Pricing Discounting in Europe: What in the World is Going On?
There is no doubt that consumers are trying to save money on vehicles in these trying times. Car dealerships find themselves in the precarious position of having to either match the dealership down the road or find themselves losing a sale. The problem with this though, is that there is only so much leeway a dealer has before they begin to lose money on the sale, and that is not what they are in business for. Despite the fact that cars can be expensive – depending on the car you buy – the fact remains that it is still an industry that is looking to profit.
It is okay for dealerships to lower the cost of a car by several hundreds of dollars, but when your price discounting starts to reach 30% of the base cost of the vehicle, what do you do? General Motors, along with Ford Motor Company have expressed serious concerns at the fact that auto dealers in Europe are trying to boost the sales market by significantly lowering the cost of the vehicles they sell.
In the past, the governments were initializing what is known as a scrappage program –a program where customers receive a tax stimulus for trading in vehicles with high emissions for vehicles that are more modern and less damaging to the environment. Today, however, with the economic recession hitting just about almost every country, these programs are not available because the governments do not have the resources to offer them.
The Chief of Sales of Ford’s European division states that companies are trying to limit the amount of self-registrations but with the industry being the way it is, this is not always possible, and it does affect profit margins. One of the biggest areas of concern tends to be in Germany, where the average discount on a car is 12.1%.
Despite economic conditions, car manufacturers and dealerships still have to look to turn a profit. When they sell less cars or heavily discount cars just to move them off the lot, they are not helping themselves.
It appears to be a buyer’s market at the moment with the buyer’s setting the prices they want to pay. However, dealerships need to take a step back and make more efforts to rejuvenate customer confidence which will then rejuvenate sales. Because despite the fact that the economic conditions are not desirable at the moment, people are still making money and still purchasing cars.