Wednesday, October 3, 2012 | Edited by Daniel Moores
||U.S. Auto Sales Jump 13 Percent in September
Toyota, Honda, VW Soar; Chrysler Leads Detroit 3
U.S. auto sales, led by Toyota, Kia, American Honda and Volkswagen, rose 13 percent last month as the annualized pace of sales accelerated to 14.9 million -- the highest rate since March 2008.
The overall results topped analysts' expectations and signaled the auto industry is poised to continue overcoming mixed economic reports to finish the year on a strong note.
Passenger car demand drove industry results last month, with sales up 23 percent. Consumers continued to opt for fuel-efficient models amid high gasoline prices. Light truck volume edged up 4 percent.
Sales have climbed 15 percent to 10.9 million through September and remain on track to top 14 million for the year, automakers and analysts say.
"The auto industry had another very encouraging month in September," said Bill Fay, Toyota group vice president and general manager.
September marked the fourth consecutive month and seventh month this year the SAAR has topped 14 million. August's SAAR of 14.5 million marked the best showing since August 2009, when the U.S. government offered incentives for buyers to swap older vehicles for new models.
Low interest rates, easing credit markets, selective incentives, new and redesigned models, and pent-up demand are fueling the industry's sales gains.
At Toyota, combined sales at the Toyota, Lexus and Scion brands jumped 42 percent. It was the fourth time in five months deliveries rose 40 percent or more as the automaker continues to rebound from last year's earthquake in Japan.
The Toyota division posted a 41 percent increase, helped by passenger car sales, while Scion demand rose 76 percent and Lexus deliveries advanced 36 percent.
Sales were strong all month beginning with the Labor Day holiday, Toyota said.
At Honda, sales jumped 31 percent, with the Honda brand up 29 percent and Acura posting a 44 percent increase. Demand for the Honda Civic and Accord soared 57 percent, Honda said, while deliveries of the CR-V advanced 14 percent.
It was the fifth straight month that Honda's U.S. sales gain topped 30 percent.
"Honda is once again firing on all cylinders as we enter fall," John Mendel, American Honda executive vice president of sales, said in a statement.
Volkswagen reported sales of the VW brand climbed 34 percent and boasted it expects to continue to outperform the industry during the fourth quarter. Audi said volume rose 27 percent and said it remains on track to set an annual sales record in the United States for 2012. Overall sales for the VW group were up 32 percent.
At Kia, sales rose 35 percent to 48,105, keeping it on pace for an annual sales record this year as well. Hyundai brand sales rose 15 percent to 60,025, marking its biggest gain since February.
Chrysler Group posted a 12 percent rise, helped by a 27 percent increase in car deliveries and a 51 percent gain at Fiat.
It was the company's 30th consecutive monthly gain in U.S. sales, but the smallest advance since volume rose 10 percent in May 2011.
Deliveries at General Motors, Ford Motor and Nissan Motor Co. were mostly flat in September.
Detroit's two biggest automakers cited lower truck volume -- a traditional stronghold -- for sales that were down less than a percent at Ford and up just 1.5 percent at GM. The results mean more market share losses for the companies.
Volume at the Ford division was unchanged and Lincoln demand dropped 3 percent. Ford said retail sales climbed 4 percent last month.
Ford's car sales inched up 1.6 percent and utility vehicle volume rose 9 percent, but truck deliveries slipped 8 percent, partly as a result of the discontinuation of the Ranger pickup.
"The industry is on plan, Ford is on plan, and we're looking forward to a really good fourth quarter," said Ken Czubay, head of U.S. marketing, sales and service for Ford.
GM said car volume rose 29 percent and crossover demand inched up 3 percent. GM's truck sales slipped 20 percent, reflecting a 46 percent drop in fleet sales.
Chevrolet posted a 1.5 percent increase and Buick volume rose 8 percent, while Cadillac deliveries slipped 1.3 percent and GMC was flat. GM said retail sales at all four brands increased.
At Nissan Motor, sales slipped 1.1 percent, with the Nissan division down 2.4 percent and Infiniti advancing 11.4 percent.
Nissan and the Hyundai-Kia Group have also lost market share this year.
The BMW Group reported a 3.5 percent increase, with volume flat at the BMW brand and Mini up 23 percent.
"The economic indicators and consumer confidence are showing improvement and the traffic in our showrooms is further encouraging our optimism for the fourth quarter," Ludwig Willisch, CEO of BMW of North America, said in a statement.
Deals, deals, deals
Fatter discounts on remaining 2012 models also helped drive industry sales last month.
Kelley Blue Book says the hottest segments last month were compact crossovers, large pickups and subcompact cars. Chevrolet, Ford and Chrysler offered cash rebates of $3,500 or more on full-sized pickups.
Chrysler's incentives averaged $3,256 last month, the highest among major automakers, TrueCar.com estimates.
Availability and affordability of auto financing is improving faster than home mortgage rates are falling, said Diane Swonk, chief economist with Mesirow Financial in Chicago.
That helps explain why U.S. auto sales are coming back faster than the housing market, she added.
(Source: Automotive News, 10/02/12)
||New Car Buying by Young Rises After Years of Decline
Young buyers are inching back into the new-vehicle market after several years on the sidelines, helped by easing credit and a slightly improving job market.
"Younger buyers have returned to market at a higher rate than any other age category," according to a recent report by J.D. Power and Associates' Power Information Network.
The young buyer group -- from teen years through age 35 -- is a hefty 23% of so-called retail buyers, the highest since 2008, according to Power. The retail sales category excludes multiple-vehicle sales to fleet buyers, such as rental-car and taxi companies.
Data from Polk, which tracks new-vehicle registrations, not sales, found a similar trend, showing buyers ages 18 through 34 are 12% of all new-vehicle registrations from January through July this year -- highest since 16.4% in 2007.
Power's Thomas King, a senior director, says that high used car values could be helping younger buyers who have something to trade-in or sell. Credit is also easier to get, and "We are also seeing growth in longer-term loans, 72 months and over," which reduces monthly payments, he says.
Long loans, however, can lock buyers into long ownership. It takes years before the loan balance is less than the value of the car, delaying the next purchase.
Still, the rebound is huge for car companies, which depend on an influx of youthful customers as their lifeblood. Younger shoppers don't buy high-profit vehicles, at first, but if they can be well-served and kept loyal, automakers believe they'll move up to very profitable models as they get older and richer.
Big gainers with young buyers: Hyundai and Kia. Polk says together they had 11% of the new-vehicle registrations by young buyers, up from just 5% in 2007. European makers, mainly Volkswagen, also grew, edging up to 4%.
Polk says Detroit makers, meanwhile, fell 3 points to 37% of the group. And Japanese brands tumbled 6 points, to 41%.
Sales tallies from TrueCar.com show a similar, if less dramatic, move back into the market by younger buyers. Its data show that buyers ages 18 through 34 accounted for 12% of new vehicle sales from January through July this year, up from 10.9% for all of last year. But TrueCar.com still shows that percentage trailing 2008 through 2010 by a point or two.
Too soon to call it a solid trend, says Tom Libby, senior auto analyst at Polk: "They're beginning to put their feet back in the water, but we're not near the (normal) level" of 2007.
Says Libby, "One theory is they've just lost interest in new vehicles; they are more interested in being online, connecting that way. If that holds true, we'll never see the number come back."
But Libby believes that's a false reading: "They are as interested as ever,and when economic conditions improve, they'll come back."
(Source: USA Today, 09/27/12)
||How the Recession Hurt Brand Loyalty
When Vehicles Are Kept Longer, Buyers More Likely to Stray
Many consumers who are finally ready to buy a new vehicle after waiting out the recession are up for grabs.
The longer an owner keeps a vehicle, the more likely the owner is to replace it with a product from a competing brand, according to data from R.L. Polk & Co. The decline in loyalty, though gradual with each passing year, means that many automakers and dealers will need to work harder to retain customers.
Job losses, wage cuts and general economic uncertainty in recent years caused many people to delay buying a new car or truck. Leasing, which puts buyers back in the market every two or three years, became almost nonexistent during the downturn.
As a result, Polk says the average American now keeps a new vehicle for about six years, up from around four years before 2007.
"They're almost like a first-time buyer when they return to market, and they become a conquest opportunity," says Brad Smith, director of Polk's loyalty management practice. "It's going to be a situation where everyone's going to be scrambling for every tenth of a point of market share as these customers are returning to market."
Polk's latest data show that 46.2 percent of consumers who go three years between buying new vehicles choose the same manufacturer for their next purchase. Loyalty rates decline steadily for each additional year, dropping to 39.8 percent at nine years.
Adding to that trend, dealers and analysts say they have seen more consumers willing to cross-shop domestic and import brands recently, particularly after last year's earthquake in Japan caused vehicle shortages at many U.S. dealerships.
Big differences in market
The market has changed significantly since many people last bought a vehicle: Brands such as Pontiac and Mercury are kaput, while Korean and domestic companies that many shoppers ignored in the past now offer much-improved lineups. Toyota and Honda have even lost some of the magic that used to bring buyers back again and again.
"Overall, the general consumer realizes that cars are better today than they were in the past," says Arthur Henry, manager of market intelligence for Kelley Blue Book. "It emphasizes that you can't rest on your laurels. There are others around to take your place."
On average, loyalty rates are likely to decline across the industry as pent-up demand from the recession is released, Henry says.
Erich Merkle, chief sales analyst at Ford Motor Co., says the company has "a great opportunity" to get on more people's shopping lists, given how much the Detroit 3 have struggled to overcome negative perceptions.
"I'm happy that we'll have more customers out there doing that homework and comparing us to other automakers," Merkle says.
Analysts say Hyundai, Kia and Volkswagen, brands that have become more prominent in the past decade, are among those expected to have the most success attracting shoppers who want a change.
"Five to seven years ago, people would come in and we'd have to explain why a Sonata is worth buying rather than a Camry. They had to be convinced of that," says Scott Falcone, owner of World Hyundai in Matteson, Ill. "Now, the product is just so good."
'Too many options'
In addition, people's lives can change considerably over six years, altering their vehicle needs in the process. A couple with a small sedan might now have several children and want a minivan, or empty nesters could be ready to ditch their SUV for a luxury vehicle or a sports car. They could find that their current brand is less competitive or does not offer a vehicle in the segment they now desire.
Shoppers also might discover that the salesperson they liked in the past is gone or even that the dealership closed, further reducing their attachment to that manufacturer.
"When you lose that connection, you're creating a scenario where the consumer can go cross-shop," Smith says. "The consumer has too many options."
Toyota, whose customers have been among the most loyal in the industry, says dealers shoulder much of the burden to keep buyers from looking elsewhere because that is where the relationship with the company is formed. Having a fresh, appealing vehicle lineup is the other big factor, says Nancy Fein, vice president of customer relations at Toyota Motor Sales U.S.A.
"If you've got both of those things, your customers are going to stay loyal to you," she says.
Kelley Blue Book ranked the Toyota brand first in shopper loyalty in the second quarter, as it has for five of the nine most recent quarters. Of the Toyota owners shopping with the help of its Web site, 52 percent were considering the brand again, up from 48 percent during its recalls but below the 56 percent that it had registered before that. The industry average, Kelley Blue Book says, is 35 percent.
Service builds loyalty
Toyota's complimentary two-year maintenance program, begun after its recall crisis in 2010 and formalized as Toyota Care in early 2011, is one way the company is helping to strengthen the bond between dealers and customers. Fein says getting buyers to visit their Toyota dealership for service three to five times doubles the likelihood they will stay with the brand.
"It's absolutely the dealership's relationship with the customer that keeps them coming back," Fein says.
Dealership service departments play a greater role in sales today, says Smith, the Polk consultant. Encouraging customers to go there for oil changes and repairs -- which are needed more with the average vehicle now about 11 years old -- instead of an independent garage is critical to promoting loyalty.
"If a dealer isn't seeing their customers twice a year, you can almost bet that those customers will defect," he says. "If they can get them back in for service, they've got a better opportunity to get them back for their next new vehicle."
In some cases there is nothing an automaker can do to stop consumers from switching.
"They say, 'I really enjoyed this car for 10 years, but now I'm ready for something different,'" says Neil Kopit, director of marketing for Criswell Automotive in Gaithersburg, Md.
Criswell, which has Chevrolet, Honda, Nissan and the full family of Chrysler Group franchises, trains its sales staff to sell vehicles from any of those brands. Says Kopit: "That is very important, because you keep the customer loyal to you even if they're not going to remain loyal to the brand."
Small gains and losses in a company's loyalty rate can have a big sales impact. General Motors says an improvement of 1 percentage point means about 25,000 vehicles and $700 million in revenue annually.
GM says attracting a new buyer costs five times as much as holding onto a past customer and now factors customer retention into annual bonuses for salaried employees. It has set a goal of increasing its loyalty rates from the middle of the pack to the highest in the industry by the end of next year.
Speaking recently at an event highlighting retention efforts, Alicia Boler-Davis, GM's vice president of global quality and U.S. customer experience, said: "Customers who are engaged with General Motors -- if they have OnStar, a GM card or other services -- those customers are the most loyal."
(Source: Automotive News, 09/24/12)
Daily Sales Tip: When the Customer Has Price Concerns
Don't dismiss the buyer when they push back. I often hear this comment: "If they push back on price, we don't want them! Pushing back on price is an indicator that a client will be high maintenance or worse down the road."
That might not be the case. Buyers are often taught to challenge price in multiple ways. Just because they challenge you doesn't mean they are bad people or are destined to be bad clients. It also doesn't mean they're challenging your value personally.
It often means they're trying to figure out how to engage you and your solutions. Some providers discount; others don't. They're just asking. Hold your ground and treat them reasonably in the process, and oftentimes they'll just come around.
Source: Sales/marketing consultant Mike Schultz