When do car makers cut prices?

by philg

We’d like to buy or lease a new car, but right now we have two cars and almost nowhere to go. I expected to fight through traffic to Harvard Medical School every day this month. Instead, I’ve been on Webex and Zoom. There’s no point going to the supermarket, which has been stripped bare by the hoarding neighbors who, just a few months ago, were touting their superior virtue and empathy level compared to the out-of-state Deplorables who voted for Trump. We can’t go to the art museums, which are closed. We can’t go to restaurants, which are closed.

At the current rate of usage, our current fleet will last for at least 40 years (an aquarium maintenance service operator told us that she now has more than 300,000 miles on her Honda Odyssey!).

Shouldn’t the car manufacturers be having coronavirus special deals? A car plainly isn’t worth as much as it was two months ago. Why are the prices mostly the same? Are people actually buying cars at a similar rate to what it was a year ago? Is the shutdown of car factories roughly balancing the collapse of demand? Even with the U.S. and Europe paralyzed, Japan and China are open for business, right? They can produce a ton of cars, can’t they?

7 thoughts on “When do car makers cut prices?”

  1. We’ll be back to demonstrating our virtue soon enough, by baking the pavement for 4 hours a day moving our laptops to a different desk to do exactly the same thing. Surprising how many people don’t feel whole without a commuting ritual & a $50,000/month corporate office with no windows.

  2. Why would they cut prices? The sales are so rare nowadays that it would be tempting for a dealership to slap on million-dollar price tags: only those who in dire need of a car would buy a car, so they are a panic buyer and should pay premium; the others won’t buy anyway. The chance of sales is so tiny it only makes sense to raise the payoff. Who would want to soldier on for a few hundred bucks?

    Other than that the Big Auto is doing fine. Cars sold in Asia are not manufactured in the US. Factories are closed in the US but there is sufficient inventory. Workers are furloughed or laid off, which helps to move production to the cheaper South or abroad by attrition and with no risk of annoying Trump. The government has pledged to cover living and medical expenses of the former workers. The expenses are shrinking in line with the sales, but bailout is coming soon and, with absolutely no need to expand production, is sufficient to cover executive bonuses and perhaps some dividends. In fact, there is little dividend/buyback pressure on the sagging corporate stock because the Treasury has promised to buy it up.

    • Of course!
      There is but one thing I forgot! The only conceivable reason (apart from executive bonuses) the US auto industry needs is being able to repair is balance sheet.s: look, the prevalent shares buybacks program in the US over the past 18 months has been leveraged buybacks: a company borrows money to buy back shares and uses some of the proceeds to pay back the short-term loans. This only works if the short term interest on the loans is (ALWAYS) lower than the equity appreciation rate. I said, ALWAYS.

      And otherwise? The Treasury discount window has been widely open as of late. So if you you claim to be big and systematic you are to get bailout from the Treasury. And if not? die you dumb f***, you peasant! Especially those of you who opted to work for a salary! We are going to import the kind, smiling, gentle IQ-80 immigrants to replace you once you are gone.

      We had this program in 2008-09 for the banks. Some called it moral hazard back then, and we claimed that would never happen again as the banks must have learned the lesson. OK, we didn’t lie: the banks have learned, and now we have to extend the program to every corporation that is solvent enough to have their own bond issuance and/or credit lanes. Pay for out debts, you hoi polloi! Otherwise we threaten to have your pity ass fired, and they’d better respond and respond soon.

  4. Inflation might finally have arrived, it will probably cost $10K to fly to Florida.

  5. Can a car actually be purchased right now? Car dealerships (sales departments) aren’t exactly critical infrastructure. I’m being particularly careful when I drive because, for now, my car is irreplaceable, and I would also like to avoid encountering any of our medical infrastructure right now.

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