U.S. auto sales from Asian manufacturers took a big hit in September 2019, and sales from U.S. manufacturers were projected to have fallen as well. Toyota, Honda, Nissan, Lexus, and Infiniti all experienced double-digit sales declines, with sales from Subaru and Hyundai down just below 10 percent. With the slowdown in sales leaving dealers with excess inventories of 2019 models, and with dealers expecting deliveries of new 2020 models very soon, automakers increased incentives in the third quarter to an average of more than $4,100 per vehicle in an attempt to stimulate sales. The severity of the sales decline has reignited fears that a long-anticipated collapse in auto sales may be arriving.
Source: Chester Dawson, Gabrielle Coppola, and Keith Naughton, "Grim Start to U.S. Auto Sales Stirs Alarm That Collapse Is Here," bloomberg.com, October 1, 2019.
-Refer to the Article Summary. When an auto manufacturer offers incentives (such as rebates or low-interest financing) to increase sales and/or reduce inventory, the average total cost for the company will ________ and will, effectively, ________ the profit the manufacturer makes on each car sold.

Question

Quizplus · Accepted Answer

Offering incentives increases the company's costs (or reduces the revenue from each sale) and effectively decreases the profit made on each car sold.

US Auto Sales from Asian Manufacturers Took a Big Hit