car price war would likely ensue. It was short term tactics similar to temporary price cuts that contributed to GM and Chrysler filing for bankruptcy to begin with.

Since then, the big three have avoided discount and incentive programs as an effort to pull in new buyers. If Nissan’s sales continue to soar and the price cuts are effective, it will be interesting to see the reaction of those auto companies that have been moving away from similar moves since the recession.

Why is a price war such a bad thing? A price war would stop progress made in profits following recovery from the recession—something competitors of Nissan are holding out to act upon.




Comments

Be the first to leave a comment.


Leave A Commment

Allowed HTML tags: <a href=""> <abbr title=""> <b> <em> <i>
Please no link dropping, no keywords or domains as names; do not spam, and do not advertise! rel="nofollow" is in use

Captcha