Diesel

Why don't small diesel cars get bought or sold in the U.S.? The last time you were in Europe up to 40% of the cars driving next to you were diesels. They were getting up to 60 MPG and didn’t have complex recharging systems or heavy batteries. Could you tell? They weren’t smoking, they didn’t sound like an F350, they were probably going to last longer than the petrol version next to them and they are great mid and small sized cars. This industry trend seems almost absent in the U.S. consumer marketplace.

If you could buy the new Taurus as a Turbo Diesel and get 40 MPG, would you? If you could buy the same Saab, Audi or BMW that you buy here in the U.S. today and get double the mileage with none of the hybrid costs or future headaches of replacing batteries – would you? I know I would.

If you wouldn't buy one, why not? Most of these vehicles have been engineered to meet U.S. vehicle safety and crash standards. The diesel that you can buy here in the U.S. is now clean enough to put in their highly tuned engines without destroying them. What is stopping the OEMs from bringing them over by the boatload? VW is making a start – their TDIs appear to be selling well but this is a small manufacturer with few models. Is it really public opinion of diesels that is driving manufacturer behavior? Has there been no consumer research to gauge loyalty for this forgotten automotive engine segment? Or are the manufacturers overstating consumer concern and missing a huge opportunity to improve U.S. fuel consumption on new vehicles... and limiting consumer choices? I know that when I buy my next vehicle, it will be a diesel since I commute 86 miles to work each day.

Posted by Chris Royle, Director, Global Product Strategy, Polk (09.15.09)

Everyone is talking about the market turbulences caused by the governmental scrappage schemes in different European countries. Much has been made of the fact that many consumers have "pre-bought" in 2009, which will have a negative effect on the sales trend in 2010. But, nobody is really talking about how the scrappage schemes have changed the market structure. I decided to look at the effect of the scrappage schemes on diesel-powered cars to see what the effect on that important vehicle segment might have been.

I found that the scrappage schemes had a significant and negative effect on diesel car sales. During 2008, the long-term upward trend of increased European market share for diesel vehicles came to an end, peaking at about 51% of total new car registrations. In contrast, during the first seven months of 2009, the share of diesel cars in the European market share fell to 45%.

Diesel Share Europe

Why did the scrappage incentives cause diesel sales to fall? People bought a heavier level of mini and small cars during the scrappage incentive period, which took away from diesel sales. As consumers who purchase mini and small vehicles typically use them for urban driving, they don't find that spending the extra money for diesel cars is justified by the savings in fuel costs. Also, since there are fewer diesel models in small or lower vehicle segments, consumers bought more non-diesel models as a result of the incentive programs.

Here is an example of the shift from diesel sales: In the German market for the first seven months, the share of diesel vehicles fell by 14 percentage points to 30% this year. I have not seen this low level of diesel penetration since about 10 years ago.

Diesel Share Germany

While we have to assume a total sales volume reduction in markets that are currently heavily supported by scrappage programs when the programs end, we also expect a normalisation in the market structures. We would expect to see sales in the small vehicle segment go down next year, which will automatically cause the market share of diesel vehicles to increase because of the higher diesel penetration in larger vehicle segments.

The scrappage schemes have given auto analysts a hard time – it is essential for them to get quick and detailed data in order to analyze the sales trends and distinguish short-term market reactions from real industry trends. From my perspective, the reduction in diesel sales is one example of a short-term sales trend.

Posted by Thomas Mawick, Manager, Automotive Studies, Polk, Essen, Germany (09.02.2009)

The first vehicle from India will go on sale in the U.S. early next year, several months later than its original 2009 launch date. Mahindra & Mahindra will launch the yet-to-be named diesel powered pickup through distributor Global Vehicles U.S.A. Inc with a 50,000 annual sales target. This sales goal seemed aggressive for a compact pickup with no brand recognition, so I did some analysis to find out how realistic it would be for the Mahindra pickup to reach 50,000 units annually.

The Mahindra pickup will enter the U.S. pickup market at a turbulent time. The entire pickup market has been contracting since 2004 and the compact pickup market, which the Mahindra pickup will likely complete in, is dominated by the Toyota Tacoma. When I looked at sales trends from Polk's new vehicle registration data, I found that the Toyota Tacoma had a 53% share in the compact pickup market for the first five months of 2009. And, no other compact pickup besides the Tacoma had sales above 45,000 in 2008. The market size, competition and the fact that the Mahindra pickup is the only diesel fueled pickup in the compact pickup segment makes the 50,000 sales target a stretch goal for an established brand, let alone a new brand unknown to many Americans.

Jan-May 2009 Market Share by Model in Compact Pickup Truck Segment

Polk just released a Polk View titled "Is the U.S. Auto Market Ready for Indian Vehicles?" The Polk View discusses topics relating to Mahindra & Mahindra entering the U.S. market including recommendations for initial launch markets, a market entry analysis on the Mahindra Scorpio SUV that will launch in late 2010 or 2011, and likely reception of both of these vehicles in different U.S. markets.

I invite you to read the Polk View and let me know your thoughts about how the Mahindra pickup will fare in the U.S.

Posted by Margaret Zewatsky, Global Market Analyst, Polk (08.13.2009)

I can almost see the headlines on CNBC or Fox Business noting that occult store stock has surged, due to the preponderant purchase of soothsayer assistance items. Magic 8 balls will reach the spire of their economic demand since being paired with lava lamps, and businesses will start hiring mystics to work with their economists and business analysts. Maybe that is more than a little far-fetched, but to assure ourselves we never reach the point of crystal ball and lucky rabbit's foot dependence, the commercial vehicle industry must go through some realistic and sound self-assessment. More than ever, my customers are looking toward forecasting tools in the hopes of gleaning enough  knowledge about their market and the business climate to make informed decisions that will mitigate the effects of the slumping economy on their businesses.

While the industry is extraordinarily complex and there are no one-size-fits-all solutions, there are some major points of emphasis that may act as a general indicator, applicable to most businesses looking for some direction. The three following issues can greatly impact the decision-making process of just about any business in the commercial vehicle market.

First, diesel engine emissions standards are becoming increasingly tough. This is especially true in the heavy duty segment, and it has already shown up in new vehicle registration volumes over the past 2-1/2 years. Meanwhile, at the other end of the spectrum, class 3-5 vehicles have increased their market share 3% - to 41.6% of the total truck market - in the same time frame. Look for this industry trend to continue as the projected Compound Annual Growth Rate (CAGR) of Class 8 vehicles looks very weak until 2013. 2009 new vehicle registration volumes will fall again, to 380,600 vehicles. This number is less than half of the new vehicle registrations of 2006. VIO is still expected to climb, which suggests there will also be much less scrappage than in years past. On the positive side, the combination of those two metrics should mean an increase in used vehicle volumes and parts and service activity. Third, we can safely say that the industry will start to recover by Q1 2010, with the overall business climate of the country and the world. Commercial vehicle registrations will rebound to above 2008 levels as early as next year. Survival is the key to reaping the benefits of the upcoming growth markets, but we know bear-like hibernation is not an option until then. 

How do you plan to maximize profit before the impending demand spurs need?
Polk Solutions Consultant Dave Goebel speaks about these issues in much greater depth in this Polk View, "The Future of the Commercial Vehicle Market." 

In a stormy business climate, navigating the troubled waters effectively can mean the difference between capsizing or making it safely back to harbor. Question is, are you using a compass or a talisman to get there?

Posted by Therran Oliphant, Account Representative, Commercial Vehicle Group, Polk (07.06.2009)