Holden plans to ease off on big discounts

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.

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