2018 Revenue at Risk Report
Manufacturer incentive programs have become increasingly controversial – the programs are overlapping, complex, and subject to confidentiality provisions. Therefore, the general public, lawmakers, and even some dealers are uncertain about their full extent.
Over at least the past six years, dealerships’ gross and operating margins have been on the decline. These declining margins have made manufacturers’ incentive program payments all the more important as dealerships try to maintain their profitability.
Anderson Economic Group has prepared this report to focus on the extent of manufacturer incentive programs, their potential effect on dealerships’ financials, and on certain problems associated with them.
Anderson Economic Group found that:
- Manufacturer incentive programs are now common in the automotive industry, and can involve almost every aspect of a dealership’s operations.
- The amount of revenue at risk is highly significant, and can account for the entire profitability of a dealership during a calendar year.
- Incentive programs can create a number of potential problems for dealerships, including:
a. vulnerability to flawed measures of sales effectiveness;
b. increasing demand on dealership personnel to effectively manage the programs; and
c. conflicts between incentive program terms and State laws or dealer agreements.
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