For the domestic automakers, 2007 was supposed to be the year that they weaned themselves off the fleet sales teat. For GM, they've been doing pretty well, limiting their offloads of 10 or more vehicles to one company to around 24-percent of total sales. Chrysler and Ford, on the other hand, are still relying on the practice, coming in at 36-percent and 34-percent respectively – the highest of any automakers.
While this keeps overall sales up, it's a proven fact that it increases depreciation and limits profits.
Ford's diet began with reducing fleet sales by 67,000 units to rental agencies, when compared to the first five months of 2006, with the intention of scrapping another 67k by the end of 2007. For the Blue Oval Boys, that's a lot of revenue – even the small amount garnered from fleets – and with sales in decline, it's a tough pill to swallow.
Chrysler-branded vehicles account for 47-percent of the automaker's sales, while Dodge comes in at 37-percent and Jeep lets go of 20-percent of their vehicles to rental agencies. According to a statement issued to Automotive News, the intention is to reduce fleet sales at Chrysler to 21-percent of its total by 2009.
Who's going to fill the fleet niche then? Nissan, Mazda, Kia and Hyundai are going strong, but all these automakers are well aware of the perils of overindulgence at the fleet sales trough, and they have no plans to follow in the domestic's footsteps.
[Source: Automotive News – Sub. Req.]
Follow the Audi Mileage Marathon starting Monday morning
Paris 2008: MINI Crossover Concept
Paris 2008: Aston Martin One-77 (partially) revealed
Paris 2008: The GT by Citroen. No, the whole thing this time
Paris 2008: Lamborghini Estoque LIVE
Autoline on Autoblog with John McElroy
Paris 2008: Le Day 1 Wrapup
Knight Rider: The Liveblog -- Season 1, Episode 2
By the Numbers - September 2008: Nobody Wins Edition
Autoblog attends the 26th Annual Newport Beach Concours d'Elegance
Reader Comments (Page 1 of 2)
Mr. Oak @ Jun 25th 2007 10:11AM
Wasn't the Sebring designed to be a rental car in the first place. Wouldn't want that god-awful thing parked in my driveway.
Really, I would be curious to know what percentage of the Sebring shown above is fleet sales and what percentage is private sales?
I don't get the designers at Chrysler. They went waaaay overboard with styling cues on the Sebring, and the Avenger looks as if they just ran out of time.
Tone the Sebring down, and someone please finish the Avenger.
Jon @ Jun 25th 2007 10:16AM
"...and someone please finish the Avenger."
Or just update the Stratus.
Stone @ Jun 25th 2007 12:12PM
They went waaaay overboard with styling cues on the Sebring
I gotta agree. The sebring would look good if they took out those damn lines and creases. Check out the SEMA concept for what this car SHOULD look like:
http://www.blogsmithmedia.com/www.autoblog.com/media/2006/10/sema_sebring_450.jpg
cowbell @ Jun 25th 2007 10:14AM
With regards to Ford, how much of those fleet sales were Crown Vics and Town Cars? Aren't those are almost exclusively fleet vehicles anyway? A more telling metric of Ford'd fleet/rental dependacy would be the number of Fusion fleet and rental sales.
Mr. Oak @ Jun 25th 2007 10:24AM
Agreed. Taxis, Limos and Cop cars.
Tagg @ Jun 25th 2007 10:58AM
Good call! Just the NYC taxi fleet alone makes up alot of the fleet sales then pair that with the police car sales at that makes up probably 80% of their fleet sales. Chrysler though escapes me. I know they are selling more police Chargers but not even a tenth of the Crown Vic sales for police purposes. I do see ALOT of Sebrings and Calibers at the rental companies though.
Brent @ Jun 25th 2007 10:41AM
Why is selling fleet cars such a bad thing? I understand margins are very low, but somebody has to sell fleet vehicles, don't they?
XJ @ Jun 25th 2007 11:26AM
Yeah, but somebody desperate. Why sell for a small profit when you make more selling to the average consumer? When your supply is greater than the demand. Hence, the negativity in resale value.
Derek @ Jun 25th 2007 11:43AM
The downside to fleet sales is that in a few years the fleet is usually sold off at cheap prices.
If the automakers do not steeply discount the fleet sales though, I could see that changing. If Hertz had to pay MSRP for its cars, I doubt they would be sold off as cheaply later...
Mr. Oak @ Jun 25th 2007 2:22PM
The margins are worse than low. Rental cars are usually decontented. "meaning, they don't have crap in them" the value and sport packages do help the bottom line. Also bulk buyers alyways fight for big discounts. Big discounts on nothing leaves you in the red.
blogged to death @ Jun 25th 2007 11:35AM
Fleet sales are not a bad thing unless that is what you rely on to keep the majority of that product line running. Selling a small amount in order to keep your factories running near optimal profit is not a bad thing.
The fleet sales are usually at your cost or below, it hits resale value of the car line b/c with the off lease cars hitting the used market at the same time as the used fleets. It makes the car a wholesale special. It also is not sustainable revenue as they buy in irregular periods meaning you'll have inventory swings which the MFGR has to eat.
As with Ford's fleet specials of crown vics, grand marquis, etc. they are based on technology and production lines from the 1970's meaning they can build it very cheaply and sell to fleets as that is at least 50% of the sales. But by total volume (Ford sells 2.2m cars in the US a year) a lot of their supposed retail cars still go to fleets (~ 800k in fleet sales a year).
geo.stewart @ Jun 25th 2007 1:00PM
nothing wrong with fleet sales if you build a business model around it. Its when you dont that you get screwed by the lower margins.
Dave @ Jun 25th 2007 12:05PM
If it helps their bottom line, let them sell to Fleets.
In their home countries, the Germans and Japanese sell plenty of vehicles to fleets.
Hamud @ Jun 25th 2007 12:52PM
IIRC, more than 35% of BMW and Mercedes sales are to fleets in Europe.
Steve B. @ Jun 25th 2007 12:22PM
I say it's the military. Almost every base is filled with stripped (manual doorlocks, manual windows, etc) Dodge Grand Caravans and Stratuses, and Chevy Malibus and Impalas, used as staff cars for official duties.
geo.stewart @ Jun 25th 2007 1:02PM
true but ithose countries, fleet sales include company cars which is a much more prevalent practice than here.
Again, build your business model around it and it doesnt matter. its no different than Hyundai selling at a lower price to the public to steal sales from competition.
FermitTheKrog @ Jun 25th 2007 1:15PM
You could always look at the bright side. Fleet sales may depreciate vehicles quickly, but to you as a consumer this could be seen as a good thing. Nothing like sailing in and snatching up a Ford Taurus, that 10 months earlier may have been $18,500 and is now $9500 with only 22k miles. It makes for affordable and relatively dependable used cars.
wally @ Jun 25th 2007 1:45PM
If GM,F,Chrysler would offer Fleet only car (Plymouth, Oldsmobile ford would have come w/nameplate) and not build low end cars this should solve depreciation.Those looking for a bargain car will have to wait for fleets to get new models.
tunercar @ Jun 25th 2007 2:04PM
someone please photochop the chrysler sebring to see if the car can look better, just curious.
Mr. Oak @ Jun 25th 2007 2:30PM
Follow the link provided by #3. This car couls be really "hot".