Holden Plans To Ease Off Big Discounts

[jpd80]

Holden's aggressive discounting has been mentioned on here a few times before,
looks like the the bottom line might be starting to bite them hard, maybe that local
production of the Cruze comes at a price, an end to the huge discounts on Commodore.

Did Ford just get an early Christmas present?
Because this sounds like Holden are prepared to stop flooding dealers and offering
give away prices.... this could mean a serious reduction in Commodore production.

LINK to Article

Holden has turned into Ebenezer Scrooge in the lead-up to Christmas.

After two years of consistently offering some of the sharpest deals in the new-car business, Holden has vowed its days of drastic discounting are over.

As the Commodore is set to be crowned Australia's biggest selling car for the 15th year in a row, and Holden is destined to report its first profit in five years, the head of the company, Mike Devereux, told media at an end-of-year luncheon in Melbourne late this week that the car maker is not going to slash prices like it has since late 2008 when the Global Financial Crisis hit.

"The last two years have been extraordinary times for Holden, probably the toughest time ever for the business, but those days are behind us," he said.

"We are not going to chase [sales] for the sake of it. We are going to operate profitably and we've been doing that for some time now."

In late 2008, Holden offered discounts of between $8000 and $13,000 on some models, in an attempt to clear stock and quickly raise cash as the full impact of the GFC was still unknown. The deal was so lucrative, many Holden dealers bought cars themselves and put them on their used-car lots.

Since then, over the past two years, Holden has consistently offered discounts of between $3500 and $5000 on Omega and Berlina models, and $5000 and $6000 on SS V8 models. On stock older than 10 months, there was a further $2000 bonus -- and this is on top of the dealer's normal margin (approximately 11 per cent, plus dealer hold back).

----------------------------------------------------------
"The old way used to be to force feed the system and push cars onto dealers," he said.

"It was a push model, and that was because we had high structural costs and had to keep the factory moving. We're not going to do that anymore, because when the market is full you have to pay [incentive money] to keep the cars moving. Since the GFC, we've found better ways to reduce our costs."

He said the move to be less generous with discounts should help resale values.

"When you buy a car you want it to be worth something when you sell it. If we keep discounting it during your ownership it won't be worth what you need it to be worth."

Devereux said the roll back in discounts will be gradual, to test what the market can handle.

"There's not going to be a sudden change, we're going to roll this back gently," he said. "Our business must be sustainable. Rather than chase volume with [Commodore], we think we're going to get a lot of growth from new models."

Holden believes it can afford to be more bullish with prices because it has a significant number of new models next year. Typically, most car makers don't discount new models in their first year on sale -- and Holden has been in runout mode with old models for a couple of years.

In 2011 Holden will introduce the locally-made versions of the Cruze sedan (Q1) and hatch (Q4), Captiva (Q2) and Barina (Q2), among others.
Devereux said Holden is expected to sell 133,800 cars this year -- up 12 per cent on last year -- and finish 2010 with a market share of 12.9 per cent, which is on par with last year.

[turbo4me]

That explains why all the Police and Gvt cars are Holdens (at least over here in NZ)
I notice in Aussie all/most taxis are Fords, is this because Ford give discounts to taxi companys?

[Smoke Pursuit]

Originally Posted by turbo4me

That explains why all the Police and Gvt cars are Holdens (at least over here in NZ)
I notice in Aussie all/most taxis are Fords, is this because Ford give discounts to taxi companys?

Nah because the Falcons are the only cars that last doing taxi duties.. holdens crash and burn!!

[au2000]

ford walked away from the taxi market yrs ago... they used to offer a taxi pack & in vic that included the car being yellow. but they now wanted to distance themselves from that market so now most falcon cabs are brought x gov auctions etc & converted for cab duties... most cabbies still find the falcon to be the best car for the job (in vic anyway) thats why the majority are falcons..
it explains the big number of commodore police cars in vic though... with those kind of prices ..

[4Vman]

Maybe Fords way works after all...

[Smoke Pursuit]

I cant see holden sticking to it.

VE is so long in the tooth now the only way to sell it is discount it, Series II has done nothing for them.

Ford are discounting too 4Vman.. between discounting and filling models up with content they are busting their butts to move cars, but just are not performing, e.g. XR50 / G6E 50.

[Brazen]

Originally Posted by jpd80

Holden's aggressive discounting has been mentioned on here a few times before,
looks like the the bottom line might be starting to bite them hard, maybe that local
production of the Cruze comes at a price, an end to the huge discounts on Commodore.

So a company starts to reduce its discounts to make each vehicle more profitable and it means that the 'bottom line is biting hard'?

All that is happening is that local Cruze production and exports being ramped up at Elizabeth is taking a massive amount of pressure off domestic Commodore sales to sell x amount of thousand a month to keep the factory viable.

Ford will probably do similar once Territory comes online, as hopefully big sales of it will take pressure off the Falcon and the heavy discounting and pushing on to rental fleets it has at the moment. There are some stupidly good prices on Falcons at the moment, easily a couple of grand cheaper than the equivalent discounted Commodore.

[jpd80]

Originally Posted by Brazen

So a company starts to reduce its discounts to make each vehicle more profitable and it means that the 'bottom line is biting hard'?

Of course it is, that applies to Ford and Holden, the pressure is on to make
profit and both companies would be mindful of giving away discounts when
buyers may be willing to pay more and get more....
pretty sure that is echoed in Mike Devereux's words:

"The last two years have been extraordinary times for Holden, probably the
toughest time ever for the business, but those days are behind us," he said.

"We are not going to chase [sales] for the sake of it. We are going to operate
profitably and we've been doing that for some time now."

I see this as progressive reduction:
1)In late 2008, Holden were offering between $8,000 and $13,000 discount
on selected models to raise cash quickly

2) During 2009/2010 Holden (and Ford) were offering between $5,000 and
$6,000 discounts on popular models, mostly through SV6/Omega/Berlina XR6/G6
having special packs with lots of added value.

3) 2011..... I'd expect to see Ford and Holden trim deals on vehicles to around
$38,990 drive away on XR6/SV6 while XT/ Omega moves back to $36,990.

One last thing, we only have Holden's word that Cruze production in Australia is viable,
neither Ford nor Toyota can justify building Focus or Corolla here even though
those vehicles are sold in greater numbers throughout the world amortizing costs.

[Gobes32]

Holden are in a lot of trouble, mark my words..........

[aussie muscle]

Sounds like Holden is getting smarter at conducting the business side of things. At least they've decided it's better to change than to disappear.

[flappist]

What is this bloody fixation with Holden?

Holden this.....holden that..... who cares what they are doing?

Of the top ten entires in the pub page, five were something to do with holden.

There hardly ever seem to be any threads about toyota (the largest selling car in Australia) or BMW/Merc/Lexus or any other performance V8.

Or even any of the RWD sports cars that are of comparable performance to FPV like 370Z, RX8, Z4, Boxter etc.

But one tiny article anywhere that mentions the "H" word and the chicken littles go off like a mentos in a coke bottle.

[bobthebilda]

Like the statistics say from one of the other forums, holden sales mix are.

12,474 or 32% - Fleet
9,947 or 26% - Private
5,719 or 15% - Government
4,317 or 11% - Rental
3,065 or 8% - Other
2,574 or 7% - Large fleet
311 or 1% - Not for profit

They probably have control over pricing for 58% of commodore sales (fleet and private sales). Probably even less, as whilst the fleets would purchase to the buyers desires, they would still drive a hard bargain. I'd like to see Devereux go to his other 42% of commodore buyers and say they are going to raise prices.

Like he said, its an attempt to try and reverse the terrible resale values his company has forced its customers to endure. Not one of the best loyalty reward schemes going around at the moment.

And whilst not happening on commodores, these comments come at the same time that Holden has begun offering $1000 cash backs on some of its other cars. Must be a requirement of the head job at Holden that one makes sure the left hand doesnt know what the right hand is doing.

[Grunter]

Originally Posted by flappist

What is this bloody fixation with Holden?

Holden this.....holden that..... who cares what they are doing?...

Don't read those threads.

One thing I struggle to believe is that Holden are doing it so tough. I'm sure they would like a much healthier bottom line, but that they are still here, must mean that they are not bleeding money.

[GreenMachine]

Interesting... We run a fleet of Commodores at work (about 20 of them) that get replaced at 100,000k's (between 18 mths and 2 years old usually), Ford can't get anywhere near the prices Holden offer us... We get Commodore Internationals with leather seats and all sorts of stuff for low $30,000s and they give us $20kish for the old ones - cheap as.

I wonder if this means I've finally got a reason to convince the boss to change to Ford?

[jmack]

prob need to so they can pay for courtney and any other ford that wins in the future

[bobthebilda]

Maybe his comments were made to try and counteract some of the bad press starting to come out of the US about GM.

http://www.nlpc.org/stories/2010/12/...fudge-earnings

Surely Holden wouldnt do the same thing here in OZ

[DanielXR8]

They are counting on the locally built Cruze being a success and keeping the plant rolling along with sufficient volume. If Cruze doesn't hit sales targets, expect Commodore and Cruze to be discounted.

Similarly Territory and Falcon will stay in "special edition" mode if the new diesel Terri doesn't live up to sales expectations. FG sales have effectively hit a wall and now all hope is on Terri outliving its own reputation, thanks to a new diesel donk. Thats a big ask IMHO.

I expect both brands will have good deals next year. Not much will change on that front.

Dan

[Dr Smith]

One thing I'm wondering is I can't see that a local Cruze will bring in the same avg profit as a Commodore and with the way things are looking, with more Cruze variants it has a good chance of surpassing Commodore sales. Plus if Holden are true and discounting on Commodores will be reduced they're going to possibly sell less Commodores as well. Seems like a whole lot more work without a proportionately similar gain.

[Joe5619]

IF (And it’s a big if), they do ease off on huge discounts, this has to be good for Falcon you'd think in one of two ways.. 1) The falcon is now more competitively priced so sales might go up or 2) Ford too can ease back on big discounts..

I believe Holden started these huge discounts or hopefully they can end it too??

[DanielXR8]

Originally Posted by Dr Smith

One thing I'm wondering is I can't see that a local Cruze will bring in the same avg profit as a Commodore and with the way things are looking, with more Cruze variants it has a good chance of surpassing Commodore sales. Plus if Holden are true and discounting on Commodores will be reduced they're going to possibly sell less Commodores as well. Seems like a whole lot more work without a proportionately similar gain.

GMH might be hoping US sales take up the volume for Commodore to the point it doesn't need to sell as many locally and overall profit from Cruze/Commodore is ahead, because of increased volumes.

That said the Aussie dollar can't be helping things for either car.

Really this is Holden being optimistic. If it doesn't work then discounts will abound as usual. Ford would like to end discounting too, but it comes down to finding enough punters who will pay full price and they are pretty scarce these days.

Dan

[Bossxr8]

With Holden losing money what, 5 of the past 6 years or whatever it is, why is it only now that they are realising that discounting cars so much just to get them out the door, removes all your profit.

Einsteins.

At least Ford tried to keep the discounts at a sane level to keep some profits. I guess it showed by making a profit when Holden built thousands more yet lost money.

[bobthebilda]

Interesting to see Holdens spread in the saturday car sales guide today (newscorp newspapers). Now they have started advertising SV6 commodores at $36999 (which has been going on for a while), but underneath they have also added $1000 less than 2011 plated.

Gee wouldnt one be ****ed if they bought an SV6 now, on the basis that the car was going up $1000 in 2011. Would be asking for my $1000 back if they didnt.

They seem to be getting a touch desperate to try and move some of their commodore range.