Wednesday, June 13, 2012 | Edited by Daniel Moores
||More MPG -- ASAP
Buyers Embrace Fuel-Efficient Redesigns -- But Supplies Are Short
Four years after gasoline prices spiked and carmakers threw themselves into developing models with vastly improved fuel economy, those new vehicles are arriving -- and cleaning up against older, less fuel-stingy competition.
Four of this year's hottest models are the Toyota Camry, Volkswagen Passat, Hyundai Sonata and Kia Optima -- all redesigned mid-sized sedans with the heady mid-30s highway mpg ratings previously limited to small cars.
And more are on the way. Last week Nissan began shipping redesigned Altimas to dealers, and Chevrolet, Ford, Honda and Dodge get redesigned mid-sized sedans this fall.
The bad news? They aren't here yet -- and that has been a drag on the market as some shoppers wait for the redesigned models and spurn the current-generation, lower-mpg vehicles that soon will be replaced.
Coupled with the capacity limitations facing Toyota, VW, Hyundai and Kia, that means the industry is likely to be short of high-mpg mid-sized car inventory all summer.
That will make it more difficult to return to the 14 million-plus monthly selling rates of January through April. The May slide to 13.8 million was blamed in part on scarcity of the high-mpg hits.
The changeover to high-mpg models, in all segments, is the key market driver this year. Dealers say it has been the release valve on pent-up demand as fuel prices soared.
"Fuel efficiency continues to be a top purchaser driver," said Ken Czubay, Ford's U.S. sales boss.
Total U.S. vehicle stocks have been falling all year, down to a 52-day supply on June 1, from 66 days on Feb. 1. But car stocks are even tighter: 43 days on June 1, down from 60 five months earlier. Toyota and Kia started June with only enough cars to last 25 days; Hyundai had just a 22-day supply.
Dealers can sell new models with advanced fuel efficiency at or near sticker, while outgoing models require hefty incentives.
For example, the redesigned 2013 Malibu Eco with 37 mpg highway -- a mild hybrid that was introduced before the gasoline-engine versions -- has only a GM incentive of 2.9 percent financing for 60 months, and is the only model not eligible for a $1,000 cash discount for Saturn owners. But outgoing 2012 Malibus have a factory incentive of $4,000, or a combination of cash and 0 percent financing. Even GM employee discounts are lower on the 2013 Malibu.
"We just don't have to discount the new Malibu," said salesman Mike Blake at Wally Edgar Chevrolet in Lake Orion, Mich.
Sure, buyers always crave the latest model, but it's different this time. Not only is the sheet metal fresh; fuel economy is significantly improved.
For example, though it hasn't yet been EPA-certified, Ford projects that the 2013 Fusion with a 1.6-liter EcoBoost engine will get 37 mpg highway, compared with 33 mpg for the 2012 Fusion powered by a 2.5-liter naturally aspirated four-cylinder engine.
The four brands with redesigned mid-sized cars already on the market are scrambling to make more cars.
-- Volkswagen is adding a third shift at its Chattanooga plant to boost capacity to 180,000 Passats a year from 150,000. In May, VW Group of America CEO Jonathan Browning said VW has calculated the cost of expanding to 250,000 a year.
-- Kia's West Point, Ga., plant, which builds the Optima, is working overtime.
-- The Montgomery, Ala., plant, where Hyundai builds the Sonata, will stay on daily and Saturday overtime until it adds a third shift in September, "and then we'll see," a spokesman said. Hyundai Motor America CEO John Krafcik has said the brand's sales growth this year will be limited by capacity.
-- Toyota has scheduled daily and Saturday overtime at most North American plants through summer.
Camry sales are up 44 percent through May -- and, yes, more supply after last year's Japan earthquake has a lot to do with it. But so does improved fuel economy on the redesigned version that arrived last fall. The 2012 four-cylinder gets 25 mpg in the city and 35 on the highway, compared with 22/32 for the model it replaced. Said Toyota Division General Manager Bob Carter: "A large percentage of the increase is the consumer response to the new car."
(Source: Automotive News, 06/11/12)
||Total Dealer Revenue Topped $609 Billion in 2011
The National Automobile Dealers Associations annual industry report confirmed that new-vehicle dealers sold 12.72 million units last year, with total dealership dollar sales growing by 10.2 percent to $609 billion.
Sales in the new-car department (up 15.6 percent) surpassed the 9.8 percent revenue growth in used cars. Net pretax profit posted strong gains, with the typical store generating $785,855, according to the NADA Data report.
"Typical dealerships saw sales increases in all departments for the year, led by new-vehicle sales, and costs moderated in relation to new-vehicle sales volume," the NADA report stated.
The industry realized those gains despite last year's devastating earthquake and tsunami in Japan, which hurt vehicle supplies and slowed economic growth. The unemployment picture improved, but not as quickly as many hoped. Consumer confidence, the report stated, generally trended upward in 2011 and in early 2012.
"In 2011, vehicle sales continued to increase, driven by the need to replace a record-aged group of vehicles in service," the report noted.
Total gross margins moderated slightly in 2011 to 14.4 percent of total dealership sales from 14.5 percent in 2010. "With economic recovery continuing at a slow pace, the 2011 operating profit increased to 1.2 percent of sales from 1 percent," the report stated.
Total expenses reflected ongoing growth in the overall U.S. economy, up 8.9 percent, but declined as a percentage of sales to 12.1 percent from 12.5 percent in 2010.
Advertising expenses increased on higher unit sales, but fell on a per-vehicle basis to $628. Franchised dealers spent a total of $6.37 billion on advertising in 2011, up from $5.88 billion in 2010, with radio accounting for 15.9% of the total.
Total dealership net profit before tax as a percent of sales was 2.3 percent, up from 2.1 percent in 2010. Dollar profits before taxes gained 24 percent.
"Economic recovery and strong new-vehicle sales in 2011 helped the gross margin on the sale of new cars and trucks increase to 4.57 percent in 2011 from 4.49 percent in 2010," according to the report.
Looking at F&I, aftermarket income rose in 2011 behind increases in F&I and service contract dollars. The F&I penetration rate, according to the report, rose to 77 percent for new cars. Acceptance rates for service contracts on new-vehicle sales rose by 0.7 percent, while the rate for used-car sales increased by nearly 3 percent.
"New light-duty sales of 12.7 million units in 2011 were 10.2 percent higher than in 2010," the report added. "Rising gasoline prices pushed the mix of new-vehicle sales toward a greater percentage of cars in late 2011 and early 2012. New-vehicle sales should rise by more than 10 percent in 2012, as vehicle supply increases."
(Source: F&I Magazine, 06/12/12)
||Fancy Add-Ons Boosting Pickup Sales
Chrysler Group LLC and Ford Motor Co. are testing the limits of truck buyers' appetite for pickups loaded with leather, chrome and heated seats at price tags that can top $50,000.
It took just three days for dealers to snap up the full-year's allotment of Chrysler's new luxury-trim Ram Laramie Limited pickups, brand President Fred Diaz said in an interview. Ford, whose F-Series has been the top-selling vehicle line in the U.S. for 30 years, said last week it will add a range-topping Limited luxury model later this year.
"I don't know if you can put enough bells and whistles on trucks," said Hayden Elder, the owner of a Chrysler dealership in Athens, Texas, 75 miles southeast of Dallas. "In my mind, I never have enough high-end trucks."
The interest in luxury pickups suggests underlying strength in the U.S. auto market, where investors have been reluctant to add exposure out of concern that higher-profit trucks as a portion of vehicle sales will deteriorate, according to Itay Michaeli, an analyst at Citigroup Inc. While light trucks have lost 1.6 percentage points of U.S. share this year, used pickup pricing has remained stable and the number of long-lasting trucks on U.S. roads continues to climb, he said.
"Automakers are warming up to the view that there is potentially far more pent-up demand for pickups than commonly believed," said Michaeli. "If you buy a pickup, there is probably some level of utility that you wanted, and if you had so much money that you could afford to buy a pickup for fun, you may still have a lot of money and still continue to do that."
Chrysler began production last week of the Ram 1500 Laramie Limited in Warren. With a heated steering wheel, ventilated front seats and heated rear seats, it displaces the Laramie Longhorn as Chrysler's most expensive truck.
Equipped with extra chrome and cowboy-boot inspired leather stitching, the Longhorn helped boost Chrysler's pricing last year. About 13 percent of light-duty Ram pickups sold for at least $40,000, up from 9 percent in 2010. Among heavy-duty Rams, 29 percent sold for at least $50,000 in 2011, up from 22 percent a year earlier.
"That gave us the rationale and a business case to build Limited," said Diaz, the brand chief. "There are guys in New York, in Florida, in the Midwest and in the Northwest who aren't exactly into that cowboy, southwestern, barbed-wire feel."
With all of the Laramie Limiteds scheduled to be built this year already spoken for by dealers across the country, Chrysler is working with parts suppliers to try to boost production, Diaz said.
Chrysler says the Laramie Limited is a "Platinum fighter," a reference to Ford's F-Series Platinum, which has heated and cooled power front seats in black or pecan leather, along with Ford's Sync voice-controlled infotainment system. Later this year, Ford plans to add a fancier model called the Limited, though it hasn't announced details on features and pricing.
When Ford introduced the Platinum for the 2009 model year the company expected it would account for about 3 percent of F-150 sales, said Doug Scott, marketing manager for Ford truck. Platinum has more than doubled the company's forecast by consistently making up at least 6 percent of the F-150 mix, he said.
A $40,000-plus King Ranch edition of the F-Series caters to Texas tastes with its 8-inch touch screen, Sync infotainment hub and dual USB ports amid the black interior with wood-grain appliqués. More interested in snakeskin leather accents? Check out the Ford Harley-Davidson F-150 that starts around $50,000.
"The truck market, maybe a little less so today but in general over this last three- or four-year period, has been made up of a higher mix of more-affluent people," Scott said.
A rebound in pickup demand will partly stem from a housing recovery, said Jeff Schuster, an analyst at LMC Automotive in Troy, MI. Contractors have held on to older equipment and delayed replacement as they "ride out" the decline in construction activity, he said.
LMC estimates pickups will slip to 12.7 percent of the U.S. auto market by 2016, from 14.1 percent last year, mainly because of challenges in housing and a consumer shift toward smaller vehicles.
Automakers are more confident. Sales of 2 million full-size pickups annually in the U.S. "is certainly in the planning horizon," Ford's Scott said. "There's a lot of profit to be made at those levels."
General Motors Co. added the Denali premium name to its GMC Sierra pickup line in 2010, and this year the sub-brand has made up 35 percent of heavy-duty Sierra retail sales, up from 15 percent in 2010, said Tony DiSalle, vice president for GMC marketing. A heavy-duty Sierra Denali sells for about $3,000 more than a Sierra SLT, which starts at $40,425.
"We've seen consumers gravitate to Denali," DiSalle said. "Buyers want the comfort and luxury amenities in a highly capable vehicle."
(Source: The Detroit News, 06/10/12)
Daily Sales Tip: Asking for the Sale
Here are some things to keep in mind to help you remember the importance of asking for the sale:
• If you've done a good job explaining the benefits of your product or service, you have every right to ask the prospect if they'd like the opportunity to enjoy those benefits by purchasing what you're selling.
• People aren't naïve; they know when someone's trying to sell them something. It's both odd and even a little rude when a salesperson makes a pitch and doesn't follow through by asking for the business. The customer can be left wondering, "What's the point of this? Does this salesperson really think I have nothing better to do with my time than hearing about this product?"
• Asking for the sale is the efficient thing to do. If you truly believe in what you're selling, you'll want to successfully meet the needs of as many prospects and customers as possible. Asking for the sale helps you do this by encountering any concerns or objections to overcome in this sale, or by giving the customer the right to say "no" and letting you move on to the next potential customer.
Remember, selling is a process of matching the needs of your customer with the benefits of your product. That process isn't finished until you ask for the sale.
Source: Sales trainer Peggy Carlaw, founder of Impact Learning Systems