Despite all good intentions, European automakers don't seem to be able to shake themselves loose from the US-inspired incentive spiral. Three months after introducing the new Golf, Volkswagen apparently feels it needs to offer free air conditioning worth more than E1,200 a car.
Meanwhile, VW's biggest competitor, Opel, is offering E1,085 off the new Astra to buyers who order before the car's March 19 launch. It will be joined later this year by Ford's new Focus and nobody knows what pressure the additional rival will put on the market.
A few conclusions come to mind. Germany's largest volume automakers don't seem too sure their products will hold up in today's cutthroat environment. Second, the European market seems destined to take its cue from the US, where incentives top $4,000 per car. And third, with Japanese and Korean automakers steadily gaining customers and market share, European brands may well see incentives as necessary to defend the home turf.
But the most important reason for this new round of price incentives so early in the year must be the abundance of product in the heavily fought-over volume segment. According to Automotive News Europe's newly updated segmentation, the Golf and the Astra compete with 30 other lower-medium offerings. In the top 10 are strong competitors such as the Focus, Peugeot 307 and Toyota Corolla.
Incentives can boost sales short term, but they undermine the image of the brand and lower residual values.
In the long run, only quality, reliability and constant innovation provide the keys to success. These are the non-financial incentives that many top Asian carmakers are bringing to the battle. And that's why they are on a roll while many European competitors are struggling.