LOS ANGELES - In a gamble that appears to be paying off in sales and market share gains, Nissan Division is outspending its principal Asian rivals by as much as 2 to 1 on retail and lease incentives.
According to industry consultants AutoFacts of West Chester, Pa., and CNW Marketing Research of Bandon, Ore., both of which track incentive spending, Nissan sales and leasing incentives have skyrocketed at the same time as Toyota and Honda have shown restraint and the overall Asian spending average has declined.
'Nissan has moved up dramatically. We're seeing a 50 percent increase year-over-year in cash incentives on sales. They are offering both customer and dealer cash,' said Suzanne Kinsler, AutoFacts analyst.
From January through June, Nissan's incentive spending climbed from $1,536 per unit to $2,167, according to CNW data. Compared to June 1996, it is spending $581 more per unit, a 36 percent rise.
In comparison to Nissan's 41 percent rise since January, both Honda and Toyota have reduced their spending, even accounting for an upward spike in June. Honda incentives in June were down 3.4 percent from January, while Toyota spending was 5.5 percent lower.
Indeed, Nissan spent more dollars-per-unit in June than Toyota and Honda combined, according to CNW figures. CNW's data are based on sales and lease incentives and some front-end lease subvention.
Because Nissan's average sticker price is lower than either Toyota's or Honda's, the incentive gap is even wider when seen as a percentage of sticker price, according to CNW President Art Spinella.
Nissan's incentives also have eclipsed the Big 3's for most of 1997 on a per-unit basis, although a summer price war brought Ford and GM spending into the same neighborhood for June, according to CNW.
In June, for example, CNW data show Ford Division spending at $2,284 per vehicle, up from $1,537 in January, despite having no new retail purchase incentives in place since April. This implies that leasing incentives account for most of the increase.
Nissan's heavy spending appears to be paying off. In conjunction with the brand advertising campaign launched last year, Nissan's spending yielded a 6.5 percent sales gain through June and a market share increase of 0.4 points.
At the same time, Nissan has narrowed Honda's lead as the No. 2 Japanese division in the United States to 30,000 units from 34,000 a year ago.
Those gains have been achieved even as two key models, the volume-leading Altima sedan and the pickup truck, reached the end of their product cycles, a time when sales normally drop off.
A WAY OF LIFE
Tom Orbe, vice president of marketing for Nissan Motor Corp. U.S.A., said the company is prepared to 'do what it takes' to maintain that momentum.
'Incentives are a way of life. There will always be some kind of incentives because there's always a different market condition,' he said.
'If it means more dealer cash or more aggressive leasing, we'll do what it takes to meet the market, hit our sales goals and make sure our dealers are profitable.'
But Orbe predicted that Nissan will be able to move away from heavy spending with each product redesign. With a $1,500 price cut, for example, the 1998 Altima won't have to have such heavy incentivizing - if any at all.
Orbe expects a similar strategy for the Frontier pickup and subsequent product redesigns.
But a Nissan insider who declined to be identified said the division may have to restart incentives on the new Altima by the end of the year.
'They'll have to keep coming back with the juice because there's not enough consumer demand,' the insider said.
The steep rise in incentive spending has occurred since the introduction of Nissan's expensive 'Enjoy the Ride' brand campaign, which is aimed specifically at netting more image-conscious, as opposed to deal-oriented, customers.
For Lou Troy of Fergus Nissan in Skokie, Ill., the incentive game seriously undermines the campaign to build owner loyalty and the brand image.
'They're just throwing money at everything. We make a quality vehicle, but we're selling price, not the product,' he said.
'Instead of taking that fantastic brand campaign a step farther and saying, 'We have a quality product,' we're buying the market instead of earning it. That should be the case only if a car's not selling.'
But with a long-in-the-tooth product line, Nissan has been forced to make incentives a major negotiating point with consumers, other dealers said.
'The real war is in quality and payment, and I need every piece of ammo I can get,' said Jerry Seiner, owner of Seiner Nissan in Salt Lake City.
In the Los Angeles region, the outgoing Altima has a $2,500 customer cash-back offer, while the outgoing pickup has $2,000 customer cash - basically 15 percent of the sticker price.
Earlier this year, customer and dealer incentives on the Quest minivan in the San Francisco region amounted to $4,500 a unit. And some dealers in the South and on the East Coast are getting a crack at repeating last year's astounding pickup truck lease of zero down, $49 a month for 12 months.
Jack Lowe, general manager of Anderson Nissan-Lincoln-Mercury in Asheville, N.C., is not worried about Nissan's spending.
'It's made a big difference in our sales and has given Nissan an advantage over the competition,' he said. 'Pumping a $2,500 rebate on a little two-wheel-drive truck is a lot of money. But there's a lot of newer competition out there, so maybe that's what it needs.'
THE SHELL GAME
In Spinella's opinion, Nissan must outspend Toyota and Honda just to stay in place.
'Nissan is caught in a peculiar situation where it tends to be compared to two of the strongest consumer names in the car business (Toyota and Honda) when it comes to product quality and demand,' he said.
'And Nissans are bought by a more domestic demographic group, a little less educated and a little younger, and not a strong Japanese-oriented buyer base. It's a demographic group that requires more incentive in order to buy your car. They don't have as good a credit rating and cash on hand.'
That's what the brand campaign is trying to change. But Spinella said Nissan may be counting on too much too soon.
'There's a lot of baggage you strap yourself to when you try to run counter to what people consider you to be. They've always been considered the less classy product, with exception of the Z and the Maxima,' he said.
'Now they're trying to say 'We're adults like Honda and Toyota.' But it will take 20 years to change that image.'