Auto Price War Looms as Japanese Restock Showrooms

Here comes an auto-incentive war, says Kelley Blue Book's kbb.com.

As Japanese automakers refill their inventory pipelines, they will be offering big incentives to get shoppers back into their showrooms and keep them away from a basketful of credible rivals.

That will trigger incentives by rivals hoping to hang on to gains they've made since the March earthquake and tsunami in Japan wrecked production of cars and components.

Also figuring into the kbb.com forecast: New models from the Japanese brands. Among them: An updated Toyota Camry that will offer a lower-price, higher-power, better-mileage, gas-electric hybrid version; a freshened Honda CR-V, which is the second-best-selling SUV in America, behind only the Ford Escape, according to tallymasters at Autodata.

KBB.com "anticipates strong incentives late in the year in the form of cash and attractive lease offerings. As the Japanese replenish inventory and begin to throw cash on the hood, expect to see the domestics follow suit, setting off an incentive battle."

Bad news for automakers' bottom lines. Great news for auto buyers. Here's more from the kbb.com report:

"Prior to the earthquake, Japanese brands were consistently capturing close to 40% of all United States sales, but since April they have seen their monthly share of sales dwindle to nearly 30%. As Japanese production facilities return to full capacity in the near future, expect to see strong incentive support from these manufacturers as they aggressively try to recapture lost market share.

"While (South Korean brands) Hyundai and Kia sales are strong, neither currently has high-enough inventory levels to support incentive programs big enough to compete with the Japanese brands. Neither of the Korean brands have the production capacity to satisfy current demand for their products as evidenced by their ultra-lean 19-day supply of vehicles currently available to consumers.

"Under those conditions, consumers in the market for a new vehicle will likely find plenty of attractive deals in the latter part of the fourth quarter."

"While the earthquake in Japan halted sales recovery earlier this year, the anticipated push by the Japanese to recapture market share will likely help sales later this year," said Alec Gutierrez, manager of vehicle valuation for Kelley Blue Book. "Since May, Japanese brands have given up considerable market share to both domestic and Korean manufacturers."

(Source: USA Today, 09/12/11)