DaimlerChrysler’s US arm will cut prices on its main models by 0.9%.
Chrysler, the troubled US arm of the DaimlerChrysler group, has said it will drop prices by 0.9% on its main models to entice customers back. Up to now, Chrysler has concentrated on offering an increasing number of incentives to increase sales, representing hidden benefits for customers. However, this more subtle sales strategy is to change, replacing the incentives with lower prices.
Price transparency is a major driver behind the decision. At the moment, customers on the Internet see Chrysler cars being $1,500 and $2,500 more expensive than rival models. Since between 60% and 70% of Chrysler’s current customers use the Internet to compare prices, the situation is detrimental to the company’s success in an increasingly competitive market. The move away from strong incentives is also part of CEO Dieter Zetsche’s longer term strategy to have customer demand pulling sales and production, rather than Chrysler pushing cars onto its dealers and customers.
This move is nothing new within the increasingly competitive US market. Car prices fell by an average 0.7% year on year from 1996 to 2000 and companies have recently been implementing cost-cutting plans to feed such pricing strategies. Vehicle manufacturers are expected to accelerate price cuts in the near future as consumer demand wavers in an increasingly uncertain economic environment. Chrysler is implementing significant cost-cutting plans over the next few years in line with other manufacturers, spending $4 billion on restructuring.
Chrysler is attempting to improve sales volume over the short term, having lost market share over recent years. The new, more transparent and aggressive pricing strategy is testament to its struggle to compete in a saturated US market. However, Chrysler is most unlikely to be the only leading vehicle manufacturer to cut prices, as customer demand wobbles in these uncertain economic times.
