Wednesday, November 23, 2011 | Edited by Daniel Moores
||New-Car Sales Speeding Up This Month
Car dealers are getting a surprise end-of-the-year bonus: More Americans are replacing old cars and trucks, enlivening a normally sleepy time for auto sales and putting November on track to be the industry's strongest month of the year.
Dealers and analysts say people are finally getting rid of cars and trucks they've held on to for more than a decade. That demand, plus attractive lease deals, an ample supply of Japanese models and promotions on remaining 2011 models have drawn buyers to showrooms in large numbers the last few weeks.
"We're seeing the most showroom traffic that we've seen all year," said Ed Williamson, part-owner of two Miami-area GM Buick-Cadillac-GMC dealerships.
So far this year, sales have been better than in 2010 -- an annual rate of 12.6 million compared with 11.5 million -- but that's still far short of the 2005 peak of 17 million.
Recent sales have been so strong that General Motors Co.'s top sales executive predicts that November figures will hit an annual rate of around 13.8 million light vehicles in the U.S. That's a big step up from last November, when the auto industry was just starting to recover from the economic meltdown. Back then, the sales rate was 12.3 million.
Moreover, the November sales give dealers reason for optimism about next year. Through most of this year, inventories of Toyotas and Hondas have been tight because of the earthquake and tsunami in Japan in March and ongoing floods in Thailand that have affected suppliers.
If business can continue to grow with little help from the Japanese giants, dealers figure, volumes could increase substantially early next year when Toyota and Honda get their production back to normal levels.
After years of holding off on purchases, people are tiring of their old cars and trucks. So despite a volatile stock market, high unemployment and worries that the European debt crisis could destabilize the global financial system, people are buying, said Jesse Toprak, vice president of industry trends for the truecar.com auto pricing website.
The average age of a car on U.S. roads is now a record 10.6 years, according to the Polk auto industry research firm. Vehicles are so old that people's lives have changed and they need different models, or their cars are just worn out, he said.
"They just simply couldn't wait any longer," he said.
In Houston, physician David Vener was among those who kept an old car for a long time. But he traded in his 1999 Lexus sport utility vehicle for a new Grand Cherokee last week.
The Lexus, he said, had been almost trouble-free for 13 years, but it was facing some expensive repairs. And it didn't have side air bags and other safety features that newer cars have.
"After three teenage boys and a lot of miles, it was beginning to show its wear and tear," Vener said.
Lease deals are also drawing people into showrooms, Toprak said, with November leases approaching an annual high. Leases had been just above 20 percent of the U.S. market during the year, but this month they're running about 25 percent.
Low interest rates and strong resale values after leases have ended are helping car companies offer deals.
This month, GM has deals with no money down. A Cadillac CTS luxury sports sedan is leasing for $399 per month, down from $429 to $439 in October, Williamson said.
Dealers are also clearing out the remaining 2011 models, and by this time of year, automakers normally offer good discounts to get them sold. Numerous 2012 models are attracting buyers, too, Toprak said.
But even the usual discounts on older models don't normally bring out so many customers in November, when sales nearly always slow down as temperatures drop and people get caught up in the holidays.
Don Johnson, vice president of sales for General Motors Co., told industry analysts last week that recent data show some strengthening in the U.S. economy.
(Source: The Associated Press, 11/20/11)
||Alt-Fuel Vehicles Face New Rivals
Automakers trying to market alternative powertrains are finding fuel-efficient internal combustion engines to be stiff competition.
In particular, the new breed of compacts and subcompacts with highway fuel-economy ratings reaching 40 mpg are attracting price-conscious buyers. Apart from miles per gallon, the key selling point is a price several thousand dollars below hybrids, plug-ins and EVs.
"Buyers, particularly younger buyers, love it when they can get this affordable car with 40 mpg," says John Krafcik, CEO of Hyundai Motor America, whose company breaks out sales of vehicles with 40 mpg highway fuel economy ratings.
Through October, Hyundai says it sold 177,323 such vehicles -- one third of its U.S. sales. Hyundai models getting 40 mpg include the Sonata hybrid, but Krafcik says its volume lags far behind that of gasoline-powered vehicles such as the Elantra sedan, Accent and Veloster.
"The way for the industry to close the gap on fuel economy isn't hybrid powertrains," Krafcik adds. "They're expensive, complicated and they create a challenge with margins and profit."
Sales of EVs and plug-ins are still in their infancy. But even traditional hybrids, which have been on sale for more than a decade, have stayed in the 2 percent market share range, notes John Viera, director of sustainable business strategies at Ford Motor Co.
"It does get down to the value proposition," Viera says. "At the end of the day, these vehicles from a value perspective are better than a hybrid."
That doesn't necessarily matter to hybrid buyers, according to analyst Mike Omotoso of LMC Automotive. Hybrid buyers generally are affluent and environmentally conscious, he says.
Automakers differ on whether there is direct competition between hybrids and efficient internal combustion vehicles. Doug Coleman, national brand manager for small cars at Toyota Motor Sales, says the Prius -- which accounts for nearly half of U.S. hybrid sales -- draws a different clientele than other Toyota nameplates.
The Prius doesn't line up with smaller vehicles such as the Hyundai Accent or Ford Fiesta. There is little cross-shopping between the Prius and Toyota's Yaris subcompact, he adds.
"Younger people may aspire to have hybrids, but they really don't have the money to buy hybrids in the market today," Coleman says. "It doesn't mean that they don't want them."
But Toyota hopes to attract small-car shoppers when it brings out the Prius C variant, a subcompact on the Yaris platform, next summer. Coleman says the move is more a response to customer feedback than to the Prius' sales competition with small 40-mpg vehicles.
"It's not as a reaction to the higher fuel economy in those segments," he said. "It's just us listening to what our customers are saying."
Cross-shopping Cruze, Volt
General Motors spokesman Rob Peterson says the Chevrolet Cruze is the vehicle most often cross-shopped against the Chevrolet Volt plug-in. The Cruze Eco variant, with a $19,995 base price, including shipping, and a 40 mpg highway rating, accounts for about 20 percent of Cruze sales, he says. Peterson says the two compacts give Chevrolet two powertrain options on the showroom floor.
Ford has two models rated at 40 mpg highway, the Fiesta SFE and Focus SFE, but would not divulge sales breakdowns for those versions.
Dealers say they see a clear division between those who buy hybrids and those who don't. Bill Perkins, owner of Merollis Chevrolet in Eastpointe, Mich., and Taylor Chevrolet in Taylor, Mich., says Volt buyers come into the store having researched the technology and wanting that vehicle.
But he says fuel economy is increasingly important to all buyers.
"Now that gas is above $3, it always comes up in the conversation," Perkins says. "People always want to know 'What kind of fuel economy am I going to get?'" It doesn't necessarily keep them from buying what they want, but they want to know."
Scott Fink, owner of three Hyundai stores, says most buyers are indifferent to technology and in fact may be intimidated by hybrids and other alternative powertrains.
By contrast, he says, "I think the hybrid buyer is someone who leaves the house saying, 'I want to buy a hybrid.'"
Fink owns Hyundai of New Port Richey, Fla.; Hyundai of Deland, Fla., and Hyundai of Wesley Chapel, Fla.
He says Hyundai's 40-mpg ratings are a strong selling point. His sales staff helps buyers calculate the payback period for different vehicles.
"I think customers do that raw math," he said. "We do the real math for them. It is an effective sales tool."
(Source: Automotive News, 11/14/11)
||Supply Low, Demand High for Used Cars
Certainties include death, taxes and aging cars losing residual values. But lately some people aren't so sure about the latter.
Automotive appraisers scratch their heads when they look at the high prices some used vehicles fetch these days on both the wholesale and retail markets.
"These are supposed to be depreciating assets," but that's not always the case when "odd-ball" vehicles defy conventional wisdom by drawing premium auction bids, says Ricky Beggs, managing editor of Blackbook, a value guide.
"We're seeing different patterns than what you would expect" at auctions and other wholesale vehicle sources, he says. "Retention values have been real good."
Often, dealers pay top dollar because retail buyers are lined up or in the wings.
"You wonder why this vehicle is getting so much money," Beggs tells WardsAuto. "Did the bidder think it was a 4-wheel-drive when it was 2-wheel? Did he think the trim level was higher than it is? I'd go over and ask, and he'd say, 'I bought at that price because it's been sold.' It's basically buy-to-order."
Moreover, dealers are willing to buy high to boost their used-car inventories, anticipating brisk turn rates.
The seller's market isn't expected to last forever, and it's not across all vehicle segments. But the new year will ring in a continuation of premium used-car prices, experts said at the National Remarketing Conference in Las Vegas last week.
The phenomenon is what happens when high demand meets low supply.
Used cars have gained popularity for a couple of reasons. One, cars are made better now. They last longer and break down less often, making them less risky to buy compared with their predecessors that didn't age well.
Two, many consumers who were new-car buyers before the recession became used-car buyers after suffering financial setbacks. They're watching their spending more closely.
"A lot of people are hurting out there," says Chad Lemieux, corporate used-car director for the CAR Group, a dealership management firm. "They are making budget-conscious decisions and have become interested in older cars with higher mileage."
U.S. consumers bought nearly 37 million used cars last year, 1.4 million more than 2009, according to Manheim Consulting. Of the 2010 total, franchised and independent dealers sold 25.8 million used units; private-party transactions accounted for 11.1 million.
Short supplies of used cars today stem from the drop in new-car sales and cutbacks on leasing a few years ago.
Used cars, particularly 2- to 3-years-old models, are in short supply because new-vehicle sales fell from 16.4 million units in 2007 to 13.4 million in 2008 to 10.6 million in 2009. Drops like that ultimately affect used-car availability.
"You sell 5 million fewer new cars in one year and that's 5 million fewer used cars to sell today," Beggs says.
Used-car prices will increase, again, early next year 3%-4%, depending on the segment, predicts Juan Flores, director-vehicle valuation and analytic insights at Kelley Blue Book.
Values remain high, says Jonathan Banks, executive auto analyst for the NADA Used Car Guide. "You'd think the market would be ready for a correction. But I don't see anything to make prices go down."
In 2008 and 2009, vehicle leasing fell out of favor with some auto makers. General Motors severely cut back on it; Chrysler ended it altogether. Leasing has rebounded today. But one result of those earlier curtailments is a vast reduction in the number of vehicles coming off 3-year leases and entering the used-car market.
"Used-car supplies will be tight in 2012, in part because there won't be as many 3-year lease returns," Banks says. Certified pre-owned vehicles, typically off-lease returns, "will be hard to find."
He adds: "Dealers have tremendous ideas about how they can build up their used-car inventories, but they are going to have to pay high prices."
Finding buyers won't pose a problem, Banks says. "The economy will limp along, so there will be an attraction to used cars."
It's pretty basic, says Joe Spina, Edmunds.com's senior manager-remarketing. "There is no significant increase in supply and demand is high and pent-up."
But as new-car sales continue to recover and auto makers build more cars that eventually will become used-car stock, supplies will surpass the low points they are at now.
"The shortage of used cars is not going to be like it is today," Beggs says of conditions three to four years from now.
Banks adds: "Three years out, it's not possible for used-car prices to be where they are now."
Flores offers a biblical analogy. "The market giveth and the market taketh away."
(Source: WardsAuto.com, 11/22/11)
Daily Sales Tip: Prospect During Off-Peak Hours
The time of day you make your prospecting calls can have a major impact on your success.
Prospecting early in the morning or late in the day can be very productive. Decision-makers often work during off-peak hours. Gatekeepers may not work during those times.
Take full advantage of these unguarded moments. Successful prospecting doesn't follow a 9 AM to 5 PM day. You must put in extra effort if you want to be successful. Calling prospects at unconventional times sends a clear message to the prospect. It says you're dedicated to your work, your company and your product.
Source: Sales consultant Paul S. Goldner