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]
Even after posting a $3.25 billion loss, General Motors won't resort to fleet sales to ease their pain. In the automotive industry, fleet sales typically represent the lightly equipped, and heavily discounted, vehicles sold to rental companies or corporations. The numbers are significant, and fleets sales of a particular model may even exceed the volume sold at retail. Often laden with special financing incentives, the sales are less profitable for the automaker, and they hurt the used-vehicle market when a large number of the same model are dumped into the marketplace simultaneously.
Last year, GM sold about 700,000 units to fleet sales. In 2008, that number is projected to drop to about 575,000 units. By 2009, it will decline even further with a sales projection of just over 500,000 fleet units. GM isn't the only automaker following this path. Ford's sales to rental companies are down 16 percent from the same quarter last year. Chrysler LLC also curbed their sales, but they have declined to offer specifics. Automakers are also taking steps to increase used car values. Instead of selling "stripped" vehicles to rental fleets, the cars are equipped more with consumer-friendly options such as sunroofs and upgraded audio packages.
click above for more pics of the 2008 Ford Focus SES Coupe
Fuel economy and CO2 emissions are on a lot of our minds right now, and many of us are re-examining our vehicle needs in an effort to save coin at the pump. The push to downsize has influenced the entire state of Ohio, which plans to switch its government fleet from 90-percent midsize sedans to one fortified with up to 50-percent of Ford Foci. Not only will the Focus save the state at the pump, but Ford's little economy car also costs less to buy. The Cleveland Plain Dealer, which calls the Focus "less stylish", pens the fleet cost of the Focus at about $12,000, while a Chevrolet Impala will run the state $16,000 or more. The switch to a Focus fleet will save the state $242,000 this year alone, and the dollar figures go up as more economy cars hit the fleet.
Of course some of the employees that have to drive the homely, yet practical, Focus are complaining about a lack of head and leg room. Unsympathetic DAS spokesman Ron Sylvester basically told complainers to shed some girth and deal with it. Who knows, maybe the state will use some of the savings to hook up its peeps with SYNC, which could give workers hands-free phone capabilities so they can complain about their car to friends while keeping both hands on the wheel. We're not so sure the rank and file will dislike the Focus though. We kinda liked it.
Chrysler has looked deep into it soul and decided to join the General and FoMoCo in an attempt to reduce its reliance on fleet sales. Chrysler's Vice Chairman, Jim Press (that still doesn't sound right), alluded to the reduction during a conference call regarding December sales figures and said, "you have to stay out of the 30-percent range and into the 20s." Where in "the 20s" was unspecified, but with vehicle sales expect to continue their decline this year, any reduction of income could hurt the automaker. However, Press went on to say that he expects a "very small increase" in retail sales during '08 and a plan is underway to increase the value-per-dollar quotient of Chrysler's brands by offering more features for less cash.
OK, this seems like a no-brainer. As GM and Ford have gradually pulled back from the low-margin fleet sales market, import fleet sales have surged. After all, somebody has to keep the rental car lots filled. It's mostly been the mainline Asian automakers that have stepped in to fill the void. Toyota, Nissan, Mazda and Kia have all increased their corporate sales of cars and trucks, but they still remain bit players overall. About 11 percent of U.S. import brand sales are to fleets so far this year. That is up from just 8% last year. In comparison, the domestics sell 31 percent of their overall production to corporate customers. Although some fleet sales can be quite lucrative, the vast majority of rental car sales are end-of-year surplus that is heavily discounted to move.
Automakers often report their sales figures in whatever way makes them look most positive, and for a long time including fleet sales has been an effective way to make a slow selling vehicle look more popular with consumers on paper. Automakers don't distinguish between fleet and retail when reporting their sales, so we've been forced to believe them recently when we've been told that fleet sales are being reduced. General Motors, Ford and the Chrysler Group have all claimed that reducing fleet sales is a component of each company's respective turnaround plan, but we've found a document that suggests they're still way behind Toyota and Honda when it comes to resisting the easy route to higher sales.
These PDFdocuments from fleet-central.com, which we've converted to images and included below in a handy gallery, report in detail the percentage of sales sold to fleet operators in the first half of 2007. It's broken down by both vehicle segment and specific models, which allows us to pinpoint exactly which depend more on fleet sales than others.
Let's dive right in and pick out some of the more interesting numbers that you may be curious to know.
Subcompacts: (fleet) 149,766 | (retail) 825,697 | (total) 975,463 | (% fleet) 15.4% Chevrolet Cobalt: 29,090 | 44,141 | 73,231 | 39.7% Ford Focus: 19,660 | 54,621 | 74,281 | 26.5% Toyota Corolla 22,999 | 121,348 | 144,347 | 15.9% Honda Civic: 2,817 | 128,113 | 130,930 | 2.2% VERDICT:Not surprising: While the Focus is older than the Cobalt, it enjoys a smaller percentage of fleet sales. The Corolla has a lot of fleet sales, but its retail sales are so large that its percentage of fleet sales is relatively small. The Civic's retail sales are higher than the Corolla's, however, which means that it is actually the real best-selling subcompact.
More segments after the jump! All the numbers can be viewed in the gallery below.
UPDATE: Fleet sales for trucks, minivans and SUVs added to the gallery.
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.
Now here's a story that won't take many Europeans by surprise. Just as GM, Chrysler and Ford get knocked for selling tons of vehicles to rental fleets in the States, BMW and Audi do basically the same thing in Europe. In fact, those two German firms lead the list of automakers who rely the most on fleet sales in their home market. This according to auto motor und sport magazine, which has reported that Audi and BMW "have the fewest private customers of all brands in Germany," with just 33.5% and 32.8% respectively. Mercedes was least likely to send a vehicle to Deutsch Hertz, with 50.1% going to private owners. VW rang in at 47.5%, Ford at 41%, and Opel tallied 39%.
To put those numbers in perspective, in the U.S., Ford sells about 66% of its vehicles now to private buyers, and 34% to fleets, which is almost the complete opposite of BMW and Audi in their home markets. Both Ford and General Motors, as well as the Chrysler Group to an extent, have managed to lower their fleet and rental sales in the first quarter of 2007.
Fleet sales take a toll on automakers because of the big discounts with which they're usually associated. The magazine says that the Focus typically sells to fleets at a discount of 28%! Passats (27%), Renault Lagunas (30+%) and Ford Mondeos (30+%) also go for a song. At 30% off those cars aren't making much if any money for the manufacturers. Essentially, they just keep the plants running, according to one sales director. It's hard to say why the percentage is so huge in Europe compared to US totals, but the fact that Americans have more vehicles per capita is probably one big factor.
In recent years, we know very few people with kids who have opted to buy domestic minivans as the primary family hauler. More often than not, we hear the Odyssey and Sienna names put forth, followed by an assortment of SUVs, domestic and otherwise. Some people have undoubtedly abandoned a domestic brand for one of the Japanese big guns. This isn't surprising, since the Odyssey and Sienna do the job very well.
Now comes word in Automotive News that fleet sales are keeping up the illusion that the domestics' position in this segment is merely calamitous and not utterly cataclysmic. Rick Kranz points out that from January through October '06, fleets accounted for 65-percent of Ford Freestar sales, 62-percent of Chevy Uplander sales, and over 40-percent of the DCX vans. And what of the Odyssey? Fleets account for 1 percent of sales. No wonder Ford and GM are all about the crossover nowadays. Their minivans are the stars in a Weekend at Bernies sequel in which they're playing the part of Bernie.
Ford's bailing out and pulling the ripcord labeled "FAIRLANE," while GM prepares its trio of new large crossovers -- the Saturn Outlook, GMC Acadia, and Buick Enclave -- with hopes for 130,000 in combined sales, according to North American sales veep Mark LaNeve. Chrysler, which as the inventor of the minivan has a lot of prestige on the line, will stay in the fight and unveil its fully redesigned vans at the Detroit show next week.
The overall market for minivans has been shrinking for several years in a row, and many of the automakers point to that as justification for looking to crossovers. We doubt that Honda and Toyota execs are fretting, however, since the (real) people buying minivans are apparently choosing theirs. Chrysler knows what it's doing here, so we hope to see something good next week. The market may be shrinking, but there is still a market for the things. It just takes a high-quality product to compete.
Historically, U.S. automakers have held both the majority of fleet and consumer sales stateside. According to new research provided by R.L. Polk and Co. the "Big Two and a Half" only holds one of those distinctions for the first time in U.S. history.
Foreign car manufacturers now account for 53% of consumer car sales through May of this year and that figure only stands to increase as the year progresses. Honda, Nissan, Hyundai and, of course, Toyota held a slim margin under U.S. manufacturers this time last year with 49% of the retail market, but most analysts have predicted this day would come sooner, rather than later.
Industry observers maintain that GM, Ford, and Chrysler's slipping numbers are due in large part to high gas prices, forcing consumers to seek out smaller, more fuel efficient vehicles traditionally offered by Japanese manufacturers. Others note that many foreign automakers have a better grasp on what U.S. consumers desire in a vehicle, with safety features, interior amenities and resale value topping the most wanted list.
Some dire soul searching is in order if the domestics stand a chance at regaining their previously held title. Especially considering that fleet sales are likely the next to go to their competitors in the east.
BREAKING: GM and Chrysler talking about merger
Spy Shots: Nissan 370Z again, with interior shots
2010 Mazda3 unveiled ahead of LA Auto Show
Spy Shots: Nissan 370Z caught undisguised
GM on Corvette ZR1 cancellation rumor: "Not true."
Knight Rider: The Liveblog -- Season 1, Episode 3
In the Autoblog Garage: 2009 Mazda RX-8 R3, return of the "hummer"
In the Autoblog Garage: 2008 Chevy Corvette Z06
Autoline on Autoblog with John McElroy
Paris 2008: Le Day 1 Wrapup
