Minicar

I was with my family this weekend at the Irvine Spectrum, a popular open-door shopping and entertainment center in Orange County, California. I happened to stumble upon the Ford Fiesta Lounge display, and of course couldn't help but inspect every inch of it, especially given my prior experience in experiential marketing at Mazda North American Operations.

As expected, the display was professional, and every aspect truly aimed at reaching that young and trendy customer Ford is seeking with the launch of the new Fiesta. Bright colors, upbeat music, use of Apple iPads throughout, and young attendants ready to answer any question you may have.

Although I had already seen the Fiesta at auto shows, somehow the car looked even more attractive in that setting, especially the hatchback in that bright green used in advertising. The trunk space was surprisingly roomy, and there is no doubt that Ford was trying to convey that the Fiesta is no cheap entry-level car, with the use of leather seats in both display cars, a feature not commonly expected in that category. That option, however, will typically take the sticker price closer to $20K, at which point you might as well consider an entry level Focus or base Fusion.

Will consumers buy into the new Fiesta and into small cars? Judging from the several product entries into that category, OEMs are betting consumers will. Polk forecasts that the small car segment will gain a growing share of the industry, with Fiesta joining the ranks of competitors Honda Fit and Toyota Yaris.

Will the Fiesta, and this type of automotive marketing, help Ford gain share in import-friendly territories such as California? Ford definitely hopes so. While Ford's share in the U.S. (retail excluding fleet) rose from a low of 10.6% in 2008 to a 12.8% year-to-date through May 2010 (Polk registrations), Ford's share in CA only grew by 0.8 pt share (7.4% to 8.2%) in the same timeframe. With California accounting for 16.9% of Toyota Yaris U.S. registrations (15.8% for Honda Fit), you can count on Ford to keep experimenting with initiatives such as the Ford Fiesta Lounge.

Posted by Stephan Gallon, PolkInsight Advisor, Polk (07.28.2010)

Raise your hand if you recall the classic MTV video by the Buggles titled "Video Killed the Radio Star."

In an Ad Age article, they discuss a similar effect of obsolescence for the auto industry. In a nutshell, its premise is that cars are less relevant to younger Americans due to a higher level of attention on the "digital world." Possible translation: younger folks won't buy as many cars tomorrow. The article focuses only on the U.S. Did anyone tell them about booming markets like China?

With or without the Internet or other digital marketing assets in their face, Chinese consumers are buying autos. Between now and 2015, China's light vehicle auto market will be 17.5 million big based on our light vehicle forecast (and this is nearly 10 million more than what was selling there in 2008). China overtook the U.S. in national sales in 2009 and we are not seeing a change of ranking any time soon.

My point? While the U.S. economy supports a fantastically diverse consumer base (that still doesn't save as much as it probably should), autos are a fact of life to all age groups. AND you should look at other emerging nations before concluding that autos are absent from one's psyche. Tell me - how will tomorrow's youth pay for their technology fix? Despite fewer jobs for an inexperienced labor force, Gen-Y/Millenials/whatever demographic cohort you choose, they still have to earn money. And getting to a job takes wheels.

I'd argue a better video for tomorrow's auto market might be Sammy Hagar's classic "I Can't Drive 55." While younger buyers aren't the ones dropping coin on Mustangs, Porsches or even more affordable Chargers, speedy and trendy small cars like the Ford Fiesta will get younger buyers to the Apple store pretty fast...with gas money left over for their iAccessories.

Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (06.02.2010)

I've held nothing back about my love of minivans, but in a time with global platforms and small cars I'm glad Toyota continues to invest in the minivan segment. New Sienna features that I found most thoughtful of the busy American family include:

• 23" second row sliding seats. Translation - I can have the seat closer to the front row for when the baby needs his pacifier while underway or I can move the seat all the way back to let third row passengers in without taking my kid out of their car seat.
• A stowable second row middle seat. Translation - I can have more cup holders and storage when there is only 2 kids in the back or another seat when friends want to come too.
• The SE trim sits lower. Translation - It's easier to get everyone in and out.

Back in 2004 there were 22 minivan players in the U.S. market and the Toyota Sienna was the best selling minivan. Now in 2009, there are 9 players in the market and Honda has been leading sales of this dwindling segment since 2005 while Ford and GM have or are in the process of discontinuing their minivan models. Minivans are now known for being uncool and to many it's seen as a necessary evil. But the Sienna is offering a new sporty SE trim with sports tuned suspension, 19-inch wheels and a bolder design. Maybe now my husband might consider driving one... I doubt it. How about you?

Posted by Margaret Zewatsky, Global Market Analyst, Polk (12.4.2009)

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 Ford Ka minicar, popular in Europe, will not be sold in the U.S. In an article by Automotive News released on November 9, Alan Mulally said the Ka is too small for American tastes. Aside from me immediately agreeing with him, I thought of the recent minicar analysis I wrote titled, "Will Super Small Cars Generate Super Small Sales". The market for minicars in the U.S. is small -- the segment is not forecasted to grow greater than 1% of the U.S. market. If I were an OEM prioritizing my U.S. lineup for the next 5 years, I would consider skipping the minicar segment and focusing on the B segment and the crossovers. Yet Fiat, GM, BMW, Hyundai, Toyota, and Volkswagen are all planning launches within the next 5 years, so there must be some common rationale for offering a minicar.

All this makes me wonder...

• Are so many manufacturers launching minicars to ensure they meet the new CAFE standards?
• Will the automotive forecast hold true or will the American consumer start demanding minicars and if so, will the OEMs be ready?
• Is Ford trying to make the most of the Fiesta launch in early 2010 and drive more volume by not launching a minicar?
• Or is Alan Mulally right and the B segment vehicles are the smallest cars Americans will purchase?

What do you think?

Posted by Margaret Zewatsky, Global Market Analyst, Polk (11.10.2009)

About half the size of a Ford F150 pickup truck, minicars get great gas mileage, are reasonably priced and have a distinctive style inside and out. Minicars are on their way to the U.S. in a big way with six OEMs investing in new minicar launches over the next 5 years to compete with the already launched Smart Fortwo. In the soon to launch models, such as the Volkswagen Up! and Scion IQ, you can expect to get upwards of 65 miles per gallon for a price that is light on the wallet, too. With a VW Up! starting at $9K or a premium packaged Fiat 500 starting at $16K, this should be a deal for many.

Although the minicar segment may be relatively new to the U.S. market, it's an established segment in automotive markets across the globe from Western Europe to China and India. In 2008 there was only 1 minicar (Smart Fortwo) available in the U.S., but in Western Europe there were 48 and in China there were 18 models for sale. Polk’s automotive forecast projects the minicar segment in the U.S. to remain below 1% of all light vehicle sales through 2014 despite growing over 500% from 2008 to 2014.

If you want to learn more, we just released a Polk View titled "Will Super Small Cars Generate Super Big Sales?" The Polk View discusses topics relating to the minicar segment’s sales trends in Western Europe, China and the U.S.; how these minicars have redefined small spaces; who are likely buyers for the soon to launch minicar models in the U.S.; and what's the motivation for OEMs introducing mincars to the U.S.

I invite you to read the article and let me know your thoughts about how minicars will be received throughout the globe, who will buy them and would you consider buying one yourself?

Posted by Margaret Zewatsky, Global Market Analyst, Polk (10.08.2009)

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)

It is not a secret by any means that we in Canada live in a very diverse country. This diversity creates the need for automotive marketing targeted at unique groups of people in almost every city. The most unique target market of all is not located in a single city, but within the provincial boundaries of Quebec.

A quick glance at the vehicle segments and brands that are popular in Quebec shows that buying habits in this province are a little bit different than in the rest of the country. This got me thinking: How different are Quebec vehicle buyers verses the other large provinces? I have always known that the demographic make-up of the province was a little different, with the most obvious difference being that French is the primary language in Quebec. But, as we looked deeper into the market, it became apparent that consumers in the province lead a more urban lifestyle and have more of a European mindset, these factors seem to be leading their unique vehicle preferences when compared to the rest of Canada.

For the last several years, the sales trends indicate a strong preference for compact vehicles in Quebec. The Asian automakers have clearly had the more appealing product as viewed by the Quebec consumer. Some automakers have not done well in the province because they didn’t offer the compact vehicles that the Quebec market demanded. Now it has taken a near crippling recession to prompt the mindset of some automakers to shift to more compact-orientated vehicles. To succeed, not only do these automakers need to offer high-quality products in these segments, but for the Quebec market in particular, they will need a specific marketing approach tailored to this very distinct consumer base.

Polk has just put together a Polk View titled "Compacts in Quebec - Small Cars with Big Popularity". This Polk View analyzes the sales trends and buying behaviours of this unique consumer group and discusses the factors driving them. Please download this Polk View and share your thoughts.

Posted by Peter Haefele, Senior Analyst, Polk (08.19.2009)

I was on a web panel last week that addressed how dealers can market to customers and leverage the U.S. "Cash for Clunker" program starting later this month. It's amazing how many questions surfaced about the implementation of this program and the questions that remain in the minds of dealers about what to expect once customers start calling them. The folks at NHTSA (National Highway Traffic Safety Administration) have no small chore to get everyone running a dealership up to speed on this program.

From an automotive marketing view, here are some things dealers can do to prepare and capitalize on the showroom traffic the Cash for Clunkers program will hopefully create:

1. Check in on your past customer base. The $3,500 - $4,500 incentives tied to the Cash for Clunkers program give dealers a perfect reason to reconnect with their past clientele in hopes of building further customer loyalty.
2. Look at the vehicle mix in your local market. Find out what the dominant vehicle age and vehicle segments (e.g., minivan, SUV, small car) are that define your trade area.  And be highly conscious of the domestic and import brand mix in your area. A lot of the qualifying vehicles will be domestic nameplates. 
3. Buy outside marketing lists. At my company, we provide analytically-based targeting tools that help marketers (dealers, OEMs, ad agencies) spend less money on targeting campaigns by using information that's refined to hit the audience they wish to reach. This week, we just launched a targeting model to help find households likely to own a "clunker." 
4. Don't use the word "scrappage" when describing this program to the public in your advertising. The phrase "cash for clunkers" is more common and will result in better web hits from prospective customers. "Scrappage" has been used widely in Europe to describe similar programs, but it doesn't seem to be descriptive enough for the U.S.
5. Make sure you have inventory in stock to enable someone to buy the type of car that fits this Cash for Clunker program. And if you're a dealer who doesn't want to order new units right now (due to inventory and carrying cost concerns), start looking for relevant dealer trades with other stores.
6. Dealers should talk to the OEM marketing reps. I'm aware of several national programs that the automakers are working on to help drive traffic to their dealer network. Find out what is coming, if anything. 
   
7. Don't forget to integrate deals from other incentives/promotions with the Cash for Clunker incentive. 
8. Lastly, use what's fundamentally worked in the past to draw in people who are likely to buy a new vehicle. Remember, this is still about selling a new car or truck, so some of the proven marketing messages and techniques should still be considered when getting the attention of the "clunker" audience.