The Chrysler group, its profitable minivan under siege, is using the Internet to pitch two new minivan models with no incentives.
The change in pricing strategy is an attempt by the Chrysler group to get off the incentive merry-go-round. Chrysler is shifting its advertising dollars away from incentives and toward product and image advertising.
Chrysler group minivan sales dipped significantly in the first two months of this year. (See story, Page 3.) So the group is trying creative ways to protect one of the company's crown jewels.
But some dealers doubt the new Internet pricing strategy will work. Many customers won't buy without a rebate check.
Some dealers also are questioning Chrysler's advertising strategy for the new models, EX versions of the Chrysler Town & Country and Dodge Grand Caravan. To save money, the group is promoting those models only online.
'I'm a big fan of using the Internet to promote sales, but not to move product,' said dealer J. Baxter Chapman of Chapman Scottsdale Autoplex in Arizona. 'That's not the way to move Caravans.'
Chrysler group acknowledges it will be difficult to stop incentives, even on minivans. The group last week extended its incentives program on minivans from April 3 to April 30. The company is offering a $1,500 cash rebate or cut-rate financing or a combination of cash and cheap loans.
Dealer discount cut
Chrysler executives dismiss the doubts, saying the new EX versions will sell because they are equipped well for the price.
The Internet EX models are priced in the middle of their lineups to compete with the Honda Odyssey EX and the Ford Windstar SE. The Town & Country EX starts at $26,830 and the Grand Caravan EX at $26,725. Both prices include destination fees.
Along with the Internet price, however, the Chrysler group cut the dealer discount for the EX models by about two percentage points from the other minivan models. That means a loss of about $500 per EX unit for dealers compared with the base models of those minivans.
About 12,000 units of each EX model are arriving at dealerships, said Chrysler group spokesman Bryan Zvibleman. He would not say how many more units the Chrysler group plans to produce this year, saying that will depend on how well the models sell.
Late last fall, dealers asked for more competitive pricing, said Dick Withnell, chairman of the Dodge national dealer council. But the jury is out on the result.
Doug Duell, new-car sales manager of Evansville Chrysler-Plymouth-Kia in Indiana, had five units of the Town & Country EX on his lot late last week.
'As much as we hate to admit it, this market is incentive driven,' Duell said. 'The EX is not eligible for any incentives, so we'll have to see if it's worth stocking the vehicle.'
Despite the squeezed margin on the EX, Duell said he will promote it. 'It very well may work,' he said.
Dealers buy vehicles at a certain discount from manufacturers, so the dealer discount is the profit margin between dealer cost and the manufacturer's suggested retail price. Automotive News estimates the discount is about 13 percent on the Town & Country and between 13 percent and 14 percent on the Grand Caravan. That means the discount is only 11 percent for the Town & Country EX, for example.
With Internet pricing, manufacturers try to come close to transaction price so that consumers know what they'll be paying.
Dealers still can reduce the Chrysler group's EX pricing; it's illegal for manufacturers to set price. But they have less negotiating room on the EX models because of the lower dealer discount.
Chrysler is scrimping on advertising for the models, running only banner ads on various automotive Web sites. The Internet-only ad launch of the models is risky, given the same, highly criticized approach by Volvo Cars of North America last fall for its S60 sports sedan.
Volvo had little money to advertise elsewhere, but after a few months caved in and bought other media to save the launch.
The money saved on EX advertising could be used for Chrysler brand-image advertising. After a year's hiatus, brand advertising will return soon, said Tom Marinelli, vice president of Chrysler-Jeep's global brand center. Dodge never took a break and will continue to do brand advertising.
Meanwhile, the Chrysler brand is phasing out incentive advertising on its minivans, Marinelli said. 'We're going back squarely to product advertising,' he said, 'positioning the Chrysler Voyager as affordable and the Town & Country as more upscale.'