Wednesday, June 27, 2012 | Edited by Daniel Moores
||June Car Sales Likely to See Double-Digit Gains
Hybrid and EV Demand Slips as Fuel Prices Fall
Once again, the U.S. auto industry appears to be in the driver's seat when it comes to an otherwise-anemic American economy.
Sales of new vehicles are looking likely to post double-digit gains over June 2011 numbers, according to industry analysts, straining industry production capacity.
Several automakers, including Ford and Hyundai, warn that demand is outstripping supply and that they might see lower market share because of factory bottlenecks.
J.D. Power and Associates and LMC Automotive estimate June's new vehicles sales are up 15% compared to June of 2011. June's new-vehicle sales rate is approaching a 12 million-unit pace on the retail side alone, the strongest level since February, according to a monthly sales forecast by the consulting partners.
Overall, the market appears to be on an annualized sales pace approaching 14.5 million including fleet sales, according to various analysts. But the market appears to be shifting away from the high-mileage and alternative-power vehicles that gained traction last spring.
As gas prices increased from $3.33 per gallon in November 2011 to $3.84 per gallon in April 2012, the combined share of retail sales of hybrid and electric vehicle sales increased from 1.7% to 4.6% during the same period. With fuel prices now at their lowest levels since the beginning of the year, demand for those high-mileage products has been trending downward during the past two months and is now at 3.4%.
"The hybrid and electric vehicle market closely follows gas prices, which demonstrates that while there is consumer interest in hybrid and electric vehicles, demand is heavily influenced by the economic environment, rather than pure interest in the technology," said John Humphrey, Power's senior vice president of global automotive operations.
"Until we see alternative power train growth without rising gas prices, we won't see the market share growth that many automakers are hoping for," said Humphrey, who stressed that overall car sales are still looking robust.
The trend is positive, Humphrey indicated, as the industry enters the typically strong summer selling season and the first of the 2013 model-year vehicles start to roll into showrooms.
And the momentum appears to be building without heavy manufacturer support. Average incentive levels, while up 9% versus a year ago, are down 5% from May of 2012.
"All indicators point toward an industry that continues to get healthy," Humphrey added.
Total light-vehicle sales in June are expected to come in at 1,265,900 units, which would be a 16% increase from June 2011, according to Power. Fleet volume as a percentage of total light-vehicle volume is expected to reach 21% in June, after falling below 20% in May.
After two months of upward revisions to the 2012 forecast, LMC Automotive is maintaining its total light-vehicle sales forecast for 2012 at 14.5 million units with retail sales accounting for 11.6 million units.
That is in line with upgraded forecasts from a number of manufacturers, including General Motors and Toyota.
"Despite a rising level of uncertainty with the economic recovery, consumers remain resilient in their willingness to purchase new vehicles," said Jeff Schuster, senior vice president of forecasting at LMC Automotive. "Concerns regarding the macro-economic environment and another potential summer slowdown have increased, but we expect the sales pace to remain strong and stable throughout the second half of the year."
Meanwhile, North American light-vehicle production is well ahead of the increase in U.S. sales, with production volume up nearly 23%, compared with the same period in 2011. More than 1.2 million additional vehicles have been built in the first five months of 2012, compared with the same period in 2011, as manufacturers -- especially the Japanese -- race to rebuild dealer inventories.
U.S. manufacturing growth continues to lead the overall North America region with a 26% year-to-date increase. Production in Mexico is up 14%, and Canadian manufacturing is 19% higher.
Vehicle inventory at the beginning of June declined slightly to a 52-days supply. Passenger car inventory remains at a below-normal level, with a 43-days supply in early June, down from 45 days in early May. Truck inventory is at normal levels with a 61-days supply, down from a 67-days supply in May.
"Despite the significant increase in production levels this year, vehicle inventory has remained at a level that is below the typical 60- to 65-days supply," said Schuster.
(Source: The Detroit Bureau, 06/25/12)
||Jaguar, Porsche and Cadillac Gain in Quality; Chrysler, Mercedes, Ford Slip
Lexus Repeats Atop J.D. Power's New-Vehicle Quality Study
Jaguar, Porsche and Cadillac posted the biggest improvements in new-vehicle quality for the 2012 model year, while the Mini, Chrysler, Mercedes-Benz, Ford and Subaru brands fell back in a year that saw overall industry quality advance nearly 5 percent, according to J.D. Power and Associates' 2012 U.S. Initial Quality Study.
Lexus topped J.D. Power's study for the second year in a row with 73 problems reported per 100 models tracked, the same as in 2011. Toyota Motor Corp.'s luxury division was followed by the Jaguar, Porsche, Cadillac, Honda, Acura, Infiniti, Toyota, Mercedes-Benz and BMW brands.
It was hard to rise and easy to fall this year as automakers scored the biggest improvement in quality since 2009 and sliced the average number of problems reported per 100 vehicles to 102 from 107 in 2011, Power said.
The Mazda, GMC, Nissan, Ram and Chevrolet brands also finished above the industry average.
Automakers are making higher-quality vehicles than ever before and continue to make gains in all areas except audio, entertainment and navigation systems, where problems increased 8 percent from last year, Power said.
The Fiat brand and Daimler AG's Smart division tied for last place with 151 problems per 100 models, Power said.
Suzuki, Infiniti, Nissan, Ram, Toyota, Dodge, BMW and Jeep also made big gains in the 2012 study, which tracks problems during the first 90 days of ownership.
The 228-question survey was conducted between February and May and is based on 74,000 responses from U.S. consumers that purchased or leased a new light vehicle.
The 2012 Porsche 911 had the fewest problems -- 44 per 100 models tracked -- and the best score since Power redesigned the study in 2006.
"If we did the math, the 911 is probably the best vehicle we've ever seen in the history of the study," said Dave Sargent, vice president of global automotive operations at Power. "It's that good."
Since 2006, when Power added perceived design flaws to the list of problems it tracks, vehicle owners are reporting almost as many things not right as things broken. This year, features that are difficult to use or confusing account for almost half of all reported problems, said Raffi Festekjian, Power's director of automotive research.
The single biggest problem this year: voice-recognition devices that didn't work properly.
"A few years ago, voice recognition was basically on only high-end vehicles," said Sargent. "Now most vehicles have some type of hands-free operation."
Power said more than 80 percent of consumers surveyed for the 2012 study indicated that their new vehicle had some form of hands-free technology.
Hard to advance
Manufacturers are doing a better job of both reducing defects and introducing advanced technologies into mainstream vehicles, but making it easy to use is challenging, Festekjian said.
"This is now an issue," he said. "The technology draws customers, but they have high expectations and want to be able to use it without reading an owner's manual."
Design complaints and the rising tide of quality gains made it more difficult to move up the list, as Ford Motor Co., Chrysler Group and Volkswagen Group of America discovered this year.
The Ford brand, which ranked No. 5 in the 2010 study before plunging last year largely because owners disliked a transmission and found the MyFord Touch infotainment system hard to use, failed to rebound this year.
It was one of the five brands with more problems this year than last and fell four places to No. 27. Lincoln finished tied for No. 18, down a spot from 2011.
Ford said it tweaked the transmission and improved MyFord Touch substantially in March but too late to boost IQS scores this year.
"The dramatic improvement we're expecting will come in the third quarter," Ford quality boss Bennie Fowler told reporters last week.
GM a winner
General Motors was the one Detroit-based winner. The automaker's four U.S. brands reduced problems substantially and finished in the top half of the 34-brand field. No. 4 Cadillac was the top Detroit 3 brand, and Chevrolet joined GMC by placing above industry average.
"This is GM's best performance in the 26-year history of the study," Sargent said. "They've come a long way; they've focused their attention on four brands and a smaller product lineup."
Each of GM's brands earned at least one segment award, including the Chevrolet Malibu, which was ranked highest among mid-sized cars.
GM also took all three top spots in the large pickup segment, with the GMC Sierra light-duty, the Chevy Silverado heavy-duty and the Avalanche finishing first, second and third, respectively.
Both Nissan North America brands slashed problems this year. Infiniti rose two spots to tie for No. 6. Nissan jumped a dozen places to tie for No. 12.
Toyota Motor Sales, which rebounded last year, treaded water in the 2012 study. Lexus was the top brand for a second year even though its problems score remained at 73. The Toyota brand reported fewer problems -- 88 -- but fell a spot to No. 8. Scion also reduced the number of problems to 117 per 100 but dropped a place to No. 26.
The Toyota brand also posted fewer problems than the average of all premium brands -- 91 problems per 100 models.
Corolla's big honor
The 2012 Toyota Corolla was the highest-rated non-premium model and ranked fifth overall, Power said. The redesigned Camry also fared better than the 2011 model.
Chrysler Group traditionally has not fared well in the Power rankings and that continued this year. Three Chrysler Group brands reported fewer problems and moved up, but Ram was the only brand to place above average at No. 12 -- tied with GMC and Nissan; Jeep was No. 23, and Dodge tied for No. 29.
The Chrysler brand had more problems than a year ago and fell to No. 25. Fiat -- which returned to the U.S. market in early 2011 -- tied Smart for dead last.
"Knowing the historical trend of how small European cars perform in IQS, Fiat's ranking wasn't unexpected," Doug Betts, head of quality at the Chrysler Group, said in a statement. "What IQS doesn't show is how much Fiat owners love their total car, even though they may not like where the window switch is located or the amount of seating room in the back seat."
VW, which is enjoying a rebound in U.S. sales, was another brand with high expectations with the study but was disappointed with the results.
"We didn't improve as much as we'd like, and it doesn't match our internal data," said Marc Trahan, VW's quality chief.
The VW brand improved to 124 problems per 100 from 131 per 100 last year -- about a 6 percent increase. But it dropped a notch in the rankings to No. 29 out of 34 brands for a three-way tie with Dodge and Mitsubishi. In last year's study, the VW brand ranked No. 28.
VW Group of America CEO Jonathan Browning said last month the brand was expecting to improve up to 10 percent.
Trahan blamed the lackluster results on the timing of the survey, which was conducted before VW implemented new quality improvement measures. He said that since taking these steps, dealers have told the company warranty repair hours are down. The launch of the redesigned Passat mid-sized sedan also has gone well, Trahan said, noting that dealers have described it as a "solid" model.
The new Passat, now built at VW's U.S. factory in Chattanooga, Tenn., was launched in September along with the redesigned Beetle.
"In years past, new model launches were a challenge for us," Trahan said. "We've proven now that's no longer an issue." So far, both the Passat and Beetle have launched better than the models they replace, he added.
Audi rose two spots to No. 16 but was below the industry average and the lowest of any import luxury brand.
Hyundai Group improves
The Hyundai-Kia group's quality drive also appeared to stall. Both brands reduced the number of problems reported, but Kia stayed at No. 18 and Hyundai fell from No. 11 into a tie with its sister brand.
American Honda Motor had fewer problems -- 83 per 100 for Honda and 84 for Acura. But the huge gains at Jaguar, Porsche and Cadillac bumped the duo to fifth and sixth in the rankings this year from silver and bronze in 2011.
Power said 65 percent of the models ranked in 2011 improved in the 2012 study, and the average quality of all-new or redesigned vehicles improved 12 percent compared with 2011.
(Source: Automotive News, 06/20/12)
||How Many of Those Facebook Clickers Are Just Tire Kickers?
Automakers love marketing on Facebook. They share videos, photos and chatter with millions of fans of their brands.
But converting Facebook fans into paying customers? Well, that's a work in progress.
Social media experts say companies need to see Facebook less as a retailing tool than as brand advertising -- creating word-of-mouth advocacy and affinity for brands. That hasn't stopped some automakers from using sales tactics on the online community.
A few examples show why marketers are tantalized by the sales potential of Facebook:
"We're asking what our efforts are worth in ROI" -- or return on investment, said Casey Hurbis, head of advertising for Fiat in North America.
- Jeep's 2.7 million U.S. Facebook fans convinced the brand to offer its Altitude edition on all vehicles this year rather than just on the Grand Cherokee.
- Audi is selling its racy TT RS coupe here as well as in Europe because 12,000 Facebook fans signed a petition pledging to plunk down $50,000 if Audi would bring it.
- At the dealer level, an "employee pricing" advertisement posted on the Facebook page of Rick Case Honda in Davie, Fla., resulted in 100 cars sold the first weekend of June, said Richard Bustillo, the dealership's general manager.
- Fiat is using an old-school marketing technique -- coupons -- in an effort to convert those who click the "like" buttons on its Facebook page into paying customers.
After Fiat surpassed 500,000 fans on Facebook in February, it offered each of those fans a $500 coupon on a Fiat 500 subcompact and a chance to win one of 12 500s by using a code at a Fiat dealership.
In early July, after the coupons expire, Fiat will know whether the coupons and contest moved the sales needle, Hurbis said.
"We know we induced some dealer traffic," Hurbis said, adding that "it was an opportunity to gauge the return on investment in the social media space."
For most brands there's a mix of encouraging results and frustration as executives explore the potential of Facebook marketing. And the relatively low cost of social media marketing relieves some of the pressure on marketers to harvest sales from Facebook.
General Motors recently signaled its dissatisfaction with a related aspect of Facebook marketing -- paid advertising and sponsored content -- by yanking a $10 million budget. Sponsored content is the practice of paying Facebook for better placement of News Feed items on fans' personal pages.
GM said it plans to add the $10 million -- and possibly more -- to the $30 million a year it already spends to create free content for Facebook pages, which it deems more effective.
"We will continue to have a huge content presence on Facebook," a GM spokesman wrote in an e-mail. "We expect to significantly increase our spending on Facebook content. We've had great success engaging customers and fans on our product and brand pages."
GM's $30 million for Facebook is a small portion of the automaker's $1.8 billion U.S. advertising budget.
Owen Peacock, Scion's manager of marketing communications, said that just because a company has 1 million fans, that doesn't mean all 1 million will receive a company's update on their News Feeds. Facebook's algorithms and formulas don't allow it -- unless the automaker pays Facebook a premium.
Honda is sticking with sponsored Facebook content, said John Watts, manager of digital marketing at American Honda. Honda's recent Facebook activity launching the redesigned CR-V has contributed to five months of record sales, he said.
"We're happy with what we're getting," Watts said, speaking last week at the TLS Automotive Social Media summit, a meeting of automaker executives and dealers in Marina del Rey, Calif. He said sponsored content is "worth it" for the increased reach Honda's message receives.
Watts said that Honda's Facebook spending is "modest" compared with GM's $30 million Facebook budget.
Doug Simpson, Facebook's manager of global marketing solutions, said companies need to approach Facebook as a branding investment and shouldn't expect an immediate boost in car sales. Engaging loyal customers leads to word-of-mouth awareness and recommendation that other forms of advertising cannot buy, he said.
Facebook is also a useful source of data, Simpson said. A new analytics platform on Facebook will give advertising partners access to the behavior and "likes" of those who follow their brand. That will allow auto marketers to produce more targeted content and contacts in the future, Simpson said.
For example, say a Facebook member changes his or her educational status to "graduate." Facebook can forward that information to an automaker or dealer -- for a fee. The automaker or dealer can then notify the member of a college-graduate cash incentive currently in place.
Viral Darth Vader
Volkswagen of America has enjoyed huge social media growth, in part from the little Darth Vader commercial for the 2011 Super Bowl.
Before the commercial went viral on Facebook and YouTube, VW had fewer than 400,000 Facebook fans. Today the number is 1.1 million, said Charlie Taylor, VW's general manager of digital marketing.
Now VW is trying to guide conversation on particular topics, Taylor said. His goal: to subtly tie VW vehicles to social issues, such as safety and the environment.
This winter the company had a regular cadence of news items and questions on product safety. The conversation this summer is on the environment, stressing VW's clean-diesel technology, Taylor said. VW tees up the topic and lets fans run with it where they want, he said.
Ford Motor has 70 Facebook pages to foster chatter about its products, said Scott Monty, Ford's head of social media.
Ford views Facebook as a place where vehicle owners and friends can be heard. To encourage engagement, Ford, like other automakers, posts daily material on its corporate Facebook page, Monty said.
Such items included the news this year that a credit ratings upgrade had earned back for Ford the Blue Oval that had been put up as collateral on loans years earlier. About 8,000 fans stepped up to "like" the item.
So the fans are there and engaged. But turning that engagement into sales? That's the hard part.
(Source: Automotive News, 06/25/12)
Daily Sales Tip: Understanding Objections
Unfortunately, the first two orders many new salespeople receive are "Get out and stay out!" It is only natural for your prospect to procrastinate when asked to make a decision involving money. As a general rule, people are hesitant to commit to purchasing a product or service until they have convinced themselves that they need it and are assured they are getting it at a fair price.
Research indicates a prospect will say no on average five times before they actually buy. As a professional salesperson, it is important to remember that an objection is not a rejection of you personally.
Believe it or not, objections are a good sign and you should actually look forward to them. After all, if your prospect was not interested in your product or service, they wouldn't be asking questions. Simply put, an objection is nothing more than a request for additional information. Top producers not only expect objections during the sales process, they actually anticipate them.
Typically, a prospect's objections will fall into four major categories: no money, no perceived need, no hurry, or no trust. If you haven't built trust and rapport with your prospect, qualified them financially, and conducted a thorough needs analysis, you can expect them to use objections to derail the sales process.
When addressing an objection, don't dump the whole bale of hay. The majority of salespeople have a tendency to overwhelm and bore their prospects by over-educating them. Many salespeople lengthen the appointment and use up their valuable fall-back positions in an attempt to show how knowledgeable they are.
Occasionally your prospect's objection may be disruptive, and therefore, you might want to delay answering it until a more appropriate time. When you make the decision to delay your response, I recommend you write their question down and ask them, "Would it be OK to address this question later on in my presentation?" However, if the same objection comes up twice, you should stop and address it immediately.
Source: Sales trainer/consultant John Boe