The large pickup segment, one of the highest volume and highest profits-per-vehicle new vehicle categories, is a battleground among just seven models. The Ford F-Series and Chevrolet Silverado perennially lead the segment, with the F-Series recently re-taking the retail sales crown from the Silverado. This is part of a recent industry trend in which Ford products have surged while GM has struggled with many automotive industry challenges such as bankruptcy.
The "middle level" players include the Dodge Ram, Toyota Tundra, and GMC Sierra. The Tundra's share of segment jumped dramatically in 2007 when the larger, more competitive version was launched, but its share has slipped slightly since then and hovers in the 10% range. The Ram also benefited from its re-design in late 2008, but also has not been able to maintain growth. The Ram's share is now slightly above that of the Tundra and the Sierra.
The Nissan Titan and Chevrolet Avalanche make up the rest of the segment (the Lincoln Mark LT has been discontinued), as the Titan has not been able to compete with the re-designed Tundra and the Avalanche has suffered from GM's general woes.
At one time not too long ago VW was seriously looking at entering this segment. There are rumors that Hyundai is currently working the numbers to determine if it makes sense to plunge in. Clearly there are risks for the OEMs when getting into this segment (the current Tundra is Toyota's third try), but the rewards – high profits, high volume, and potential advertising claims, among others – are considerable.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.30.2010)
For the first five months of this year, the production of cars in Germany rose by a remarkable 26%. It was just a few months ago that the German OEMs reported a 10% decline in their production volumes for 2009 due to strong export reductions (-17%). Only the European scrappage schemes prevented the automakers from an even sharper downturn. These trends intrigued me, so I took a closer look at the significant comeback the German auto industry is making so far in 2010.
Given the German OEMs were impacted by the worldwide economic crisis, especially between the fourth quarter of 2008 and the second quarter of 2009, it is difficult to make a direct comparison with past car production trends. Nevertheless, the output of the first five months of 2010 is only 6% below the record car production level seen in 2007. As for the exports, the May YTD figure shows a 50% increase over last year. While this is a large increase, exports were extremely low during the first few months in 2009.
Exports are currently the only component to give impetus to the production in Germany. The domestic car demand is expected to fall 25% this year due to the expiration of government incentives. For 2010, we expect that 77% of the cars produced in Germany will be exported, as opposed to a 69% export rate in 2009. Incoming orders from foreign markets make the industry look quite optimistic in the medium term. Polk predicts that exports will reach 4.25 million cars in 2010, the second best year ever. Production is currently expected to be 5.5 million units, which would make 2010 the third best year in history — not bad for the first year after the most severe automotive industry challenges ever faced.
Click here to see the latest forecast for German Passenger Vehicle Sales.
Posted by Thomas Mawick, Manager, Automotive Studies, Polk, Essen, Germany (07.09.10)
I am currently attending the 10th Annual Telematics Detroit 2010. I left the first day with three main points: keep it simple, location services are key and telematics are not just for the luxury market.
Keep it simple. There's an app for everything these days available on mobile devices, but this isn't the best strategy for apps appropriate for moving vehicles. Customer retention and conquest sales will depend on an OEM's ability to balance the consumers' increasing desire to incorporate media seamlessly into the driving experience while maintaining vehicle safety. Simple apps designed for automotive use that engage the user, while improving the driving experience, will help win business.
Location Services. The first speaker of the conference, Thilo Koslowski from Gartner, revealed the top three applications consumers want. These include mapping, traffic, and weather updates. Seems obvious right? But most drivers are interested in getting from point A to point B in the fastest possible way. So focusing on delivering user location-based information services is key. The challenge will be differentiating vehicle mapping, traffic, and weather functionality from mobile device functionality already available.
Not just for the Luxury Market. Luxury vehicles will be the first to market with integrated telematics. But the real numbers start to hit when you incorporate telematics into volume vehicles. Ford is doing this today with their Sync system as is GM with OnStar, but the general consensus at today's Telematics conference was by 2016 industrialized nations will provide telematics on volume vehicles. Not too far away when you consider the automotive development timeframe.
Today's conference has really got me thinking about changes the connected car will bring to consumers and OEMs. Many questions are running through my mind that I'd like your perspective on. Is the key to monetizing telematics in vehicles differentiation or integration with mobile devices? Will regulation stop telematics in its tracks or can regulation even prevent media availability in cars and trucks?
Your opinion matters and I appreciate you sharing it.
Posted by Margaret Zewatsky, Product Strategist, Polk (06.09.10)
It's Friday and I didn't want to blog people down with a serious entry about the depressing automotive industry challenges or sales trends. Today I decided to blog about something lighter, but something that we can all think about—how can we make the car even better? The OEMs are doing such cool stuff already, as seen by features like the Ford SYNC® and the recently announced KIA UVO voice controlled system (to name just two), but what would make the car perfect for me?
Now, I’m not a techie. And frankly, I have no idea how my car works. I'm a marketing guy. But, I pay attention. I see all the neat new technology that my sons ask for, that I refuse to get them. And what I have learned most recently is, no matter what you want to do, there seems to be an "app" for that.
Take the automatic car starter. Today, they require you to push a button on a key fob aimed at the car. That's too much work. My colleague, Cenk Hepaktan, discussed new features that could easily be available with your smart phone in his blog last fall. I'd like an app that would allow me to set a timer to start the car and warm the seats, too. Then I could walk out my door and have my car running with absolutely no effort on my part. It seems simple like a marriage made in heaven.
Today, many cars come equipped with a GPS. A great advancement, but I know where I'm going when I drive. I want a system that tells the guy in the nearby car how to drive instead. Remember the old Mr. Microphone that let you project through your car radio? Same idea—if someone is tailgating you, your car could automatically broadcast into that car’s radio and scream whatever epithet is pre-programmed for that offense.
How about a car with a built-in memory? Computers have memories. Computers are in cars. Therefore, cars should have memories. I want to get in my car and simply say, "Work," and my car should take me to my destination. Actually, I'm pretty sure my car can already do this, since there are days that I drive to work where I would swear the car drove itself. I’ve also seen some pretty interesting ways that programmers are using their smart phones to actually DRIVE their cars, using telematics and smart phones, as can be seen in this humorous video.
However, I would prefer to not sit on or in the car. I would rather stay home and have the car drive and pick up my kids from their friends' houses. So I guess, those really far-fetched futuristic George Jetson ideas may be showing up at the next North American International Auto Show.
So have you thought about your perfect car? Are you already driving it? What features would you love to see at the next auto show? How can the OEMs create your perfect car? Posted by Jeffrey Stone, Sr. Marketing Specialist, Polk (02.05.10)
Last week I attended the AAIA Car Care Council—Women’s Board 2010 Winter Meeting at the Rio Hotel & Casino in Las Vegas. I was also honored to participate in a Hybrid Technology Panel to discuss the future of hybrid vehicles and how they will affect the automotive aftermarket industry.
Through the discussion, it became very clear that while hybrids are talked about a lot, they are still very, very young. As of July 1, 2009, hybrids represented less than 1% of the vehicles in operation. However, while currently not that significant, it is clearly viewed as the technology of the future. And, new technologies bring new challenges and that means new opportunities for the aftermarket.
The training available for technicians at this time is still very limited to only maintenance work and since these vehicles are still so new, it is too soon to determine what types of service issues they may be prone to.
All in all, the aftermarket needs to keep an eye on this small, but growing segment. Hybrids don’t appear to be going away, so we need to embrace and prepare for a very promising future.
Posted by Heidy Herrera, Account Representative, Aftermarket, Polk (01.26.10)
2009 will forever be remembered as an extremely turbulent year—filled with global automotive industry challenges. Global Light Vehicle sales for 2009 were approximately 61.9 million, down 5.1% from 2008. However, from a purely statistical point of view, the Global Automotive market demand seemed to be far more robust than expected at the beginning of 2009. November '09 sales were up 25% from the year before, and December '09 sales were up by about 22%! All together, fourth quarter sales were up about 17% over the final quarter of 2008, when sales bore the full brunt of the financial crisis.
Looking back we have to realize that demand was inflated by numerous government programs enacted to stimulate the automotive markets and as a result impact sales trends. On the other hand, it is astonishing how different the results were in most of the developed saturated automotive markets (e.g. the U.S.) compared to the upcoming "emerging markets" (e.g. China) which are still characterized by a very low density of vehicles on the road.
Stimulated by energetic government intervention, the global economy has stabilized in recent months so the basic economic outlook for 2010 is clearly better compared to the economic framework in 2009. Will the Global Automotive market follow this positive industry trend?
The latest Polk global light vehicle forecast report is available free for your download. This automotive forecast analyzes 2009 sales, Polk's economic outlook and light vehicle forecast for the year ahead. Take a look and let us know your expectations for 2010.
Global Light Vehicle Sales Forecast
Posted by Uwe Biastoch, Director Global Forecasting, Polk's Europe Operations (01.20.2010)
It was my honor to present the 14th Annual Polk Automotive Loyalty Awards at the Automotive News World Congress this week. We’ve discovered over the years that the more you know about customer loyalty, and the more you focus on it, the better. And I can tell you first-hand that we’re seeing more and more of our customers taking their loyalty objectives very seriously. Our 2009 Model Year winners are no exception!
Every year Polk recognizes automotive manufacturers for their superior performance in customer retention. Our Loyalty Awards are based on actual model year purchase and lease activity. This year, we analyzed over 4.5 million household records to determine our winners. In these days of struggling sales and overall automotive industry challenges, the winners this year are a testimony to those OEMs who recognized the importance of spending their resources wisely, and focusing on areas with bottom-line impact like customer retention; which we view as a “must” for automakers hoping to compete.
In our white paper, "Managing Customer Loyalty in the Auto Industry," we share three strategic tips automakers should consider when developing their plans to manage and build their owner loyalty. I hope you find it interesting.
In closing, and on behalf of R. L. Polk & Co., I want to congratulate all of the 2009 model year winners. I hope to see you all again next year at the 15th Annual Polk Automotive Loyalty Awards. Until then, continued success in your customer loyalty efforts!
Posted by Stephen Polk, Chairman/CEO, Polk (01.14.2010)
There has been much recent news and comment with respect to Europe and the sales environment looking ahead. We know from our own experience that the introduction of scrappage incentives can have positive influence whilst in effect, but can also have negative impacts on future vehicle sales. Further, our own analysis has identified unforeseen side effects relative to these programmes with reductions in loyalty rates. Once these programmes ended the loyalty rates returned to normal – demonstrating just how sensitive repeat buyers can be to these types of programmes.
With scrappage programmes coming to an end in Europe, and market-specific influences such as the VAT increase in the UK – it begs the question as to what we can expect in the years ahead.
We will be reviewing our most recent global automotive forecasts, with a detailed view on European Car Demand at a Polk EuroCar Seminar in the UK upcoming on 20 January 2010. For those attending, we look forward to reviewing these forecasts with you, and for those who cannot attend – we hope you will follow Polk’s Forecasting Dashboards or engage with us directly.
The current and projected sales trends have caused many vehicle manufacturers and dealers to increase their focus and attention on customer retention and related programmes. Customer loyalty and optimal aftersales programmes drive positive customer behaviours, and ultimately dealer and manufacturer profitability – key in the difficult sales environment. We will explore some of the best practices we have seen at the seminar, including such areas as predictive targeting and multi-channel integrated communications. Aftersales and service matter, and there are opportunities to succeed and drive results.
And whilst there is no doubting the impact of customer loyalty and retention, no brand can excel in these times without converting the highest percentage of active prospects. There are proven approaches to prioritising focus that generate demonstrable results in increasing conversion rates – and particularly with respect to internet leads. We will discuss our experience in this area at the seminar, and the broader effects the internet and social media are having on the industry.
These are indeed interesting times, but there remain opportunities for the taking.
Posted by Norm Marks, Vice President & Managing Director, Northern Europe, Polk (01.13.2010)
So there I was, sitting in my car at a local quick lube establishment, trying to stay awake, when I remembered I needed new wiper blades. I asked the attendant, who checked his stock and sadly told me he did not have blades that would fit my car. WHAT? How could that be? Sure my car is 12 years old...and a model that is no longer being built...by a brand that no longer exists. I still have the car and I still need to maintain it. I need this car, because I’m about to pass it down to my son as his first car. But I digress.
So why didn’t this oil change place have my wiper blades? They should know that there is a 12-year old Geo Prism in the area. It's basic parts and service etiquette! As a Polk employee I was curious to see what our vehicle population database said. So I did some research and there are 1,178 '97 Geo Prisms in the Detroit DMA. And nobody has a wiper blade for them?
But, maybe I'm being too harsh. The idea of stocking up for one specific vehicle is probably unreasonable, especially with all of the automotive industry challenges the aftermarket is currently facing. Yet, inventory efficiency is critical for automotive aftermarket companies. I know because I’ve been very fortunate to have met several companies that have implemented exceptional inventory management systems. These are the winners of Polk's Inventory Efficiency Award. How good are they? Check out their award-winning projects at: http://usa.polk.com/Industries/AfterMkt/videos.htm.
Want a deeper dive? Check out this case study about Uni-Select, a large automotive parts distributor who worked with Polk to develop an e-modeling tool to save their customers time and money. I think you will be impressed.
And hopefully the next time you need a car part—it will be in stock!
Posted by Jeffrey Stone, Senior Marketing Specialist, Polk (11.12.2009)
This has been a difficult year with many automotive industry challenges; consequently, marketing budgets have been cut significantly. I attended EquipAuto 2009 for the fifth time as a visitor, and the second time as an exhibitor. I must say that the show left me with a funny feeling.
Despite rumors of cancellation, the exhibition took place from the 13th to the 18th of October in the North of Paris. The limited number of exhibitors meant that the surface was reduced from six to two halls. I was even more surprised to discover that these two halls were not full. Last minute budget shortages left so many holes, it was like navigating your way through a piece of Swiss cheese. It really was unusual to have such a low turnout of exhibitors, yet the increased visibility worked to our advantage. The attendants could spend time on stands, discussing the technologies and the innovations.
The event included the traditional tooling, servicing and hardware exhibitors showing usual products supported by new sales concepts -- those mainly acting in the independent aftermarket. I've noticed the growing importance of computers in the traditional parts & service industry. The image of the greasy mechanic dressed in blue is quickly being replaced by a clean consultant, checking databases and launching programs to give you the expected answers and service for your car.
I noticed something else different – it seems the first steps are being taken to follow the path required by the many new regulations for environmentally-friendly cars. After years of heavy cars and big engines, we are living through a major change to more efficient, lighter, and safer cars. And to support that, parts and service suppliers brought new things to the table -- new technologies that go along with drastic reductions of carbon emissions. I’m talking about the growing number of dry cleaning solutions, the LED suppliers, the catalytic converters fabricants, etc. Innovations are following the evolution of cars. The more than necessary reaction and adaptation to change within the industry is finally here. It is costly, but the adaptation to the upcoming cars is necessary, especially since the scrappage premiums and the CO2 regulations in Europe are accelerating the phenomenon. Although, the crisis been difficult on the industry, the creativity and innovation remain!
Posted by Bertrand Rakoto, Analyst for Marketing and Consulting, Polk (11.11.2009)
There's still a lot of press regarding automotive industry challenges like the recent GM and Chrysler bankruptcies and related dealer closings, but has anyone looked at the domestic OEM’s market share lately? I have and the industry trend is very sobering – GM, Ford and Chrysler combined retail market share has dropped over 10 percentage points during the last five years and is currently hovering around 40%. Yes, almost two out of every three vehicles currently purchased at retail in the U.S. is an import. I know that the definition of an import is fuzzy at best with Hondas built in Ohio and Subarus built in Indiana; but for the purposes of this discussion, let’s consider anything not made and/or distributed by the Detroit Three an import. We’ll also count future Fiats and Alfas as domestics since they will be distributed through Chrysler dealers.
My crystal ball is as cloudy as anyone else's, but I don’t see this sharp downward trend reversing in the near term. With the impending demise of Saturn and Pontiac, the reduction in GM and Chrysler dealerships and the heightened import competition (particularly Hyundai, Kia and VW), Detroit Three share can’t help but continue to slide even further. Add to the mix a newly refocused Toyota and vehicles from China and India on the horizon, and one can only wonder where the domestic share will bottom out.
I can say that from R. L. Polk's automotive forecast, we expect the Detroit Three total market share (including fleet units) to stabilize around 40% over the next five years. Even with Ford's recent uptick in share, I predict the Detroit Three to account for only 25% to 30% of the retail U.S. market within the next five years. What's your forecast, and what, if anything, can the Detroit Three do to become the Big Three again?
Posted by James Dimond, Vice President of Global Network Planning, Polk (10.28.2009)
Join me and my colleagues from Polk on November 3rd-5th at AAPEX 2009, located in the Sands Expo Center at the Venetian Hotel in Las Vegas, NV. On November 3rd, Uwe Biastoch and I will present: "The New Global Automotive Outlook—What Will the Recovery in Global Volumes Mean to You?"
The global automotive aftermarket industry is at a crossroads. Challenges of the global economy, reductions in global vehicle demand, the contrast between saturated and emerging vehicle markets, changes to the automotive manufacturing landscape, and new players looking to dominate the global stage... what does all this mean to you? Come hear how the ever-changing global automotive forecast is expected to change our industry in the years to come.
You’ll learn about:
The economic outlook of the U.S., Europe and Asia
How new vehicle registrations, production and the global vehicle population are expected to change in the coming years
How the global aftermarket may evolve in years to come
Meanwhile, Polk will be displaying its data-driven solutions for the global Automotive Aftermarket & Commercial Vehicle industries at the 2009 Automotive Aftermarket Products Expo (AAPEX). Stop by Polk Booth #838, to learn how Polk can help you address some of your toughest business challenges:
Information Process Management
Inventory Management
Forecasting
Global Vehicle Volume Analysis
Target Marketing
VIN Decoding
Recall Campaigns
Commercial Aftermarket Demand
Fleet Profiling
And More
Click here for more information or to register. We’re looking forward to seeing you there!
Posted by Dave Goebel, North American Forecast Consultant, Polk (10.19.2009)
Listen-up independent repair facilities! Pontiac, Saturn, Hummer and Oldsmobile brands alone represent 15.2 million vehicles on America's roads today. Combined with the closing of many OEM locations and the consolidation of their networks to meet vehicle sales projections, you should now ask yourself, "Who's going to service and sell parts for all of these vehicles?" There is no question that consumers are keeping their cars for a longer period of time, prompting a greater need to pay for parts and service.
I don't know too many people who enjoy reveling in the misery or demise of others. I do know how to recognize an opportunity when I see one, though. It's like this time when I was a junior in high school and the kid in front of me on the basketball team went down with an injury. I got my shot, added value to the team and earned some playing time. Did I enjoy seeing him in pain or losing minutes on the floor just because he got hurt? No, but I did relish the chance and take advantage of the opportunity that was presented me.
There is a bittersweet opportunity available to the automotive aftermarket in the near future. For independent repair facilities, there may be an even greater opportunity because studies suggest there are exorbitant differences in parts and labor costs between franchise dealers and independent repair facilities. This is just the type of play that could keep independent repair facilities ahead of the game.
I heard much lament over Cash for Clunkers stealing some of the volume from the automotive aftermarket. Although those concerns are valid, the future is looking brighter. Even though I don't see fireworks and hotdogs on the horizon, I still feel confident calling it "Independents Day".
Posted by Therran Oliphant, Account Representative, Polk (10.09.2009)
Yet another entry in the book of automotive industry challenges this year...talks with GM's Saturn and the Penske Automotive Group fell through. There have to be some very heart-broken dealers out there right now and it's discouraging to see a hopeful marriage fall apart before the bride and groom chose a date.
But let's speculate on a scenario: What if an OEM such as Toyota or Hyundai took the Saturn brand? What a clever, defensive move that would be. Recall that Saturn was to be GM's "import-killer" when they launched the brand in 1985. But this never blossomed. In fact, past conquest analyses from our company showed that most of the Saturn buyers were mainly from other GM divisions. That's not doing the job.
While the Saturn retail model was refreshing and unique (hassle-free and highly customer-centric...recall their tagline? "A different kind of car company"), the product line got stale and investment in Saturn from GM waffled. However, there have been many people talking about what a great opportunity Saturn represented to give US domestic auto owners a taste of an import experience. I think many domestic "loyalists" would come running if they knew another established and growing import manufacturer took the helm. Particularly one with a strong brand image and talent for growth.
Or...would a Chinese entrant seeking to capitalize on an existing North American retail network want to pick up the tab? Is there something here?
Being in the auto industry, this is tough to watch. I feel for the Saturn retail network and their raised spirits which are likely falling today. Let's hope GM can find ways to nurture current Saturn owners and not erode customer loyalty through this brand elimination. GM put good product on the road with Saturn. Let's hope more can be done.
Posted by Lonnie Miller, Director of Industry Analysis, Polk (10.01.09)
In a recent Polk View on automotive industry challenges, we looked at the impact of Chrysler's and GM's bankruptcies, brand eliminations and dealership closings on consumer attitudes and likely buying behavior. Our ongoing consumer research program painted a picture that wasn’t particularly rosy just a few months back: over two-fifths (43%) of surveyed consumers were likely to defect if their local GM or Chrysler dealer closed; one-third (35%) would be less likely to purchase a brand being discontinued and a similar proportion (34%) said an auto company bankruptcy would make them less likely to buy.
Consumer Attitudes - Impact on Purchase Consideration Level of Agreement: I am less likely to buy because of...
Fortunately, things are starting to look a little brighter for the U.S. auto industry, with positive signs emerging in a relatively short time. GM's and Chrysler's rapid emergence from bankruptcy and the government's highly successful Cash for Clunkers program have been big factors contributing to the improvement.
While we're clearly not out of the woods yet, there are some signs of an upturn. Chrysler recently announced it's re-signing 140 dealers of the almost 800 closed under bankruptcy protection. As reported in Automotive News, dramatic cost cutting and production cuts, along with Cash for Clunkers sales, have left auto inventories at their lowest levels since 1992 and now automakers are scrambling to build more of their popular models. GM just announced that it's increasing production and calling back laid-off workers at several plants to fill the void. Retailers also report a late model used car sales boom from shoppers who didn't qualify for Cash for Clunkers and the increased traffic is driving service and maintenance business, which are both quite profitable.
Things seem to be boding well for Ford, which gained market share due to the other Detroit manufacturers' duress. Also, Toyota has trimmed its huge losses from last quarter. Economic indicators add to the optimism: the stock market's up, GDP is shrinking less than previously, unemployment is slowing, the housing market may have hit bottom and consumer confidence is showing signs of renewed life.
Let's keep our fingers crossed that the economy, a leaner and meaner GM, and Fiat’s merger with Chrysler all mean that brighter days are ahead for a smaller but "better" auto industry. What do you think? Are things improving for the U.S. auto industry?
Posted by Bruce Giffin, Corporate Market Research Manager, Polk (08.24.2009)
There's been a lot of talk and media attention to the weak state of the auto industry, so I decided to take a look at a segment of the market that doesn't get covered quite as much: the luxury market. Surprisingly, we’re still not seeing the drop in luxury vehicle sales this year that might have been expected considering the current economic and automotive industry challenges.
Sales Trends
Industry trends are showing that luxury vehicle sales have declined 34% year-to-date compared to 2008, less of a decline than the 35.1% drop experienced by the overall category of cars and light trucks. Looking strictly at cars (not trucks), we see a drop of 35.8% from last year...still lower than the year-over-year 38.6% drop for non-luxury cars. We have noticed a slight shift to lower-priced luxury cars, with greater sales declines seen in the higher-end flagship cars such as the Mercedes-Benz S-Class, the BMW 7 Series, and the Lexus LS.
The sales trend is better for trucks, although the segment still experienced a decline. Sales of luxury trucks are down 30.4% year-over-year compared to a 31.9% drop for non-luxury trucks. And some brands are increasing market share and sales. The Lexus RX is the luxury truck leader, and has increased its share of the luxury truck market by four percentage points over last year. The new Audi Q5 and Mercedes-Benz GLK-Class have added almost 12,000 units this year through May.
Customer Loyalty
Tracking customer loyalty and competitive financing programs will help identify keys ways to increase share as the industry struggles to recover.
The luxury auto makers still have to contend with declining loyalty. Polk’s most recent loyalty study shows serious declines for Lexus, Infiniti, and Volvo. BMW, Porsche, and Jaguar have all improved their loyalty for Q1 2009, but loyalty in the luxury segment overall is down 1.5 points from the prior quarter.
Leasing
While leasing for luxury cars and trucks has declined from last year, it’s probably not the great leasing deals that are causing defections. Luxury truck leasing is down 47.8% from last year and leasing of luxury cars has dropped 44% since 2008. Leasing penetration is off for most makes, but as credit conditions ease, manufacturers with the best financing programs will increase both loyalty and conquest.
Careful management of customer retention to increase loyalty and implementation of competitive financing programs will be the key to increasing market share until the segment rebounds.
Posted by Rick Vicedomini, PolkInsight Advisor, Polk (07.30.2009)
In my last blog post, I shared two critical dealership survival strategies for today's economic slump: 1. Know your market and 2. Obtain a fair and objective assessment of your dealership facility. Following are two additional steps that all dealers should take in light of the current automotive industry challenges:
Step 3: Maintain a steady and open dialog with your OEM and understand your dealer agreement: In most countries, the only way new vehicles can be sold or have warranty service performed is through a franchised dealer. Accordingly, auto companies are continually seeking to optimize their dealer networks by evaluating and scoring such items as sales performance, customer satisfaction and financial strength. Through open and direct communication with their OEM's field or home office personnel, dealers need to be in tune with their OEM's network strategy and how they fit into it. Just as every college student knows what their GPA is, every dealer needs to know what their performance scores are with their OEM. Any shortfalls need to be addressed with a corrective plan.
While listening to the recent Capitol Hill testimony regarding U.S. dealer terminations, it became painfully clear that many dealers either didn't read or understand their dealer contracts to know what was expected of them. Most don't read it until there's trouble. Dealers need to thoroughly understand every facet of the contract by reviewing it with either their field rep or business attorney.
Step 4: Take care of your current and potential customers: CRM, business development centers and effective lead management are more than just industry buzzwords; they are the most important activities a dealer can and should undertake to ensure survival. Many dealers have told me that following up with existing customers is the major initiative getting them through these tough times.
Customers now expect basic conveniences like service shuttles or free overnight service loaners. Dealers that don't offer these and other customer perks aren't even in the game. Customer handling may get a little lax in a 17 million unit industry, but it's importance cannot be overstated in a 10 million unit industry.
The economy will eventually recover, but the "good old days" and "boom times" for dealers may never return. The future for a dealer includes increased competition from existing dealers and new entrants (e.g., Mahindra, Geely, Cherry, Fiat and the "new" Saturn), continued economic pressures (fluctuating oil prices, credit & real estate) and a more discriminating consumer with lofty expectations. The days of "Mom & Pop" dealerships are long gone, and going forward, the successful dealer must be sophisticated, technologically advanced and competitive in all aspects of the business. Posted by James Dimond, Vice President of Global Network Planning, Polk (07.29.2009)
It's no secret that with the global recession, tight credit, low consumer confidence and a U.S. new vehicle industry down over 40%, it is a very difficult time to be a car dealer. No one knows how long the recession will last, but in a recent Automotive News editorial titled "Don't expect normalcy anytime soon," Editor-in-Chief Keith Crain warned dealers that "Chaos will be the norm." Automotive consultant Dennis DesRosiers closed his recent Canadian newsletter, Uncharted Waters, with the quote, " there is going to be a whole pile of 'ungood' over the next few years." Although both are right, there are basic survival strategies that can help dealers weather the current automotive industry challenges and prepare to flourish when the economy does improve.
Hopefully by now, surviving dealers have already performed the "basics" such as cutting all unnecessary expenses, right sizing the staff and refocusing the entire operation on customer satisfaction. Here are additional steps dealers must take to get through the industry slump:
Step 1: Know your market: In good or bad times, a successful dealer needs to continually analyze basic market data to determine which vehicles are selling in their area (both new and used), who's selling them and how their dealership stacks up against local competitors. Most publicly-held companies and successful, large dealer groups have this information readily available and fully integrated into their sales and service strategies. This information not only helps dealers balance their new vehicle inventory, but lets them know which are the hot-selling used cars they should buy at auctions. Data-based decisions also allow dealers to more effectively evaluate the success of their marketing campaigns.
Step 2: Obtain a fair and objective assessment of your dealership facility: In today's hyper-competitive market, it is absolutely critical to have a clean, well-maintained dealership. Too often, dealers become complacent about their facility's attractiveness. They need to drive the market in the daytime, nighttime and weekends and critically assess how their facility rates against the competition, including independent used car lots and service facilities. Better yet, the dealer should have someone else do this to remove any subjectivity. After all, how likely is a customer even going to walk into a poor appearing facility, let alone plunk down $30,000 for a new vehicle?
All major OEMs have a facility brand image program, some with incentives for upgrades. If a dealer hasn't taken part in the facility program, they may as well do it now, because the OEM and the consumer will be demanding it in the near future. I know the timing seems bad, but if the facility is deficient, it needs to be corrected now.
In my next blog post, I'll talk about two additional dealership survival strategies.
Posted by James Dimond, Vice President of Global Network Planning, Polk (07.27.2009)
With the rash of cost-cutting in the face of current automotive industry challenges, I feel like something should be said on behalf of digital investment. It’s no secret that the number of dealerships will drop dramatically this year and beyond. I think it's obvious that the economy has had a fairly dramatic effect on consumers, too. But it’s more than just declining sales. The economy is also impacting how consumers are shopping for their next new car or truck.
If consumers are replacing vehicles at a slower rate, this means they are taking more time than ever to research their next purchase. Odds are they are staying away from the actual point of sale to avoid the perceived risk of being trapped by dealers desperate to get a sale. Instead, consumers are doing vehicle research via the Internet from the comfort of their homes.
With consumers spending more time online gathering information, digital marketing has become significantly more important. Yet I get the sense that some manufacturers and dealer groups are considering reductions in their online investment (e.g., less content and fewer features).
Closing even one brick and mortar store is a difficult decision. The decision to cut digital investment is not one that should be taken lightly, either. In this difficult time, carmakers and retailers should make every effort to maintain or even increase their investment in their customers' online experience. Otherwise, they risk losing sales to dealers who realize the power and potential of digital marketing.
Posted by Derek Vertin, Product Strategist, Polk (07.22.2009)
The eagerly awaited Cash for Clunkers program is one of the hot topics du jour in the automotive industry. Given the current automotive industry challenges, any additional incentive program could be an instrument in enabling the recovery of auto sales. Although experts in general are skeptical of the real impact on sales trends, many in the industry are wondering how many households qualify for this new program (although the budget cap on the program will make it impossible for everyone who qualifies to participate).
Here at Polk we created a model identifying the households likely to own a vehicle that qualifies for the Cash for Clunkers program. At the same time, independently of the Cash for Clunkers model, we segmented the entire US market into groups based on the type and number of vehicles they own, age and market value of the vehicles, income and ability to pay for a new vehicle (with or without extra incentives). Based on this segmentation and the Cash for Clunkers model, we came up with a rough estimate of the program's market potential: 4 million.
Let me explain how we arrived at that number.
Roughly 11 million households are highly likely to own clunkers. However, not all of these will be able to afford a new vehicle, will be interested in taking advantage of the program or will even be aware of it. Of the 11 million clunker owners, we identified a group (about 6.5 million), that have high income and can easily afford a new car. Most likely, these people keep the clunker as an extra vehicle in their garage. It is hard to tell without further research how many of these households will actually be interested in getting another new vehicle, but a fair estimate is about 3.5 million.
Another segment of 2.5 million clunker owners have relatively low incomes and will probably be challenged in securing funding for acquiring a new vehicle, even though they may actually need one. We estimate conservatively that about 500,000 consumers from this group will actually be able to acquire a new vehicle via the program.
Whether or not the Cash for Clunkers program results in the additional 4 million sales we estimate will depend on a series of factors that are difficult to control. First, the $1 billion budget cap allocated for the program limits severely the number of customers able to take advantage of the program. Even if the budget were unlimited, some households would want to purchase new vehicles that wouldn't qualify due to poor gas mileage. Other consumers will simply not want to incur payments for an extra new vehicle, even if they can afford it, and yet others may not even be aware of the program. Even with those caveats, we believe that the potential of the Cash for Clunkers program is significant.
Posted by Dan Zetu, Analytic Consultant, Polk (07.20.2009)
Given the German OEMs were impacted by the worldwide economic crisis, especially between the fourth quarter of 2008 and the second quarter of 2009, it is difficult to make a direct comparison with past car production trends. Nevertheless, the output of the first five months of 2010 is only 6% below the record car production level seen in 2007. As for the exports, the May YTD figure shows a 50% increase over last year. While this is a large increase, exports were extremely low during the first few months in 2009.
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