Put A Bow On It: What’s Driving Automobile Incentives This Holiday Season

Let’s be honest. As much as we’d like, cars don’t show up on the shopping lists of most consumers over the holidays. Still, December consistently brings a spike in auto purchases and incentives that make it more likely you’ll open your curtains to find a large bow atop the roof of a new car parked in your driveway this season.

After seven years of consistently outpacing expectations, PwC’s insight concludes that US automotive sales appear to have reached its zenith, especially considering they have cooled in the third quarter. Still, our Autofacts team forecasts this holiday season should provide a boost to fourth quarter sales, putting the US auto market on course for another record year with 17.5 million new cars sold in 2016.

So what’s pushing sales over the top? We identified a few drivers in our 2016 Holiday Outlook:

Automakers typically offer rebates―of $500 on average―particularly for luxury vehicles. And, with a potential interest rate hike before the end of the year, taking advantage of lower rates is expected to be a motivating factor for consumers on the fence. Not to mention low gas prices could provide a boost to purchases of pickup trucks and sport-utility and crossover vehicles for shoppers, which bodes well for automakers’ bottom lines as these vehicles enjoy extremely high margins compared with their passenger-car counterparts.

But like our holiday report says, it’s the most digital time of the year...which begs the question: is vehicle connectivity and new car technology making a difference? At this moment in time, the answer remains to be unseen despite the number of attention grabbing headlines about today’s connected car world. While the value of automotive connected mobility is set to increase worldwide from $52.5 billion in 2017 to $155.9 billion in 2022, carmakers are faced with challenges as they strive to build the different elements that make up more intelligent and connected vehicles.

The in-car technology is coming, but so is the cost of that technology and all three industry players―carmakers, suppliers and new entrants, like technology companies―are striving to build the different elements that make up more intelligent and connected vehicles. How each fares, however, will largely be a function of whether they can build, buy or collaborate for the distinct technologies and capabilities consumers demand, and do so in a way that not only increases sales, but profit margins, too.

But consumers have already grown accustomed to having what they need at their fingertips―and that is translating from their shopping needs to their in-car experiences. As such, the increasing levels of connectivity in vehicles could help drive future auto sales, but the long-term outcome from rising connectivity and autonomy remains unknown.

Bottom line, it’s the fundamentals that are helping car sales remain strong this holiday season, not the shiny new toys. While the vehicle of the future is already taking shape in a variety of forms, it hasn’t reached full fruition, and likely won’t on public streets for another 10-20 years. Still, there is enough innovation happening that is transforming the automobile, and the culture of the automobile, that we expect an impact on holiday seasons to come.

Until then, it’s the practical benefits versus the “cool factors” that are driving consumers to the floor.

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