||The Real Automotive Sales Story: Tier 2
Hard-Chargers Grab Share from the Giants
On the surface, the July sales story played out as expected: Japanese giants Toyota and Honda roared back from disastrous quake-shaken figures of 2011 and won back more of the U.S. market share they had lost to General Motors and Ford Motor Co.
But the real story was what continues to happen in the background, beneath the Battle of the Giants: An ever-stronger group of hard-charging Tier 2 brands continues to grab share and reshape the U.S. market.
Shoppers have broadened their gaze, sampling more brands because there is a wider range of attractive choices and near-universal high quality. Other factors in the changing sales mix are local production capacity by import brands, higher marketing budgets and the ease of searching a wide range of brands online.
Since July of 2010, GM, Ford and Japan's Big 2 have lost a combined 4.6 points of U.S. market share. Since 2008 they have lost 7.3 points. Except for scraps, that lost share was snapped up by four rivals: Chrysler Group, Hyundai-Kia, Nissan North America and Volkswagen Group.
Hyundai is benefiting from "a big voices in big places" marketing strategy that has improved consideration for the brand, said Hyundai Motor America CEO John Krafcik.
"Right now," he said, "over a third of American car shoppers have a Hyundai on their shopping list -- a good position for a brand with a 5 to 6 percent retail market share."
Jonathan Browning, president of Volkswagen Group of America, said there is an "underlying shift in the U.S. auto market, and it will continue to look more and more like other world markets." That is, multiple players with substantial shares rather than one or two dominant players, he said.
VW has opened a U.S. plant, expanded its Puebla, Mexico, plant and chosen Mexico for an Audi plant. "Our locally built product strategy translates into greater consideration," Browning said.
And the VW brand is getting that from shoppers. Consideration for the VW brand grew from 15.1 percent in late 2011 to 18.2 percent in the second quarter, according to Neilsen Media Research.
In July, with industrywide sales up 9 percent for a 14.1 million annual selling rate, the story was relatively simple. Restocked Toyota Motor Sales U.S.A. and American Honda Motor Co. added 4.5 share points compared with July 2011, while GM and Ford lost 4.8 points. A year ago, after the March 2011 earthquake in Japan, GM and Ford were taking share from their crippled Japanese rivals.
But those sharp swings have all but canceled each other out. Compared with July 2010, GM, Ford, Toyota and Honda were flat this July in a market that rose 10 percent. The next four automakers all jumped by double digits: Volkswagen is up 54 percent; Chrysler, 35 percent; Hyundai/Kia, 23 percent; and Nissan, 19 percent.
Strong-performing nameplates such as the Nissan Altima are accounting for the change. For all of 2007, it was the sixth-best-selling car behind the Toyota Camry, Honda Accord, Toyota Corolla, Honda Civic and Chevrolet Impala. But this July it was No. 3, close behind the Camry and Accord.
Nissan -- aided by a closeout incentive burst prior to the introduction of the redesigned 2013 model -- sold 26,602 Altimas in July, most of them outgoing 2012s. And the brand has big sales goals for the 2013 model.
More good choices
In the new Tier 2 era, "it's not as simple as just 'Camry or Accord,'" said analyst Jesse Toprak of TrueCar.com. "Consumers have more good choices, and they are more comfortable in buying other brands."
And the fast-growing automakers are making more vehicles in North America. Volkswagen opened a U.S. plant in 2011. Chrysler and Nissan are adding shifts to boost capacity. Hyundai and Kia opened U.S. plants in recent years, and Hyundai is adding a third shift in Alabama in September.
Sales at capacity-constrained Hyundai Division were up only 4 percent in July compared with a year ago. But Krafcik says the company is boosting output.
"With the imminent addition of a third shift at our plant in Alabama increasing Elantra and Sonata production and the launch of the Santa Fe in Georgia under way, we'll be better able to meet demand for our core products in the coming months," he said.
IHS analyst Rebecca Lindland says Internet research and social media give people more credible independent sources of information for a wider range of vehicles.
Meanwhile, consumers can find smaller-brand dealers almost as easily as mainstays. In 2008, GM, Ford and the Toyota and Honda groups had 11,600 more dealers than the next four: this year, only 4,300 more.
"People are now much more open to new brands," Lindland said. "The baby boomers for decades were blindly loyal to Toyota and Honda and, combined with Detroit loyalists, that gave Chevy, Ford, Toyota and Honda a stranglehold on U.S. sales. Now market share is up for grabs."
(Source: Automotive News, 08/06/12)
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