NAPA, Calif. - With its launch of the Axiom sport-utility next April, American Isuzu Motors Inc. will eliminate high-end versions of the Rodeo and low-end versions of the Trooper in order to eliminate price overlap among the three models. The Axiom will be priced in the mid- to upper-$20,000 range.
As a result, the Rodeo will become more of a bare-bones vehicle, while the Trooper will be offered mostly in upscale trim levels, said Yasuyuki Sudo, American Isuzu president, at the media introduction here for the Axiom sport-utility.
This move will set up a more risky maneuver to be rolled out when the redesigned Trooper arrives next fall and the redesigned Rodeo comes in fall 2002: an attempt to do away with cash incentives altogether, in exchange for dramatically lower sticker prices, Sudo said.
'Maybe we will keep some lease and (interest-rate) deals, but we want to eliminate the cash incentives,' Sudo said.
Currently, Isuzu has about $3,000 in various incentives on the Rodeo and $4,500 on the Trooper. Sudo wants to see sticker prices more accurately reflect transaction prices, but he knows that a price cut in the middle of a product cycle would be difficult.
Sudo did not detail the range of price cuts but said that dealer discounts would remain from 12 percent to 14 percent.
Eric Noble, president of CarLab, a Santa Ana, Calif., consulting firm, said Isuzu has no choice but to cut prices.
'Current Rodeo pricing is out of control for what it is. They can't continue to sell $27,000 Rodeos in a market with $22,000 Ford Escapes,' Noble said.
But a broad price cut is not without risk, analysts point out, because it can hurt residual values and used-vehicle prices.
Charlie Vogelheim, editor of Kelley Blue Book in Irvine, Calif., said it will be 'very difficult' for Isuzu to keep its residual values from slipping as a result of the action.
'Pricing on the new always has an impact on the used. If there are incentives, then it's already been factored in to making used prices lower,' he said. 'But if the transaction prices start trending lower (after the price reduction), then it will affect residuals negatively.'
VOLUME GAINS UNLIKELY
Even with a price reduction and the new Axiom, Sudo does not project a volume gain in Isuzu sales for the next three years. Isuzu expects to sell about 32,000 Axioms annually, but about 20 percent are expected to be cannibalized from Rodeo and Trooper.
In 2001, Isuzu no longer will offer the Hombre pickup, which is built by General Motors.
Said Sudo: 'We were losing money on it.'