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Saturday, July 09, 2005

The Downside to Discounts

Now that every American manufacturer is giving consumers the employee discount, it stands to reason that someone would write disparagingly of this strategy. And they did. I'm on the fence when it comes to this strategy myself. On the one hand it sells cars that normally wouldn't sell or at least wouldn't sell as fast. On the other hand it raises some issues:

1. It might make your cars look cheap. American cars have a reputation, undeserved mostly now, that their cars are "cheaper" than Japanese or European ones. This doesn't help things, especially since all the companies doing this are American.

2. The people who are buying the cars are really not new customers, but future customers who are buying now when they see a deal rather than later. This means there will be a huge drop off in sales in a few months. This is probably true for at least some of the sales.

3. When the new models come out, will they be differentiated enough from the discounted 2005 models? If they aren't, then see issue number 1 again. I believe for many of the vehicles that GM is giving the discount to, we are going to see new ones next year, such as the Impala and the Monte Carlo. But we will still see the same LaCrosse, Cobalt, Aveo, many of the pickup line etc.

On the bright side, there have been some product improvements by GM, and if there are any conquest buyers, they will realize that GM has a new product. For a company like Chrysler which is only offering the discount for its poorly selling models like the Neon, and the Sebring, I don't see the point of having this at all unless a replacement is coming soon. I think Ford and DCX are still locked into a Detroit mindset where the only competition they are aware of is down the street rather than across an ocean. I don't know if I like where things are heading for the domestic automotive industry in America.

Comments:
i take it no job offers yet?
 
I've been appointed Prime Minister. Watch BBC for more info soon.
 
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