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Steve B, good point, I hadn't considered the idea that the rebates could be the root cause of the high depreciation rates. Being new to Saabs, I also wasn't aware that rebates have been available for years.
I thought perhaps the existence of high Saab rebates were more related to several other factors:
- Enterprise Car rental dumping product on the market
- New focus on rapidly acquiring market share to gain production economies of scale
- Build trial and usage to improve overall brand strength at the expense of short-term cash (JD Power goals, too)
Absent a big advertising budget and a large dealer network, Saab must rely on a higher "shopper conversion rate". They don't generate near the store traffic that other makes do, so they have to do a better job closing and rely on a higher yield of closed sales. Rebates give the dealer lots of latitude to close the deal immediately.
Their alternative to pricing at $40k but rebating/selling at $33k would be to attempt a lower, single-price, controlled-supply strategy, something Acura seems to be doing very well. However, that might take years to accomplish. Consider Acura's strengths:
- Underlying production strength and volume from Honda, allows the manufacturer to improve quality and profitability through standardization
- Mainstream brand strength of Honda for the past 30 years, allows Acura to create a premium image
- Acura now competes across several important lines, and at various price points, allowing a "lifecycle" approach to marketing. Start with a Honda or an Integra (now RSX), upgrade to TL, get an MDX when you have a family, then look at RL later in life (weakest product in the line).
- "restricted" supplies allows pricing to be more tightly controlled
Controlling supply, hi-quality low-cost manufacturing that allows lower MSRP price points and still yield profitable results, cultivating a premium image on top of an already-accepted mass production brand. Conservative styling, and bullet-proof reliability & reputation. All those factors contribute to fewer discounts, and higher resale & demand.
Would Saab be willing to step down to permanent, fixed $33k price points? Their aspirations are much higher, and they set their sights on higher-priced competitors, but without some of the strengths Acura enjoys it will be a challenge for them to sustain premium pricing. It will take time.
Good discussion.
posted by 168.73.2...
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