Article Summary
In June 2015, Fiat Chrysler outsold Ford in terms of sales to individual consumers at dealerships, with one reason being the higher incentives offered by Fiat Chrysler. According to Autodata Corp., Fiat Chrysler spent an average of $3,382 in incentives on each vehicle sold, compared to $2,595 by Ford. For the first six months of 2015, General Motors spent an average of $3,427 on discounts, lease incentives, and rebates, compared to $3,277 for Fiat Chrysler and $2,736 for Ford. According to the National Auto Dealers Association, the industry is on track to sell 17.2 million domestic automobiles in 2015, which would be the second-best year for auto sales for American car companies.
Source: Mike Ramsey and John D. Stoll, "Chrysler Hits Retail Milestone, Tops Ford," Wall Street Journal, July 1, 2015.
-Refer to the Article Summary above.What happens to the profit a car company makes on each car sold if it offers incentives such as discounts, cash rebates, or lease incentives to customers? How might a car company decide which of these strategies to use?
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