Pickup and SUV sales plummeted when gas hit $4 per gallon, and many thought these gas-guzzling segments would never fully recover. That may be true, but for now Americans are once again getting more comfortable with trucks and SUVs. Truck sales fell below 10% of overall vehicle sales back in May and June, but the price of gas falling from an average of $4.11 per gallon to $2.78 has helped the share of trucks rise to 14.1% of the overall market for September. Depending on how buyers react to the financial crisis, October could be even better as gas prices have continued to go down. SUVs have seen a smaller but still significant jump in overall share, going from 1.9% in May to 2.5% in September – a big improvement for a shrinking segment.
Much of the increased interest in trucks and SUVs can easily be attributed to huge incentives on the hoods of these hefty haulers, but gas prices are a big factor, as well. And while most analysts feel the truck market won't recover until construction picks back up, we're sure automakers are happy to see an increase in sales for their most profitable vehicles, even if it takes a pile of cash on the hood to get them moving.
[Source: Automotive News - sub. req'd, Photo by Bill Pugliano/Getty ]
Just less than a year ago, the Big 3 domestic automakers' combined market share dropped to less than 50-percent of the overall automobile market. That sobering statistic was made factual when the combined sales of vehicles from both Asian countries, such as Japan and Korea, were combined with sales from European companies, like Volkswagen, BMW and Mercedes-Benz. It seems that this sad state of affairs did little to stop the bleeding coming from Detroit, as last month marks the first time in history that Asian automakers alone, with a combined share of 47.8-percent, sold more vehicles in the United States than companies actually based there. Ouch.
Large pickup trucks and SUV's have long been the last stronghold for Detroit's struggling automakers. While the Big 3 still have a commanding lead in sales of these large vehicles, it's the smaller, more fuel efficient vehicles which are taking the largest bite from the overall market share pie. Record-high fuel prices have put such a damper on truck sales that a shocking five vehicles outsold the F-150 last month, all of them highly practical sedans. It seems easy to see, then, where Detroit should be spending what engineering dollars it has left.
The Jeep Wrangler Unlimited, Compass, and Patriot are helping Chrysler defend its market share in a declining sales environment. Between these new models and incentives on Dodge and Chrysler vehicles, Chrysler has managed to stay 0.1% ahead of the market's year-on-year drop in sales. The Wrangler Unlimited is proving a noteworthy boon, helping lift Wrangler sales by 71% year-over-year. Steve Landry, Chrysler's EVP of North American sales said, "The four-door has really created a halo effect for the Jeep brand, bringing people into the Jeep showrooms and it has improved our two-door sales."
Although Chrysler-brand vehicles lead the way among the Big Three in incentives, Jeep has placed little reliance on them. The numbers mean that Chrysler's market share has actually improved a tiny bit, from 12.85% to 12.86% in the US. It's a minuscule improvement to be sure, but for a company that has been through the wringer over the past few months (years, some would say), it's still a great statement.
As we reported in our By the Numbers post earlier today, last month nearly every automaker, import and domestics alike, had a tough time selling cars. The domestics, including General Motors, Ford Motor Co. and the Chrysler Group., had it tougher, however, and for the first time in the automotive industry's 102-year history, the Big 3's market share fell below that of the imported brands combined. The official tally according to Automotive News was 629,569 units sold by the Big 3 and 679,523 units sold by the imports. That works out to a 48.6% market share for the domestics and a 51.4% share for the imports.
Shall we all cry in our travel mugs that our beloved automakers from downtown Detroit, Dearborn and Auburn Hills have lost their leading role in the U.S. market? Hardly, we say. All three domestic heavyweights have realized that bouncing back from their financial doldrums requires ditching their excess and paring down to the essentials. With fleet sales drastically reduced and resources diverted to programs that will bear fruit a few years out, we all know their sales are going to fall, in some cases drastically. Nevertheless, their loss in size and sales will allow each to focus on product more in an environment where what's on the sales floor is all that matters.
And don't fret, the Big 3 still retain majority market share in the U.S. year-to-date. This was just one bad month of sales. One really bad month.
VW's has strengthened its position in Europe as the leading brand, claiming more than 20% market share. In the US, though, VW sales have dropped by an average of 25,000 cars every year for four years, and the company has lost close to a billion dollars each of the past three years. Stefan Jacoby, the former head of global sales and marketing who raised the firm's Euro market share, has been put in the top US spot in order to achieve one goal: breaking even in the US by 2009.
Blame for the slide can be attributed to a variety of factors (and we're sure you readers have plenty of theories about what's wrong with and how to fix VW), but unless they figure out how to get them right, the feeling is that VW could leave the US market. It's almost impossible to believe that the company known for fun, funky cars that drove until the wheels fell of, two cars that have been famous for decades around the world (Beetle and Golf), deep brand equity, and fervent brand loyalty would have to grab its wurst and head back home. Yet the situation was summed up by one exec as: "For the first time in some time, the phrase 'If we are to stay in the U.S.' precedes a lot of conversations at VW."
Can a drawn-out incentive campaign keep the domestics ahead of the imports? Automotive News, for one, seems to think it would only serve to delay the inevitable. Detroit is on a trajectory to fall below 50 percent in market share in the very near future, maybe even this month. It seems obvious that offering rebates and other incentives is merely a band-aid for the underlying issue.
As of the first half of 2007, GM, Ford and the Chrysler Group were down to just 50.2 percent of the new-vehicle market. That's a record low. A year ago that number was 56.0 percent. So given the fact that their share is plummeting, does it make sense to throw money at the problem and try to hold onto something they will surely lose eventually?
Actually, they may need the incentives just to stay competitive. Toyota, Honda and Nissan have really been aggressive in using incentives to grab customers this year. The Japanese now account for 37.5 percent of the market, up 5 percent from last year. Sure it comes with some psychological baggage, but losing market share isn't everything. It's a largely meaningless number and profits mean more in the end. Not that the domestics are any better in that arena, but dwelling on market share is a bit misleading.
Unless your current residence is beneath the Earth's crust, you probably know about the beating Toyota has been laying on the domestic automakers. Almost every month, Toyota's sales rise by double-digits while the Detroit-based competition endures losses. It seems there's constant debate over which US location at which Toyota will build its next assembly plant, and the gang from Aichi has a good chance to become the world's largest automotive manufacturer by sales volume in 2007.
Honda, too, has seen a steady climb in US market share with volume rising 50% in the past 10 years. Overall volume in the United States is now at 1.5 million units and Honda doesn't even have full-size trucks and SUVs like the competition. It's looking to expand its offerings with a planned V10 supercar and a new, more powerful Accord coming stateside by year's end. Incentive spending has been right around Toyota's levels also, with total spend at about 1/3 of the competition. Honda is also the technological leader in many non-automotive areas, with 12.7 million motorcycle sales in 2006 in addition to other businesses including robots, power equipment, and aircraft.
The automaker is also scoring high marks for quality. In the Consumer Reports 2007 Top Picks, Honda scored winners with Fit, Civic, and Accord -- a sweep in the volume passenger car categories. Positive results in JD Power initial and long-term quality studies have also helped keep resale values much higher than the domestic competition.
With domestic automakers taking aim at Toyota in a bids to gain back lost ground, they'd be well advised not to forget about Honda as well. Each year, it takes a little more share away from Detroit while flying under the radar asToyota registers as the 800 lb. bogey.
Ford Motor Co. has admitted what we saw coming for some time. The New York Times just ran a story saying Ford has announced that they fully expect Toyota to take over as number two behind General Motors. At least in America. Perhaps not unexpected, but it still sounds weird to hear that Ford won't be #2. To put this in perspective, Ford has been number two since the 1920s! And if that's not enough, Ford says the projections show they think that third place might be their permanent new slot. Apparently The Way Forward means taking one step back, which if that's what it takes to return to profitability, then so be it.
Back in September Ford speculated that its market share would hit a low of 14-15% allowing Toyota to surpass it. With the death of the Taurus and the decline in sales of light trucks, Ford has certainly been hurting. Conversely, it seems that Toyota can do no wrong with buyers, despite product that some consider boring and increased recalls with uncharacteristic lapses in quality. But things aren't looking any better for Ford. The new Tundra should be out in February, which will only increase Toyota's market share according to most analysts. Although we expect the Dodge Ram to be the truck that suffers most from the Tundra's arrival, eventually relinquishing it's No. 3 spot to the Japanese pickup over time.
The automotive industry isn't back on the upswing yet. 2007 may prove to be a nine-year low for sales at 16.2 million units, with Detroit automakers taking the biggest hit. CSM Worldwide, leading auto industry analysts, released a report recently indicating that U.S. light-vehicle sales would drop 1.2 percent from the 16.4 million units expected to leave dealer showrooms by the end of this year.
The leading reason -- surprise, surprise -- is that folks have bought their new cars already, or as CSM says, the industry has "depleted pent-up demand." Contributing to the problem is the soft housing market and vehicle devaluation, but efforts to eliminate incentives and raise the value of vehicles should help out. Despite efforts to raise the values of its vehicles, however, the situation poses major challenges for Ford and General Motors in their restructuring efforts.
Asian automakers, on the other hand, are poised to do well despite the market contraction, with Toyota actually gaining a full point of market share.
Reuters is reporting that Ford will be shrinking its dealer base over the next three years in order to better align its distribution network with a market share that is smaller than it has been in the past. Dealers were told of the planned reduction at the dealer meeting in Las Vegas last month. The East Coast and California have the highest saturation of Ford dealerships and are likely to see the largest reduction in numbers. At the moment there are about 4,300 Ford dealerships operating in the U.S. This is tough but smart call by Ford. It would be easy for Ford to use the belief that its market share will begin climbing again in the near future as an excuse to keep its dealer network intact. However, shrinking the dealer network now to more comfortably handle its reduced production capacity, it appears Ford is accepting its current situation and trying to build a smaller, more efficient Blue Oval.
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