Wednesday, October 17, 2012 | Edited by Daniel Moores
||September Surge Changes Auto Forecasters' Tone
New-vehicle sales hit their fastest annual pace in more than four years in September, but the month could have been even better. After all, fleet sales were flat, fuel prices were unseasonably high and automakers laid off the incentives.
September's seasonally adjusted annual selling rate of 14.9 million exceeded expectations by a wide margin, and the surge was driven entirely by retail gains, said Adam Jonas, Morgan Stanley's top auto analyst.
So are long-term forecasts being revisited?
The strong September -- in which sales rose 13 percent to 1,188,899 units -- has so far not prompted official forecasts to rise. But it has changed the tone of conversation among automakers and analysts, many of whom had revised 2012 forecasts downward since the first quarter.
Bill Fay, Toyota Division general manager, still expects 2012 industry sales of 14.3 million but now adds "and maybe a notch above."
R.L. Polk hasn't raised its forecast of 14.3 million this year and 15.2 million in 2013, "but we reviewed it for upward revision after August and September sales beat expectations," said Tom Libby, North American forecast manager.
TrueCar.com is still forecasting 14.4 million this year and 15.0 million next year.
Morgan Stanley's Jonas called September's 14.9 million annual selling rate "dreadful, no better than 1978." But he says the underlying strength of the market is consumers being forced to replace the aging U.S. vehicle fleet, which he says averages 11 years old with 130,000 miles on the odometer.
Fleet volume rose just 1 percent in September and retail jumped 15 percent for the seven largest automakers, which dominate sales to fleet buyers, according to the Automotive News Data Center.
"If fleet had been as strong as retail, the September SAAR would have been 15.2 million," Jonas said.
Kurt McNeil, General Motors' U.S. sales boss, said GM pickup sales slipped because fleet volume fell in September, but the company isn't turning to incentives on them.
"We don't necessarily have the newest truck in the industry, but we still have the lowest incentive spend," he said.
Industrywide, per-vehicle incentives ranged from flat to slightly lower in September, according to TrueCar.com.
And gasoline prices, which normally decline after the summer peak driving season, remained unusually high. The mid-September average of $3.83 a gallon was only five cents off the year's highest level, the U.S. Energy Information Administration said.
That may have helped sales of fuel-efficient new cars in September, TrueCar.com analyst Jesse Toprak said, but it was a damper on trucks.
"Trucks are hurt by lingering high fuel costs," he said. "Small cars are remarkably strong, but trucks are weak."
In addition, small businesses may be spooked by the uncertainties of the upcoming presidential election and Congress' so-called Dec. 31 fiscal cliff and therefore deferring pickup purchases, Toprak said.
"Truck sales are based on prospects of business growing," he said. "Maybe the deals are not that great on trucks and so buyers are waiting. We'll probably see more incentives in the fourth quarter as is typical."
GM's McNeil believes auto sales will continue to outperform the slow recovery pace of the general economy, "which is particularly good news for GM as we walk into a cadence of new product in 2013 and 2014."
(Source: Automotive News, 10/15/12)
||Small Car Sales May Capture Largest U.S. Share Since 1993
Small cars are selling big for brands from Chevrolet and Fiat to Toyota, Volkswagen and Honda, on pace to capture the largest share of the U.S. auto market since 1993 and driving the best sales month in four years.
High gasoline prices coupled with the best crop of compact and subcompact cars that the market has ever seen drove a 50 percent increase in sales of small sedans, coupes and wagons last month. Diminutive models were huge for almost every automaker, accounting for one in five sales for the first time in more than three years.
While Toyota Motor Corp. and Honda Motor Co. models still lead the pack, U.S. automakers proved they can wow shoppers, too. General Motors Co.'s Chevy won the subcompact and compact segments last month with its Sonic and Cruze, Ford Motor Co. delivered more small cars than in any September in a decade, and Chrysler Group LLC's Fiat brand set a second straight monthly record.
"These cars that a while back were perceived as econo- boxes now come standard in some cases with 10 airbags and all the other features available in bigger, more expensive cars," Tom Libby, an analyst at R.L. Polk & Co., said in a telephone interview. "Whether it's the Civic or the Focus or the Sonic or whatever, everybody agrees these are much, much better cars with more integrity than their predecessors."
20 percent share
Sales of cars such as Ford's Focus and smaller jumped 50 percent in September to 240,288, the biggest increase among vehicle segments, according to Autodata Corp. The small-car market made up 20.2 percent of deliveries in the month, the most since August and July 2009, when smaller vehicles benefited from the U.S.'s "cash for clunkers" trade-in program.
At this rate, 2012 may be the year of the small car. The segment accounted for 19.3 percent of the U.S. market through September. The last year that small cars held a greater share of the U.S. industry was in 1993, when the segment was 20.5 percent of the market, Autodata said.
"Traditionally small cars were purchased by people who couldn't afford anything else," said Jesse Toprak, an industry analyst for TrueCar.com, a vehicle pricing and data company. "Right now, that's not the case. We see people choosing them because they find them more appealing."
Sales of GM's Chevy Cruze jumped 42 percent to 25,787 last month, topping the year-to-date leader, Honda's Civic. In its first full year on the market, Chevy's Sonic is running away with the subcompact segment previously led by Ford's Fiesta and Honda's Fit. Sonic deliveries more than quintupled in September, leading GM's 97 percent surge in small-car sales for the month from a year earlier.
"Chevrolet has a pretty competitive lineup now when you go from the micro car to the subcompact to the compact," said Libby. "That tends to create a synergy where they feed off each other."
Ford delivered 91 percent more Focus compacts and introduced its new C-Max hybrid last month. Sales of those models plus the Fiesta subcompact climbed to 24,628, the best September for the automaker's small cars since 2002. That year, the industry sold at least 15 percent more cars and trucks than analysts estimate for 2012.
Amanda Rinker was one of Ford's 19,736 Focus buyers last month. When the 24-year-old freelance writer and editor set out to replace her Ford Fusion sedan, she and her husband wanted more features such as a touch-screen with navigation and satellite radio. And they wanted to save at the pump when taking trips to the beach from their home in San Antonio to Port Aransas, Texas, about three hours away.
"Mostly it was gas prices that really took us to a smaller car," Rinker said in a telephone interview. "We can afford more luxury in a smaller car. Bigger cars cost more money and more features cost more money as well. To afford another monthly payment, we dropped down to the Focus."
Honda and Toyota, rebounding from car shortages at this time a year ago tied to Japan's tsunami, increased sales of their bellwethers Civic by 57 percent and Corolla by 43 percent.
"It's cool and hip right now to be frugal," said Tamara Darvish, vice president of Darcars Automotive Group in Silver Spring, Md., which owns seven Toyota and Scion franchises. "Consumers are thinking much more logically than emotionally compared to how they did in the past."
Deliveries for Fuji Heavy Industries Ltd.'s Subaru Impreza models soared 82 percent. The Impreza, unveiled earlier this year at the New York auto show, is one of more than 25 small-car models that automakers redesigned or introduced as new since 2011, according to Polk.
Chrysler's Dodge Dart, which began rolling into dealerships in July, was initially available only with manual transmissions. With shipments ramping up and models with automatics now becoming more available, deliveries climbed 72 percent from August to 5,235 last month.
The Fiat 500, a disappointment last year for Chrysler CEO Sergio Marchionne, set a record for the second month in a row, with sales surging 51 percent to 4,176 in September.
Demand for small cars, as with gasoline-electric hybrids, tends to rise and fall based on fuel prices. A gallon of regular gasoline cost an average of $3.782 at the end of last month, up 10 percent from $3.433 a year ago, according to AAA's Daily Fuel Gauge report. The price last month peaked at $3.871 on Sept. 13, 5.9 percent below the record $4.114 set in 2008.
"With higher fuel prices at the beginning of September, the small-car segment moved to just over 23 percent of the overall industry, with much of the strength at the end of August flowing through to the first half of September," Erich Merkle, Ford's sales analyst said Oct. 2 on a conference call.
In California, the biggest U.S. auto market, gasoline stayed above $4 throughout September following a refinery fire Aug. 6 that reduced supplies in the most populous U.S. state. Prices have continued to rise, reaching $4.655 on October 7.
Just as the case was for the national market, Ford's small-car deliveries in California were the company's best in a decade, Merkle said.
"That is where we have been making our gains, starting with Fiesta, followed by the new Fusion and we are just now starting sale of C-MAX," Merkle said in an e-mail.
Volkswagen AG's Beetle, redesigned in 2011, more than tripled its September sales of a year earlier. The automaker has delivered 21,566 of them this year, compared to 924 in 2011's first nine months. VW also placed its Jetta 18th in sales among all vehicles last month.
Sales of Kia Motors Corp.'s Rio, which also returned to the market as a revamped model last year, surged in September to 3,171 from 190. The automaker also delivered 42 percent more Soul wagons and 27 percent additional Forte compacts than a year ago.
"Small cars were unseasonably strong in September, trucks were unseasonably weak, and gas prices were a part of this," Toprak said. "It's also the products that are propelling demand. They are more appealing and there are some strong new models."
(Source: Bloomberg, 10/08/12)
||Aftermarket DIY Consumers Shop at Multiple Retailers for Automotive Purchases
Automotive do-it-yourself (DIY) consumers appear to spread the wealth around to multiple retailers when it comes to maintaining, accessorizing, repairing, and cleaning their vehicles, according to The NPD Group, a leading market research company.
Recent NPD automotive aftermarket research finds that only 37 percent of consumers rely on the same retailer for all of their automotive product needs. Almost half of DIY consumers shop at two or three different retailers, and 14 percent shop at many retailers.
In addition to retailer loyalty, the NPD aftermarket research report, which examines shopping behaviors and attitudes of automotive products shoppers across the retail landscape, identifies the attributes that are most important to consumers when choosing where to shop. The top four attributes that DIY consumers said were "very important" to them are, in rank order: knowledgeable employees; having items in stock; offering the best value for the money; and quality of merchandise.
"While the four attributes listed above ranked highest in overall importance, individual retailers should leverage the attributes relevant to their particular consumers and craft distinct offerings to help them stand out in the marketplace," says David Portalatin, NPD's aftermarket industry analyst.
"Retailers, working with their supplier partners, who deliver on these important attributes will have a compelling offer that is sure to drive consumer traffic."
(Source: The NPD Group, 10/08/12)
Daily Sales Tip: Why Do Sales Incentives Fail?
When sales incentives fail, the most common reason for the failures is that many of the company's salespeople lack key talents required for sales success. When salespeople lack these talents, no amount of incentives will cause them to suddenly sell more effectively. A more likely outcome is they will start to press harder to close sales and suffer a decline in sales performance!
In other cases sales incentives fail because the contest is "stacked" in favor of certain salespeople. Look closely at your sales team and your company's sales incentives and contests while considering the following questions:
* Do the same salespeople consistently win all of the contests and incentives?
* If some salespeople service larger or more productive accounts, are your contests and incentives structured to enable all of your company's salespeople to have a fair chance of winning?
* Are the incentives generating incremental sales, or are they simply rewarding salespeople twice for results they would have produced without a special contest or incentive program?
Source: Sales consultant/author Alan Rigg