Wednesday, April 11, 2012 | Edited by Daniel Moores
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$4 Gas Fuels the Surge in March Sales Buyers Aren't Thinking Small; They're Thinking Fuel-Efficient It feels counterintuitive. Expensive gasoline not only helped propel new-vehicle sales in the first quarter. It was a key factor in the surge. But customers aren't flocking from big trucks to small cars as happened four years ago when fuel prices spiked. Instead they are shopping within the same segments and snapping up newer models that get better fuel economy. So despite $4 gasoline, consumers bought 1.4 million light vehicles in March, up 13 percent over March 2011 and the highest volume for any month since August 2007. What's the attraction? New vehicles with better fuel efficiency than slightly older models of the same size. "Fuel economy was the name of the game in March (and) the first quarter," said Ken Czubay, Ford Motor Co.'s U.S. sales boss. "Dealers across the country told us that higher fuel prices played a larger role in customers' choices." Czubay also cited the improving economy but said the availability of fuel-efficient vehicles has done the most to boost sales this year. The March surge wasn't a wholesale rush to small fuel-sippers as it was in 2008. Truck sales rose at about the same rate as car sales. In March, cars were up 14 percent, and truck sales rose 11 percent. In May 2008, when fuel prices skyrocketed, cars were up 2 percent, and trucks plummeted 25 percent. The big winners in March were models that combine much-improved fuel economy with utility, such as the Ford F series and Focus, Nissan Altima and Toyota Camry and Prius. Compare the redesigned Camry, on sale since September, with the archrival Honda Accord, which is in its final year. The four-cylinder Camry with a six-speed automatic transmission is rated at 25 mpg in the city and 35 mpg on the highway, compared with the five-speed automatic Accord's 22/33 mpg. Both have a 3.5-liter V-6 available, though the Accord has a five-speed and the Toyota, a six-speed transmission. The ratings: Camry, 21/30 mpg; Accord, 19/29. And first-quarter sales? The Camry was up 37 percent to 105,405 units. The Accord was down 8 percent to 61,132. 'Tipping point' Ford sales boss Jim Farley said the industry's fuel-efficiency drive has hit a "tipping point" in transforming product lineups. And customers are realizing how much savings come with a fuel-efficiency increase of perhaps 10 mpg, he said. "If you do the math, it's thousands and thousands of dollars," he said. Customers still buy big vehicles but insist on fuel efficiency, said Mike Good, general manager of Street Toyota in Amarillo, Texas. March was the dealership's best month ever. "It's not changing their buying habits," he said. "But they want fuel efficiency. Everybody knows the mpg when they walk in." The market gained 13 percent in both March and the first quarter, the first time since early 2008 the annualized selling rate has exceeded 14 million for three straight months. Chrysler Group was the big winner for both, up 34 percent in March and 39 percent in the first three months. But American Honda Motor Co. and General Motors missed the industry's wave. Honda sales fell 5 percent in March and are up just 4 percent so far this year. GM needed its 12 percent March increase to swing its first quarter from a loss to a 3 percent gain. Many of the most popular models in the first quarter were redesigned vehicles with much-improved fuel economy or vehicles with new fuel-saving engine options. Some examples: -- The Toyota Prius sizzled, up 42 percent for the first quarter. With a third variation, the Prius C that was added in March, the car's monthly sales jumped 54 percent. That made it the sixth-best-selling U.S. vehicle, up from No. 14 in March 2011. -- Sales of the Ford F-series pickup rose 9 percent in March despite the high fuel prices. The big truck captured 4.1 percent of total U.S. sales in the first quarter, higher than in 2008 and 2009 when most F-series pickups were sold with big V-8 engines. About 60 percent of F-series trucks now are sold with V-6s, Farley said -- most of them with the 3.7-liter EcoBoost V-6, introduced a year ago, that offers V-8 grunt with six-cylinder fuel economy. Since 2007, the F series has moved from all four-speed to five- or six-speed transmissions. -- The Ford Focus' 2011 redesign added a six-speed automatic transmission that helped boost its fuel economy rating to 28 mpg city and 38 mpg highway. First-quarter sales jumped 78 percent for a 1.9 percent market share, compared with 1.1 to 1.5 percent shares the past five years. Big payoff Michael Sivak, a researcher at the University of Michigan's Transportation Research Institute, said that with incremental product improvements and consumers looking for fuel savings, new vehicles purchased in March had a combined average fuel economy of 24.1 mpg, up from 20.1 mpg in October 2007. The big fuel-efficiency gains arriving this year are a payoff for the big effort manufacturers have made since the 2008 fuel spike. Quick fixes were installed piecemeal, but products designed from scratch since 2008 with a focus on fuel efficiency are just starting to hit the market. Last week's unveiling of the 2013 Ram pickup suggests the next stage for fuel efficiency. The redesigned Ram drops the 3.7-liter V-6 and six-speed transmission for a 3.6-liter Pentastar V-6 and eight-speed transmission, boosting horsepower by 42 percent. The Ram gets other fuel-saving features: a stop-start system, air suspension, front grille air shutters that close at higher speeds to reduce drag, and thermal management to raise oil and coolant temperatures quickly on startup. As post-2008 vehicle redesigns reach the market, they'll need that fuel-efficiency technology because gasoline prices are likely to stay high and consumers are increasingly aware of operating costs, Ford's Farley said. "If someone buys an F-150 and pays $4 a gallon for gas and drives it 150,000 miles, guess how much they pay for fuel," he said. "It's $36,000. It's more expensive than the truck." That's why Ford pickup customers are buying almost half their F-series pickups with EcoBoost V-6s. And it's why Ford will triple production of the year-old engine this year, Farley said. "Do the math!" (Source: Automotive News, 04/09/12) |
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The Surprising Reason for Record New Vehicle Prices Buyers are paying record average prices for new cars. But it's not gouging by automakers. Rather, more customers are ordering all the frills. The average price of a new car is running at $30,748, up 6.9% from a year ago. Consumers are choosing more expensive trim levels and makers are being smarter about producing the right combinations of options and trim levels that minimize the chance that cars will be spurned on sales lots. Average prices will increase in the next few months, level off, and then see small increases again next year, said Jesse Toprak, vice president of industry trends at online research firm TrueCar.com. Alan Helfman, whose family owns River Oaks Chrysler and Ford dealerships in Houston, said "interest rates are low, used car prices are high and people are willing to pay for vehicles with all the amenities. Things are very, very good." After decades of training customers to wait for the biggest rebate, or cut-rate lease, buyers are coming to terms with a seller's market. In 2005 and 2006, Detroit automakers routinely offered 15% to 20% discounts. Not now. "Now it's 5%," Toprak said, with production more in line with demand. The average incentive in March was $2,440, down $43 from a year ago, according to TrueCar. And it fell $36 from February as the trend to keep rebates in check continues. "Consumers are being weaned off incentives, but not voluntarily," said analyst Joe Phillippi of AutoTrends Consulting in Andover, N.J. "Nobody wants to pay retail (sticker price), but now they are being forced to pay close to it." The consolation is vehicles are holding their residual value better and used car prices have never been higher. Consumers are not balking. U.S. auto sales in March ran at a 14.4 million annual sales rate, up from 13.1 million in March 2011. "Sales do not seem to be artificially inflated," Barclays Capital analyst Brian Johnson said in a report analyzing the sales data. "Strong sales were not supported by incentives." In contrast to the surplus of assembly capacity that drove General Motors and Chrysler to seek government support, now most automakers are letting a gradual steady sales recovery determine how much they boost production plans. The industry took out brands and closed plants so capacity has come down overall, which has kept supplies tight, said Phillippi. A perfect example: General Motors' decision to shut down production of the Chevrolet Volt for a month rather than adding more incentives to sell down growing inventory, Phillippi said. "GM had the discipline to take down production." The upside of these actions: GM's vehicles sold in March at an average price of $33,289, 3.4% higher than a year earlier, according to TrueCar data. The hot-selling Chevrolet Equinox is selling for an average price of $27,437, up 6.5% from a year earlier. At Ford, the new Focus is selling for $3,100 more than the outgoing model, Mark Fields, Ford president of the Americas, told investors this week in New York. TrueCar puts the difference at $3,137 -- a 19.5% increase. Toyota is getting 9.5% more, on average, for its redesigned Camry. "Automakers have finally found their sweet spot...keeping incentives to a minimum," Toprak said. Big winners include Chrysler (average selling price up 6.4% in March to $29,842), GM (up 3.4% to $33,289), Hyundai and Kia (up a whopping 9.4% to $21,717), and Nissan (up 7.4% to $28,322). A wave of compelling, redesigned vehicles hitting the market helps, Toprak said. Higher gas prices have customers buying loaded versions of smaller vehicles. In the past, small cars carried heavy incentives. Now, compacts come with deals worth $1,000 or less while subcompacts are offered with only $700 off, he said. Toprak sees little danger of automakers going back to their old ways. "They learned valuable lessons and the new structure of companies should prevent it. They are more flexible organizations and the emphasis is on profit, not market share." (Source: USA Today, 04/10/12) |
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Loyalty to Hybrid Cars Elusive Most Americans aren't sticking with hybrids. A study released Monday by auto research firm R.L. Polk shows only 35 percent of hybrid vehicle owners chose to purchase a hybrid again when returning to the market in 2011. Hybrids typically cost $5,000 or $7,000 more than a traditionally powered vehicle, and the payback period can take years. The number of hybrid models offered by automakers has doubled since 2007. If repurchase behavior among owners of the high-volume Toyota Prius isn't factored in, hybrid loyalty drops below 25 percent. Hybrid owners, however, are maintaining brand loyalty when returning to the new car market, Polk says. In 2011, 60 percent of Toyota hybrid owners bought another Toyota, according to Polk, and 41 percent purchased another hybrid from any brand. More than 52 percent of Honda hybrid owners stayed with the brand, while just under 20 percent of this same owner group bought another hybrid vehicle from any brand. "Having a hybrid in the product lineup can certainly give a brand a competitive edge when it comes to attracting new customers," said Brad Smith, director of Polk's Loyalty Management Practice. "The repurchase rates of hybrid vehicles are an indication that consumers are continuing to seek alternative solutions to high fuel prices." Online cross-shopping data from Edmunds.com shows consumers are comparing hybrids with similar gasoline-powered vehicles. The Honda Civic is the second-most cross-shopped vehicle among Toyota Prius and Honda Insight shoppers. Hybrid vehicles represent just 2.4 percent of the overall new vehicle market in the U.S., according to Polk. That's down slightly from a high of 2.9 percent in 2008. "The lineup of alternate drive vehicles and their premium price points just aren't appealing enough to consumers to give the segment the momentum it once anticipated, especially given the growing strength of fuel economy among compact and midsize competitors," said Lacey Plache, Edmunds.com chief economist. For electric vehicles and plug-in hybrid electric vehicles in particular, he said, "Certain obstacles -- including consumer unease with unfamiliar technology and the lack of an adequate recharging infrastructure -- will need to be overcome before sales increase." Polk's research also indicates that volatility in fuel prices between 2008 and 2011, which ranged from just under $2 a gallon to nearly $4 a gallon, had little impact on hybrid loyalty. Polk found that consumers in traditional eco-friendly markets in the United States -- Los Angeles, San Diego, Seattle and Portland, Ore. -- are no more loyal to hybrid vehicles than the nation at large. West Palm Beach, Fla., was the most loyal, with 43.2 percent of owners buying hybrids again, followed by Phoenix (40.2 percent), Orlando (39.9 percent) Tampa (39.9 percent), St. Louis (38.4 percent) and Boston (38.4 percent). (Source: The Detroit News, 04/10/12) |
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