Detroit 3 show restraint in tough times, continue to limit fleet sales
Showing great discipline amid declining sales, the Detroit 3 have held back on the temptation to dump vehicles on fleet customers in order to boost numbers. As we reported last month, selling vehicles to corporate fleets and daily rental companies has been a long-practiced method to offload automobiles when sales slow down. Unfortunately, it also results in lowered residual values in the marketplace as these vehicles are dumped in quantity at auctions at the end of their service. Over the years, some models have even earned a "fleet" or "rental vehicle" stereotype, additionally damaging their public image, and sales, at the retail level. The Ford Taurus, for instance, was only sold to fleet customers during the last generation's final year of production, which may have further damaged the brand and affected sales of the renamed 2008 Taurus.
Even though the Detroit 3 are limiting fleet sales, it is still a large chunk of their business that accounts for nearly 35 percent of total U.S. sales for Ford and Chrysler. While fleet sales to Chrysler, GM, and Ford are down, other automakers are increasing their volume. It is reported that Toyota sold an additional 10,000 units to fleets during the first four months of 2008.
[Source: Automotive News - subs. req'd, Photo by Stan Honda, Getty Images]
Reader Comments (Page 1 of 1)
Tricky dicky 3:40PM (6/16/2008)
yep like has been said for a year now here, toyota and the koreans expand their sales into the rental biz, and take positive press for expansing their sales... while the detroit folks get mocked for it...
The article states toyota is up to 11% of their sales from fleet up from 9.
..
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geo.stewart 7:58PM (6/16/2008)
i see a ton of altimas at the lots
SPG 3:40PM (6/16/2008)
It's a good time to be a customer in the automotive world right now.
Had I not earmarked my savings for other things I'd be picking up a new or used ride.
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Johnny 3:47PM (6/16/2008)
Michael,
1-Please mention that fleet sales are down because government agencies all over the country are having budget constraints for a variety of reasons and are not purchasing as many vehicles as they used to
2-Rental agencies are also not buying as many vehicles because people are not vacationing as often as before. Enterprise Rent a Car rentals are down 9.9% this year. They dont need more vehicles.
3-Even though Toyota went up 10,000, According to the latest estimate by PIN and Global Insight the breakdown of sales to fleets out of total sales is Chyrsler 41%, Ford 35%, GM 34%, Toyota 6% Honda 1%. Those are the only five I could google.
Do you think if there was a buyer for 20,000 Explorers Ford would say no we are not selling? The UAW would have a fit. Even Ford management would not refuse. Fleets are down mostly because demand for fleets are down.
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Michael Harley 4:06PM (6/16/2008)
You just did.
- Mike
Robert 4:31PM (6/16/2008)
Close, but not quite right on several accounts.
1) Government fleets are down, but Ford's sales to corporate and government fleets, as an indicator, are stable YOY. Rental is down about 30% this year. I'm not sure of GM/Chrysler/Toyota/Honda/Nissan break downs.
2) Rental car companies are down, but if Toyota is increasing its total sales, it is "stealing" it from somewhere else. That means, as a share of the rental market, the Detroit 3 are realigning with their overall sales.
3) The thing people always forget is that GM and Ford OWN the work-truck market. Ford OWNS the chassis cab market (small buses, ambulences, etc). Those are all fleet sales, but they are profitable and don't hurt residuals.
For rentals, Ford is targeted at about 10% rental fleet this year. Toyota is sitting at about 8% rental this year after their fleet sales grew 35% last year. Nissan is at similar levels. Only Honda can play the "low rental" game, but less effectively than they used to. Most of their growth this year has been increased fleet sales. And again, not all of these sales are bad, but I've never seen as many Honda's sitting at the Avis lot. I've never seen as many rental Altima's tooling around either.
Fleets are down because demand is down, but Toyota/Honda/Nissan are taking larger shares of the declining market. Check.
Then, let's always be clear that when we talk fleet, there are two bodies: commercial/gov, which are mostly profitable and good sales, and rental, which are rarely profitable but in small quantities can be positive sales (new vehicle intros, durability testing, etc). With the F-series and E-series, Ford is about 70% commerical/gov and 30% rental. Toyota, for example, was about 15% comm/gov and 85% rental last year.
I can't speak for Chrysler or GM, but Ford's rental percentage is stablizing very well. Their commercial sales will always give them higher fleet numbers than, say, Toyota. But that doesn't mean they are failing in their mission. They are actually doing exactly what some of their vehicles (Super Duty, F-150, E-series) are designed to do.
Tragedy 3:53PM (6/16/2008)
Just give up, Detroit. You got beat at your own game, horribly. Have some dignity and pull the plug.
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david 10:53PM (6/16/2008)
What a great message to preach. When someone or something is better than you, just give up.
/sarcasm
Sure, the big 3 have made some poor decisions, due to many reasons, but it doesn't mean they should give up. Hopefully they'll stop, look around at the competition and ask how they can do better.
Torrent 4:12PM (6/16/2008)
OMG stop talking.
Gstill 3:59PM (6/16/2008)
Fleet sales flood the market place and damage resale values?
Seriously, how much more could you damage the Sebring/Avenger or the Canyon/Colorado? If fleet sales can move the vehicles, go for it.
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kory kickul 5:03PM (6/16/2008)
really good point. It cant get any worse so why not..... a lot of those fleet sales are rentals or work cars for people..... they can buy their own personal nice cars........... toyota and honda. and rent the 2nd class vehicles and use them for work? its genius i tell you!!!!!!
Disgruntled Goat 5:52PM (6/16/2008)
Fleet sales are only bad if you're peddling bad cars. If you have a great product why wouldn't you want as many people as possible to experience it? Resale schmesale, Detroit hated it because they'd pawn junk to the fleets, then when someone drove one they'd say "Wow, what a piece of crap. All GM (or Ford or whoever) cars must be junk. I better go buy a Toyota."
psu48187 6:25PM (6/16/2008)
Not only does it kill resale it also puts a dent in your profit margin.
faundoo 4:52PM (6/16/2008)
Why don't the automakers create a "rental/fleet only" model? They coulda sell the model at dealerships but be prmarily rental. If the volume was large enough 10-15k it would pay for itself.
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BlazerUnit 6:28PM (6/16/2008)
You know how GM's Oldsmobile Cutlass Ciera stayed around forever (latest design from 1989-1996, actual platform dating back to 1982) but would always get updated exteriors, interiors, mechanicals, and safety upgrades? I believe it was a faithful 'fleet' car since it debuted. They had no resale value, but they were reliable cars with parts plentiful and cheap.
You have purpose built cars for taxis and special lines of light trucks built for work fleets. Why not the same approach for cars? Creat a new brand just for this purpose. A small sedan and perhaps one more larger model that could be bought and sold en masse for rentals, state and government use, and with the right powertrain, law enforcement. Like the Ciera, you'd update the exterior styling, interiors, and mechanicals until new safety regulations cause you to start all over again.
You'd be protecting your higher profile retail cars, and resale values would only matter toward used car auctions. The automakers might have to work with rental companies in terms of revamping their rental packages, but this is probably a minor concern--there will still be mainstream vehicles placed in fleets at higher price points, and the purpose built cars could easily slot in as the 'best value' options.
psu48187 6:37PM (6/16/2008)
BTW I absolutely love the comments around here. The minute the Big 3 show some semblance of knowing what consumers want and delivering on it, or righting their business practices, there is always someone willing to discredit it.
If this were Honda or Toyota and the article went on to mention that their fleet sales were at an all time low, no one would bat an eye.
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Jobu37 7:21PM (6/16/2008)
Ford has been reducing "rental fleets" for three years and GM has been reducing them for two years. Chrysler started late last year and that is the primary reason they have fallen behind Honda in sales last month. The Sebring was around 70% rental fleet. It was such a retail failure it became a fleet queen in a matter of months after introduction. The oft praised 300 is still the fleet darling for Chrysler. I guess at somepoint you run out of retail customers that want to live the dream of being a pimp daddy. $4.00 gas certainly doesn't help a model that's only desirable engine is the Hemi. Toyota has been inching up each year in the fleet arena. Honda is the best example of how to run a car company at least on the marketing side. They are unbelievable in how they are able to develop brand loyalty that allows them to almost completely ignore the fleet sales arena. Even a dated Civic model that is outclassed by most of the primary competition can still be largest selling car in the US with limited fleet sales. As noted in an earlier post commercial fleet sales and rental fleet sales are two completely different animals.
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