Sales Trends

It has been said that Americans are suckers for lists, and I'll admit I'm as guilty as anyone. The lists below showing the 10 most popular new vehicles with U.S. consumers (private individuals, not fleet) illustrate some industry trends that, coincidentally or not, also exist in the broader U.S. new vehicle market that includes over 400 models.

The number of compact vehicles on the top 10 lists doubled from 2 to 4 during the 6-year time frame, consistent with the move towards smaller vehicles after the spring 2008 temporary gas price explosion. Crossovers were not on the list at all in 2005, but 2 made the top 10 by 2009, and they remain there this year.

The midsize sedan segment remains formidable and the Japanese continue to thrive there, as witnessed by the fact that 3, and then 4 of these models ranked among the top 10 (including the Camry, Accord and Altima every year). Similarly, the lists point out the ongoing strength of the large pickup category, though it has lost some of its luster since the 2008 gas price spike; the domestics still dominate this segment, with the Ford, Chevrolet and Dodge models making the top 10 every year except 2010. The re-designed and larger Tundra made the list in its inaugural year, 2007, but it has not re-appeared. There was one minivan on the list in 2005, but none since as that segment has retreated.

There are no truck-based SUVs on the list in any year, again in keeping with the broader overall industry where these vehicles have rapidly been replaced by crossovers.

The domestic OEMs' weaknesses in cars are supported by the fact that only 2 of the 50 entries on the table are domestic cars, and the Chrysler Corporation does not have any cars on the list. Finally, though the Ford F-Series has been the most popular vehicle in the U.S. for many years on a total sales basis, it has not always been at the top of the chart on a retail basis. It was the retail leader in 2005 and 2006 and is out in front again this year, but it trailed the Silverado in 2007, four vehicles in 2008, and the Camry in 2009.

Posted by Tom Libby, PolkInsight Advisor, Polk (07.23.2010)

• In Detroit, for every retail unit sold by an Asian automaker, we get just over 5 Domestic sales
• And for every retail unit sold by a European automaker, we get nearly 20 Domestic sales

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)

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)

Mass produced hybrids have come a long way since 2001 when the Prius was first launched in Japan. In 2009, 35 different hybrid models were offered accounting for just over 1 percent of the global market share. One percent (1.28% to be exact) may not seem like a big deal, but the emergence of hybrids is more than a vehicle purchase. It's a culture change. Hybrid sales are a direct results of multiple forces within a market coming together to drive a change in automotive purchase behavior.

These forces encourage consumers to include hybrids into their consideration set and ultimately buy a hybrid:

• High retail fuel prices
• Availability of hybrid supporting infrastructure (i.e. dealerships and service facilities)
• Consumer range and reliability confidence
• Government incentives

These topics and more are discussed in a new Polk View titled "Asia Pacific Region Propels Growth of Hybrid Market." I invite you to read the article and let me know your thoughts on the future of global hybrid sales including the adoption of hybrids within emerging markets and if Japan can sustain the hybrid sales trend growth experienced in 2009.

Posted by Margaret Zewatsky, Product Strategist, Polk (03.31.2010)

I think there's some good news based on our annual analysis of the U.S. vehicle population. "For whom and why?", you ask? Read on.

1. The U.S. light vehicle forecast is expected to be 11.5 million units for 2010. That's up from 2009's 10.4 million... we'll take any gains possible. Good news for dealers and automakers.
2. The average age of light vehicles on the road has been creeping up as well. It's just north of 10 years as of September 2009. A decade ago it was 8.8 years. This means vehicle repairs needs should continue to increase for service and repair facilities. Go get 'em aftersales folks!
3. The length of time you and I are typically holding our vehicle is also increasing. See my earlier blog post. Again, good news for both the dealer network and independent service and repair facilities.
4. Light vehicles are scrapping out at a rate of 6.1%. The trick here for marketers is to find out which segment of us vehicle owners are actually eliminating vehicles at a higher rate than other consumer groups. Over the last 60 years, this measure of possible vehicle demand has actually averaged around 6.3% for all cars and trucks (counting trucks in the commercial vehicle market - see the below graph). While the scrappage rate may be a bit higher this year, it's NOT directly implying new vehicle sales will be shooting upward to make up for the "scrapped" or lost units (new sales are driven by several factors, not just a scrappage rate). There are a lot of older vehicles that are natually "dying" now, yet you can't assume this will be compensated by a 1-for-1 replacement. Case in point: if people are holding onto their vehicles for longer periods (see above), it implies you don't get more sales with increasing scrappage rates in all cases.

My question to you: how reliable have you found these factors to be in your business and how do you use such trends?

Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (03.30.10)

I did a brief interview for a public radio program last week and they asked me about people and their ownership patterns of cars and trucks. Specifically, they wanted to know if people were hanging onto their wheels longer and why. Short answer: "Yes."

Americans Continue to Hold Onto Vehicles Longer

 

The trend we've seen over the last 8 years is pretty stark. As new and used vehicle sales in the U.S. have taken a hit in recent years, the chances that we'll hold onto our vehicle for longer periods of time has definitely risen. In late 2001, the average number of months we Americans held onto a new car or truck was 47.5 months. As of September 2009, it was over 60 months. Same pattern, but at different levels, apply for used vehicles, too. Why? How?

1. The economy helped this, but it's not the only reason. I won't elaborate on the old news of what a recession does to individual spending in the auto market. But that's not the only contributor motivating you and I to hold onto our vehicles longer.
2. Financing. Leasing options were more difficult to come by in 2009, particularly as Chrysler Finance and GMAC withdrew from this type of activity. That hurts the "churn" of someone being able to move from a temporary owned vehicle into another one. Plus, there are more deals out there where you can finance for longer term lengths. You've heard of 72 month car loans? They're growing. That'll add to the average ownership length. I found an article from LendingTree dated 2007 citing the beginning of this pattern.
3. Warranties and extended warranties. Automakers are covering their powertrains for longer periods of time and bumper to bumper warranties are also growing. Go talk to a dealer and they'll be happy to sell you an extended warranty as well. Add another factor to my motivation to hang on to 'ol Betsy.
4. Vehicle durability is rising. While perceived durability and reliability may be an issue for some brands, consumer research shows that more and more brands are on par with one another regarding their overall product quality ratings. That is a systematic factor allowing you and I to deal with the same set of wheels for a longer period of time.

The trend bodes well for the automotive aftermarket. (Repair business is good - have you checked out AutoZone's stock lately?) It does suppress the annual sales rate for new sales, but if you are a franchised dealer, can you think of a better reason to have for building a customer retention game plan for your service business? I can't.

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

• New BER is anticipated in June for service but for sales there will be a transition time until 2013. In my opinion, we must not separate regulations for new vehicle sales and aftersales business. I have outlined how important integrated sales and service functions are for both dealers and manufacturers – Vertical BER does not help this way.
• Vertical BER allows brand exclusivity contracts for up to a 5 year contract period, while automotive BER does not. Multi-brand dealerships are on average underperforming, therefore I have no doubt that manufacturers will make use of this exclusivity option. For many multi-franchise businesses this could mean that recent investments will not pay for themselves.
• And finally a legal issue: the principle of legal certainty is not given for those manufacturers and/or dealers which exceed 30% market share.

Global hybrid sales trends have continued to increase despite the declining global light vehicle market. Some of the fastest growing light vehicle markets in the world are BRIC nations with China, India and Brazil experiencing light vehicle growth in 2009.

Despite the overall automotive growth in these emerging markets, hybrids have declined. And not just declined, but not sold. In China from January - October of 2009, only 303 vehicles out of nearly 9.7 million sold, were hybrids. For this same time period, India had 61 hybrid sales out of nearly 1.7 million vehicles. And Brazil didn't have a single hybrid vehicle sold during this time period.

So why don't hybrids sell in these otherwise fast growing markets? My best answer for this is a combination of activities including relatively low retail gas prices, no financial incentives from the government to buy "greener" cars that would compensate for the higher sticker price and also the possibility of limited availability due to OEM distribution strategies.

I'm currently working on a global hybrid Polk View analysis that will be published soon and would like to hear your thoughts on why hybrids aren't selling in emerging markets.

Posted by Margaret Zewatsky, Global Market Analyst, Polk (02.09.10)

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)

Last week we recognized winners of Polk's annual Automotive Loyalty Awards. One category that gets a lot of attention by our customers is the overall "Make Loyalty" category which basically recognizes superior customer loyalty to an OEM's brand. Since many of the automakers have multiple divisions (i.e., makes or brands), they like to see how consumers react to these separate entities due to the unique position they try to create in the marketplace. This year, Honda won for the U.S. market. But by how much? And how many more repeat sales would have been needed by other brands to beat this year's winner? The point of these questions is an estimation process can be used by automotive marketing managers to figure out what the sales mix needs to be in order to help them predict how they'll help their companies reach their overall sales targets.

How Close Was Each Brand to Beating Honda's Make Loyalty Rate in 2009?

For the 2009 model year, the average make loyalty rate was 44.53%. Honda's make loyalty rate was 54.86%. Toyota missed beating this rate by 0.15 percentage points and Ford missed it by 0.74 percentage points. If I look at the brands, including Honda, that had an above average industry make loyalty rate, there are a total of 10 of them.

But here's what's intriguing to me: is there an "efficiency thing" going on for some brands? Meaning, what dynamic allows a relatively few more sales from past customers to make some brands "win" while other brands need far more sales from past customers to get the same outcome?

Take Subaru, for instance. They missed beating Honda by 6.03 percentage points. But they only needed another 3,914 sales from past customers to exceed Honda's make loyalty of 54.86%. Now if you're Subaru and you only sell just north of 200,000 units in the U.S., yielding another 3,900 units isn't an easy task. But it's worth noting what sales volume deficits exist in order to possibly reach a loyalty target. Now a brand like Chevrolet needed 27,781 additional past customer sales to make them win, yet Chevrolet's overall gap (5.10 percentage points) from beating Honda was smaller than Subaru's (6.03 percentage points). Cross-town rival, Toyota, missed getting the top spot by 849 sales from past customers. In these examples, we have two large volume OEMs and one relatively small volume OEM. So it's not always a size issue that creates the disparities I'm highlighting.

The point is that when companies set targets for sales, much of this will come from past customers. And if there are specific loyalty targets established, managers can conduct a sensitivity analysis to estimate "what's needed" to hit the number. Awards are something to be proud of, but more importantly, hitting sales targets that are built on a bit of science with the use of consumer research and knowing industry trends can make hitting targets a more plausible effort. Here's to 2010... may the best, and most efficient, brand win.

Posted by Lonnie Miller, Director, Industry Analysis, Polk (01.18.2010)

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)