It seems that almost every other vehicle on the road these days is a small utility vehicle. In fact, this category comprises two distinct sets of light trucks, one that is thriving and one that is holding on for dear life.
Compact non-premium crossovers (CUVs), those vehicles using a unibody, car-like architecture, offer the compelling combination of a car-like ride, superior fuel economy, competitive pricing and SUV-like utility. With this combination of features, the small crossover share of the retail new vehicle market has almost doubled to 11.2% through the first six months of this year from 6% in 2005. Excluding the luxury market, small crossovers now account for almost 13% of the market. They also account for more than a third of all utility registrations, including all sizes, architectures and brands. Small non-premium crossover retail registrations (June 2010 YTD) are up 26% year-over-year, substantially above the industry increase of 10%. Almost every make now offers a small crossover - there are now eighteen models on the market versus fourteen just five years ago.
In contrast, small utilities using a traditional body-on-frame design, which is common among pickups and large SUVs, currently account for only 1.99% of the industry, and they make up just 15% of all non-premium compact utility registrations. There are only five truck-based small utilities, less than a third the crossover model count. Truck-based small utility registrations (June 2010 YTD) are just 84,871, down 8% year-over-year.
Several makes have benefited from this surge in small crossover market share. The Honda CR-V, Toyota RAV4 and Subaru Forester are the most popular light trucks for their respective brands, and, not coincidentally, these three models were the original small crossovers, introduced in the 1990s. The Escape is Ford's number two light truck, and had the domestic compact crossover space to itself for several years before the launch of the four-cylinder Equinox and others. Lastly, the recent launch of the GMC Terrain has helped stabilize the share of both GMC and its parent company.
On the other hand, neither Dodge nor Chrysler has yet launched a small crossover, leaving a substantial hole in their product portfolios. And Nissan came to the party late, launching the Rogue in 2007, years after its Japanese rivals.
Posted by Tom Libby, PolkInsight Advisor, Polk (08.31.2010)
Discussions about aspirational luxury makes almost always include at some point a mention of BMW, Lexus and Mercedes-Benz. It is not a coincidence that these same three makes (and Jaguar) have at least one entry in both the very high-price, and low-volume, luxury car segments: the Large Premium Sedan and Large Premium Sport Segments. In fact, both BMW and Mercedes-Benz have multiple models in one or both of these segments. It is also not a coincidence that several luxury makes striving to attain the image of BMW, Lexus and Mercedes-Benz are not represented in either segment. These "near-luxuries" include Volvo, Saab, Acura, Infiniti, Cadillac and Lincoln. Audi falls somewhere in the middle, as it is represented in the Large Premium Sport Segment with the R8 and in the Large Premium Sedan Segment with the A8/S8, but the latter has struggled and is currently selling at a far lower rate than any of its German competitors.
Together these two segments now account for less than 1% of the U.S. retail new vehicle market, but having a product in these categories is invaluable. Each large premium sedan or sport car on U.S. roads lends its respective make an aura of true luxury and exclusivity that a lower-end model can't generate. Don't look for any of these high-price models to be discontinued any time soon, even if volume drops further (unless the brand itself is in serious trouble). Lastly, when one of the "near-luxury" brands is able to successfully market a vehicle in one of these segments, that marque will have genuinely "arrived" in the luxury market.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.30.2010)
For any brand, automotive or non-automotive, greater diversity across its product portfolio reduces risk since dependence on any one product is limited. Given the generally high quality of today's new vehicles, there is not as much risk as there used to be of one product being virtually crippled by a major quality problem, recall or bad publicity.
The seven leading premium marques have varying degrees of product diversification (see table below). Mercedes-Benz appears to have the most diverse set of vehicles, as no Mercedes-Benz model accounts for more than 29% of the brand's total U.S. retail new vehicle registrations (May 2010 CYTD). And each of four Mercedes-Benz models has more than 10% of the make's registrations, something only one other brand (Acura) can claim.
Other premium brands with moderate diversification include Acura, Audi (which is less reliant on the A4/S4 than it used to be), Cadillac and Lexus. Both BMW and Infiniti are heavily reliant on one product, with the 3-Series accounting for almost half of all BMW sales and the Infiniti G claiming almost six of every ten Infiniti deliveries.
It is also noteworthy that the three leading large premium sedans (7-Series, LS and S Class) each account for exactly 6% of their respective brand's portfolios, suggesting the direct competition among them and their ongoing positioning against one another. Lastly, for six of the seven leading luxury market brands, the model with the highest proportion of registrations is a small car or crossover, which one would predict given these models' low prices. However, this is not the case at Mercedes-Benz, where the E-Class out-sells the smaller and less expensive C Class, which underscores the long history – and substantial owner base - of the midsize E in this country.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.28.2010)
More than half of all premium new vehicles delivered to private retail consumers in the U.S. are now equipped with either all-wheel drive or four-wheel drive, according to Polk new vehicle retail registrations for the first four months of 2010. Three drivers of this trend have been the growth of crossovers, the consumer's increased interest in safety, and OEMs' continued use of common platforms (including those designed and engineered with AWD) for both non-luxury and luxury products.
The premium AWD mix has been steadily rising since 2005, when it was a little over a third of the market. At the make level, two of the three luxury market volume leaders, Mercedes-Benz and BMW, have driven this trend, as their AWD penetration rates have climbed from less than a third to 54% and 46%, respectively. The trends have been similar at other major luxury makes including Acura, Infiniti and Cadillac. Audi's exceptionally high AWD mix of 81% reflects the installation of its highly-touted Quattro on virtually every unit. The premium retail volume leader, Lexus, has actually exhibited a slight drop in AWD penetration, though it remains over 40%.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.27.2010)
The interview with Sergio Marchionne, CEO of both Fiat and Chrysler, related in the
July 3-4 edition of The Wall Street Journal, and conducted by Paul Ingrassia, includes Mr. Marchionne's plans to position Chrysler and Fiat's six brands in the U.S. new vehicle marketplace. Mr. Marchionne says that Dodge will focus on performance, Chrysler on the mainstream market, Jeep on SUVs and Ram on trucks. Several of these efforts are well along. Jeep is already pretty much where it needs to be, and will be more clearly defined when one or more of its two crossovers, Compass and Patriot, are dropped. Jeep also will benefit going forward from the recent discontinuation of Hummer, a make that could have been a direct challenge to Jeep. Dodge has been promoting performance for years.
Positioning Chrysler as a mainstream OEM brand will be a change – heretofore Chrysler had been a mid-level make, a la Buick, with dreams of even being a luxury make going up against Cadillac or Lincoln. To be re-positioned as a mainstream make, Chrysler will need a broader product portfolio and these products will need to be priced competitively with those from other mainstream brands, including Ford and Chevrolet. This certainly can be done but it will take a while as customers' perceptions of the brand will need to be changed (as opposed to reinforced as in the cases of Jeep and Dodge).
Two other thoughts come to mind. One is that the brand positioning strategy laid out by Mr. Marchionne in the Wall Street Journal article implies the company will not offer a brand in the luxury market other than the niche Alfa Romeo. This is actually in keeping with other thoughts he mentions, including that "I don't want to conquer North America. I only want a share." But one benefit of a high-end brand is its profits, which can be used to fund product programs company-wide. Without these profits, which Chrysler's competitors currently enjoy, Chrysler will need in the long-run to find other sources for funds for product programs.
Lastly, as mentioned in the same Wall Street Journal article by Mr. Ingrassia, it is no secret that Chrysler has struggled in vehicle quality as measured by both J.D. Power and Associates, and Consumer Reports. If Mr. Marchionne wants to widen the universe of shoppers for each of the six current and upcoming Chrysler brands, it might make sense to improve the company's quality image to attract some owners who currently pass by Chrysler dealerships on their way to Asian, Ford or GM stores.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.21.2010)
Even though the automotive industry has experienced exceptional turbulence in the past few years, some things have not changed all that much. One of these is the propensity of males to purchase certain types of vehicles and females other types. Men, who still comprise more than half the new vehicle buying population, remain the dominant purchasers of pickups (all sizes) and high-end vehicles in the luxury market. Four of the five segments with the highest percentage of male buyers three years ago are also among the top five this year. (The data address actual purchases, and do not reflect who influenced the purchase decision.)
Woman, on the other hand, are more likely to buy a small car or sport utility vehicle than other types of cars or light trucks. Similar to the results for males, four of the five segments with the highest percent of female buyers back in 2007 reappear on the list this year. These include three small car categories and one small utility segment.
These industry trends are driven by the vehicles' functionality, basic economics and cultural norms. Regarding functionality, men are simply more likely to need pickups for their jobs than women (though there are other reasons for men to prefer pickups as well). Economically, young single women don't have unlimited financial resources, so they tend to gravitate to the more economy-minded vehicles, which are smaller. Older women are more likely to be married, in which case most of the time the actual legal purchaser in the household is the male. Similarly, households with exceptional amounts of disposable income with which they can purchase high-end sports cars tend to include a couple where, again, the purchaser will be the male. These economic and cultural patterns don't change all that much, which in turn drives the stability of the buying patterns illustrated in the attached table.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.20.2010)
A wise neighbor once told me, "Everyone wants to get a house in the best neighborhood, but then they don't want anyone else to get in." The same may apply to the luxury vehicle market. Everyone would like to drive a Mercedes-Benz, Lexus, BMW, or similar vehicle, but then once we have it, we would prefer that no else is able to get one. This speaks to exclusivity, a core attribute of luxury products. If a car, jewel, piece of clothing, or whatever, is commonplace, it has little inherent attraction. A Rolls-Royce is much more valuable, much more craved, than a Mercedes-Benz, in part because you rarely see a Rolls on the road but Mercedes-Benz vehicles are much more prevalent.
Managers of luxury makes are always trying to balance this need for exclusivity with the need for volume. They know that exclusivity – and the accompanying image - are hugely important, but the management teams at several luxury makes – including Lexus, BMW and Mercedes-Benz – also know that being the most popular luxury marque is a valuable talking point too.
Luxury management teams are continually making decisions about how much volume to strive for, and what impact these efforts will have on their makes' images and exclusivity. Lexus has achieved leading retail volumes in the U.S. through frequent re-designs, leadership positions in new trends such as crossovers and hybrids, and a reputation for unequalled quality and reliability. Lexus has not resorted – so far – to moving downstream in price below the RX and ES/IS products. BMW has used different methods to become one of the three luxury volume leaders. It has split the U.S. luxury market into mini-segments and offered products in each of these, including the X6 and the 5-Series Gran Turismo. BMW arguably has moved downstream in price as well, marketing the 1-Series and soon bringing in a vehicle slotted under the X3.
Mercedes-Benz has stayed close to its rivals on retail volume by offering a wide array of series and powertrains within most models. Today the C-Class is the lowest-priced car available at a Mercedes-Benz store, and the brand is viewing the lower end cautiously after struggling with the C230 hatchback several years. Other luxury brands have also put their toes in the waters of low-priced luxury, including Volvo with the Mitsubishi-designed S40, Jaguar with the X-Type, Cadillac notoriously with the Cimmaron, BMW with the 318ti, and Acura with the RSX.
We have witnessed their victories and struggles as the luxury managers deal with the challenge of balancing exclusivity and image with volume. This delicate maneuvering is likely to continue.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.19.2010)
The "pecking order" of the premium makes, based on retail registrations (to individual consumers), has remained remarkably consistent over the past 5+ years. From 2005 through this past April, the same five luxury market brands have occupied the top five spots every year. Further, the top three - Lexus, BMW and Mercedes-Benz - have ranked one, two and three each and every full year, and the fourth and fifth place finishers, Acura and Cadillac, have also occupied one or another of those spots every year. These five premium brands together have accounted for more than two thirds of all luxury market retail registrations every year as well.
From 2005 through 2009, Lexus, BMW and Mercedes-Benz ranked one, two and three, respectively, but through the first four months of this year, Mercedes-Benz is edging out its German rival to claim the number two spot. However, Mercedes-Benz was number two at this time a year ago as well, but finished the year in third place.
Among the top three marques, each has its own traditional area of strength, with BMW being strong in small cars, Mercedes-Benz doing well in the midsize premium sedan segment, and Lexus prevailing in the crossover market. But Lexus's superior crossover results (40% of the brand’s total April 2010 retail registrations, more than double the registrations of both X Series models combined and close to double the registrations of the ML and GLK combined) have given it a leadership position that seems unassailable. The Lexus RX benefits from having been on the market since 1998 and therefore having a large pool of potential re-purchasers, frequent styling updates, a hybrid version, and a reputation for stellar quality, reliability and customer service.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.14.2010)
The compact premium (aka small luxury) sedan segment is an important vehicle category. It's one of the largest premium segments because its vehicles are among the lowest priced, and more importantly -- it acts as a bridge between the non-luxury and luxury sections of the new vehicle market. The compact premium sedan arena is the cut-throat battlefield where the luxury marques use enticing incentives such as low APR programs, artificially high residuals, and free maintenance, among others, to lure Camry, Avalon, Maxima, Altima, Accord and Malibu buyers to move up a notch and drive (and park in their driveways) a Lexus, BMW, Mercedes-Benz, etc. The management teams of these premium makes are well aware that if they can successfully put a non-luxury driver into a small luxury sedan, eventually these new luxury owners will want to move up again, this time to a midsize or large luxury vehicle. And these larger high-end cars are the biggest money makers for the OEMs.
So, who's winning in this segment? Well, it depends. It depends from what perspective you view the segment. If you look at the individual models in the segment, there is no contest. The BMW 3-Series is the segment sales leader, and has been for many years. Registration data for the first four months of this year show nothing has changed - the 3-Series leads its nearest rival, the Infiniti G, by more than 10,000 units April 2010 CYTD, which equates to a 30,000+ unit gap through twelve months. The 3-Series has attained this leadership role through, among other things, coming in several different body types, offering a wide choice of powertrains, offering the exhilarating M3 performance version, creating over the years a huge owner base, offering attractive lease terms, and frequently being re-styled. Through all these actions, BMW has infused the 3-Series with the image and stature that are the envy of the luxury market. Many 3-Series competitors claim they are better than the 3-Series on one or more attributes (which in and of itself promotes the 3-Series), but there is only one 3-Series.
But, the story isn't that simple. If one looks at the segment at the make level, BMW actually plays the role of bridesmaid. Lexus has managed to offer three products in this segment, each of which appeals to a different buyer profile. And the combined registration total for all three Lexus products edges out the 3-Series, though by less than 900 units through 4 months (January-April 2010). Acura, Infiniti, Mercedes-Benz and Audi follow, but their volumes don't come close to those of the two leaders.
While BMW has successfully crafted an iconic model to which all others aspire, Lexus simultaneously has been able to sell more small luxury sedans than any other brand by slicing the segment into three distinct sub-categories and offering an appealing product for each one.
Posted by Tom Libby, PolkInsight Advisor, Polk (07.09.2010)
Hyundai wants you to have an
iPad and to stay home if your car breaks. I love it.
When the new Equus sedan comes out, a car representing Hyundai's continued march into the luxury market, owners will receive an Apple iPad. And on this iPad you will be able to use it for its basic purpose
and for scheduling service visits. Plus, Hyundai wants to give Equus owners the royal treatment with their valet service whereby they will come to your home and pick up the sedan and take it to the dealership.
I think this is a good formula. In the luxury market for autos, technology and convenience rule. Look at BMW and other luxury brands. For anyone paying north of $55k-$60k for a vehicle, convenience almost comes as an entitlement. Let's say an obliged perk. And for a Korean automaker who's done very nicely to reinvent its brand, a one-two punch of valet service supported by an iPad app will resonate with many who are considering the new Equus. Makes me wonder how many people will buy the car just to get an iPad (crazy, I know, but transferrable accessories often make a larger purchase seem reasonable).
The real test will be how many times these owners contact their Hyundai service advisor. Let's hope for some positive customer loyalty at the dealer network through these contact opportunities. And let's also hope the iPad service app doesn't get over-used beyond the need for basic maintenance.
Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (07.06.2010)
As I head into my "mid-somethings" the Lincoln brand has caught my eye (
did I really just type that? Yes!). One of my dear friends who works for Ford Motor Company does a nice job of showing me what they are doing to their vehicle line up and nudges me to look at more and more of the Ford products, especially in the luxury market. Over the last year, Lincoln has landed on my "future short list" of cars I'd consider buying. And not due to any ads or cool automotive marketing tactics.
While last week's article in the
Wall Street Journal alludes to Lincoln still being a stodgy brand, they do show how the luxury marque is making progress. I'm rooting for them. Have you seen the new MKZ? Gorgeous. I never thought I'd be saying this, but this brand has something to offer.
Are you seeing what I'm seeing with some of the domestic OEM luxury brands? Cadillac...you've done great work lately and have done nicely at attracting a younger buyer base (which Lincoln still needs to work on)... but I'd keep a close eye on this cross-town rival. Something's brewing.
Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (07.01.2010)
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)
Retail registrations comprised more than 90% of all registrations for the nine major luxury makes (viewed as an aggregate) in the years 2005 through 2008, but this metric slipped below 90% in 2009 and the first quarter of this year. Most of the remaining registrations have been fleet deliveries (defined as 10 or more deliveries to one business), and a small number have been sales to dealers for loaners and demos, etc. Acura, BMW, Lexus and Mercedes-Benz have consistently had a retail mix over 90%, and Audi has regained this threshold after relying more heavily on fleet in the 2006 – 2008 time period. Infiniti previously had a retail registration mix above 90%, but through the first three months of 2010 this make's results have been just 85%. Volvo's retail mix has been below 90% for the entire 5+ years, dropping as low as 81% two years ago.
Cadillac and Lincoln have consistently lagged their rivals on retail/fleet mix, and so far in 2010 these two domestic makes have sold just 80% and 70% of their products, respectively, to retail customers within the luxury market.
The fleet business frequently comes under criticism from industry pundits, but it does have some benefits, one of which is the ability to expose your products to drivers who otherwise may never take a look. But the rental car component of the fleet category still provides OEMs with an outlet for excess production, a dangerous temptation that increases supply and puts downward pressure on used prices and residuals. Audi's recent decline in fleet business correlates with recent comments by the Audi management team that they are now running short on most products; on the other hand, the high fleet numbers for both Cadillac and Lincoln suggest these brands still place a higher priority on production than on residual values.
Posted by Tom Libby, PolkInsight Advisor, Polk (05.19.2010)
The 13 most popular luxury makes collectively are showing a 6% rise in retail registrations through the first two months of this year when compared to the same period a year ago. This increase is more than seven percentage points ahead of the entire U.S. retail industry, which is down 2% overall. While the luxury sales trends are encouraging, they are still down 31% versus two years ago before the economic recession. Four of the 13 luxury makes have enjoyed double-digit improvements compared to a year ago, with the luxury leader, Audi, far outpacing its nearest competitors. Audi's registrations are up almost 39%, more than double the improvement for luxury runner-up, Volvo. In fact, Audi's year-over-year gain is the greatest in the entire light vehicle industry, luxury or non-luxury.
Audi's success results mostly from the effective launches of its all-new or redesigned models in growth segments. The all-new Q5, which competes in the flourishing compact luxury crossover category, had just been launched a year ago, so its registrations this year were almost all incremental. The A5 and S5 were recently launched as well, and the A4 and S4 were redesigned for the 2009 model year.
The second and third best-performing luxury makes, Volvo and Lexus, also benefited from customer acceptance of new products. Volvo's all-new XC60, another small luxury crossover, gave Volvo more than 1,000 incremental registrations in two months. Lexus's hybrid-only HS250h, the only such model in the luxury arena, provided Lexus with almost 1,800 additional registrations.
At the other end of the luxury market, Saab, Jaguar, and Lincoln lag furthest behind their competitors. Saab is suffering from a well-publicized change in ownership that included a "near-death" experience. Jaguar has been operating for several months with virtually no availability of its flagship XJ model, while the all-new 2011 version ramps up, leaving it with just the XF and the low-volume XK. Lincoln is hurt by the discontinuation of the Mark LT pickup, a decline in volume of the aging Town Car, and an alarming drop in registrations of its bread-and-butter MKS and MKX models.
Posted by Tom Libby, PolkInsight Advisor, Polk (04.15.2010)
The luxury* and total U.S. new vehicle markets move together as the calendar year progresses, based on average monthly new vehicle retail registrations by month in each of the past five calendar years. Both categories enjoy their highest volumes in the six month period from March through August, dropping off precipitously thereafter. The luxury market peaks in August, with the total industry cresting the prior month. Total new vehicle registrations reach their nadir in November, while luxury deliveries bottom out in February.
Industry and Luxury Volumes by Month
During the May – July time period, industry registrations rise faster than luxury results, which brings a decline in luxury market share. By the same token, from August through December, the industry declines at a faster rate than the luxury market, pushing up the luxury share. These luxury share changes are illustrated in the chart below.
Luxury Share by Month for Each of the Past Five Years and Average
The dramatic decline in luxury share in August of last year was most likely caused by the "Cash for Clunkers" government-funded incentive program, in which the price (window sticker) of eligible vehicles was capped at $45,000. A year earlier, the luxury share rose considerably, probably caused by the decline in the non-luxury market during the same time period triggered by the sudden gas price spike immediately prior. Both luxury and total new vehicle registrations climb as the year draws to a close, driven at least in part by a push at the OEM, dealer and salesperson levels to meet both month-end and year-end sales objectives. Since the two categories are climbing at about the same rate as the year ends, luxury share begins to plateau.
With awareness of the variations in luxury sales and share during the calendar year, dealers and OEMs can adjust their plans accordingly. Inventory levels need to be appropriate for the rise in luxury deliveries in the spring and early summer, while stocks need to be curtailed for the following several months. Similarly, plans need to be put in place to provide for the increase in luxury share at the end of the calendar year.
Posted by Tom Libby, PolkInsight Advisor, Polk (04.05.10)
*Includes basic luxury, mid luxury, prestige luxury and prestige sporty segments
Retail throughput (new vehicle sales per franchise outlet) is arguably the most important issue in the controversy about the recent dealer count reduction by Chrysler and the planned reduction by GM. The huge disparities in throughput between the domestics and Asians have not been highlighted in discussions of the dealer count reductions, but maybe they should since they are the crux of the problem. In 2008, the typical Toyota dealer sold 1,589 new cars and light trucks, the highest average throughput in the industry*. Honda was second at 1,253, and Nissan was third (among non-luxury brands) at 785 units. In contrast, the typical Ford Division dealer in 2008 delivered 477 units, with Chevrolet at 459 and Dodge at just 202.
In the luxury market the gap is even larger. The typical Lexus dealer sold 1,158 new vehicles in 2008, more than ten times that of the typical Cadillac (112) or Lincoln (83) dealer. Lexus's average throughput was higher than that of any other brand in the industry except Toyota and Honda.
While the Toyota, Chevrolet and Ford brands nationally sell approximately the same number of new vehicles, the typical Toyota dealer sells many more than its domestic counterparts because there are far fewer Toyota stores. As of January 1, 2009, there were 1,225 Toyota and 1,029 Honda franchises nationwide, compared to 3,812 and 3,430 Chevrolet and Ford outlets, respectively. These widely divergent numbers have received virtually no media coverage.
The obvious way to increase throughput at the domestic stores is to reduce the number of stores, something the domestics have been trying to do for years. But closing one store in normal times can take years because of state franchise laws. GM and Chrysler’s bankruptcies presented them with an inviting one-time opportunity to dramatically shrink their networks with "one stroke of the pen."
Throughput is highly correlated with dealership profits. The more profitable Toyota and Honda dealers currently have more money to spend on employee salaries, employee training, and facility improvements (among other things), raising the entire water level of their operations relative to the competition. The domestic OEMs are well aware of this situation, and it is the central reason for their recent actual/planned dealer count reductions.
All comments and/or rebuttals are welcome.
*All throughput data are from the 2009 Automotive News Market Data Book
Posted by Tom Libby, PolkInsight Advisor, Polk (02.15.2010)
Small cars can provide ultra luxury, too! Luxury OEMs, Rolls Royce and Aston Martin have both announced new releases of small cars in Europe.
Rolls Royce recently announced they are planning to release a special edition Mini Cooper in 2010. Mini Cooper and Rolls Royce are both owned by parent company, BMW. It makes sense to offer a minicar to wealthy Rolls Royce owner garages that is easy on the environment, yet still allows the posh comforts to which they are accustomed.
Aston Martin is also working on a minicar called the Cygnet for the European market. The Cygnet will help the automaker comply with the 2012 emissions regulation. Aston Martin is partnering with Toyota to utilize the iQ platform, but the exterior and interior plans are said to meet the Aston Martin luxury expectations. In the recent minicar analysis I wrote, titled "Will Super Small Cars Generate Super Small Sales", the Cygnet, included in the Western European automotive forecast, was expected to sell 625 units in Western Europe by 2014.
So the big question... With a Mini Cooper starting at $20K and a Rolls Royce Phantom going for $380K+, how much will the Mini Cooper Rolls Royce Edition cost? Anyone ready to place an order?
Posted by Margaret Zewatsky, Global Market Analyst, Polk (11.24.2009)
The much talked about U.S. automotive industry trend towards smaller and cleaner engines is picking up speed this fall. A look at the next three months' product launches shows that customers looking for fuel-efficient vehicles will have a greater choice.
Smaller engines are being introduced in vehicles typically powered by six or eight cylinders. The Audi A5, Buick LaCrosse and Chevrolet Equinox/GMC Terrain will for the first time use 4-cylinder powerplants. Given the current market conditions, those trims should quickly grab a significant share of their respective product mix. So does it mean that the U.S. automotive market is headed towards a more "European-like" engine mix type? It is likely. As of calendar year to-date May 2009, 4 cylinder engines still make up only 41% of the U.S. car and light truck industry. That share is bound to increase.
Much has already been said about Ford’s new 6-cylinder Turbo 'Ecoboost' engine. It is Ford’s way of replacing thirsty V8s without compromising performance. The Ecoboost is now available in the Ford Flex, Lincoln MKS and MKT vehicle lines. Interesting from a technology point of view, the V6 Ecoboost should only account for a small part of those model mixes. Next in line will be Ford’s higher volume 4-cylinder 'Ecoboost'.
One other way for manufacturers to improve on gas mileage is to "de-content". Mazda and Volvo will both launch non-turbo versions of their already-on-sale CX-7 and XC60 compact turbo SUVs. This is a smart and inexpensive way to offer customers a greener and cheaper alternative.
Acura will go a slightly different route to improve on its crossover's fuel efficiency. The RDX, on sale since 2006, will for the first time be available as a two-wheel drive and consequently get an additional two miles per gallon. It should be a success especially in the Sun Belt region where many luxury crossover customers do not need four-wheel drive vehicles.
Finally, a European manufacturer (a first!) is entering the hybrid vehicle market. Mercedes-Benz is adding new electric-gasoline powertrains to its S and M luxury vehicle lines. The ML450 will compete head-to-head with Lexus' new RX450h. If properly priced, and if the RX is any indication, we can expect the ML hybrid rate to quickly reach 20%. As for the S400 hybrid, it will be a unique proposition for customers looking for an environmental Über-Sedan; getting close to 30 mpg in a full-size luxury car is a first in the U.S.
As manufacturers venture into new niches, as more diversified powertrains become available and as customers ask for more trims, model launch frequency will keep rising. Who's next to the party?
Posted by Francois Gravigny, Senior PolkInsight Advisor, Polk (08.06.2009)
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)
Is it wrong for me to be excited about the new Ford Taurus? Maybe I’m just getting old, but the Taurus always represented what my father and his friends drove . . . a boring car for the practical, budget-minded adult.
| | It’s not just me . . . it seems like a lot of people are interested in the Taurus. From what I’ve heard, the Taurus will be sporty and content-heavy. With pricing at the low end of $25 K to a fully loaded SHO at $45 K, it will appeal to a wide range of consumers. In client meetings and over discussions with friends, the Taurus keeps coming up. Media companies that count on automotive marketing dollars believe that the Taurus will be a home run and expect Ford to invest significant advertising dollars in it. Friends that drive BMWs, Toyotas and Volvos have talked about considering the Taurus for their next sedan purchase. |
A combination of pent-up demand, GM and Chrysler bankruptcies, and a ‘buy American’ sentiment could make the Taurus’s July 2009 release date perfect. Automotive consumer research indicates that the public’s perception of Ford is improving due to Ford’s strong quality scores, its avoidance of government bailout funds, and the release of more exciting vehicles. If we look at the midsize sedan segment, Taurus’s major competitors include the Toyota Avalon and Chevrolet Impala . . . the buzz seems to indicate that the 2010 Taurus competes exceptionally well from a price, content and quality perspective with these makes. At the high end, the SHO could steal share from entry-level luxury buyers that traditionally consider brands such as Cadillac, Mercedes and BMW. My guess is that the Taurus is going to be a major hit.
Now the tough question . . . can I really see myself driving the same boring car dad used to drive? I'll have to ask my kids.
Posted by John McBride, Director of Sales and Client Services, Polk (07.10.2009)
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