Wednesday, November 28, 2012 | Edited by Daniel Moores
||After a Slow Start, Analysts See a Big Finish for Auto Sales in November
Hurricane, Holiday May Drive Transactions
Auto sales got off to a slow start in November, but demand to replace hurricane-damaged vehicles and positive economic signs have helped increase showroom traffic.
Automakers and dealerships are expecting brisk sales during the final week of the month, helped by Thanksgiving weekend and end-of-year promotions.
The holiday discount frenzy "seems louder than at anytime in the past," said Jessica Caldwell, senior analyst with Edmunds.com.
At midmonth, the auto industry was on pace to post its lowest selling rate of the year, Caldwell said, but she believes November will end up as one of the best months of 2012.
She forecasts a seasonally adjusted, annualized selling rate in the "mid-to-high" 14 million range; that would be up from 14.3 million in October but likely below the September rate of 14.9 million.
J.D. Power and Associates and LMC Automotive predict that November will have a 15 million SAAR, with double-digit percentage increases in both overall and retail sales. "Sales have strengthened each week in November, which bodes well for a strong finish to the month and the year," said John Humphrey, senior vice president of global automotive operations at J.D. Power.
Dealers typically make a large percentage of their November and December sales during the final week of each month, around Thanksgiving, Christmas and New Year's Eve.
Hurricane Sandy, which smashed into the East Coast Oct. 29, put many dealers out of commission for at least a few days, but most are now operating as usual.
"As soon as everybody had power back, business has been normal," said Lou Narcisi, general sales manager at Acme Nissan in South Brunswick, N.J. "It's just been what we would have normally expected out of November before the wind started blowing and the first tree fell."
In the hardest-hit areas, dealers have had busy showrooms and service lanes as customers scramble to replace or repair damaged vehicles.
At Toyota World of Lakewood, nine miles from the Atlantic coast in Lakewood Township, N.J., the general manager, Cary Rose, said those with the means to buy a new car right away started coming in as soon as the store had reopened. Traffic has picked up more as people learned how much they could expect from insurance, and Rose expects the dealership to be busy through the end of the year as reimbursement checks arrive.
He said only about 5 percent of sales this month have involved a trade-in, compared with more than half in an average month.
"We've had a huge spike in business, and it's mostly replacement vehicles," Rose said. "It's going to be a big-volume month, but not big-profit because these are our people. We're not trying to take advantage of this opportunity and make it a big-profit game."
Analysts have estimated that as many as 250,000 vehicles might have been flooded or crushed during last month's storm. The majority are expected to be replaced with used vehicles, even as tight supplies of those have pushed prices higher.
Along with the added sales in Sandy's aftermath, automakers such as Toyota and Nissan are hoping to benefit from starting their year-end sales in November instead of December. Many finished 2011 on a strong note by doing the same a year ago.
"This is an excellent time for consumers to be in the market," Peter Nesvold, an auto analyst with Jefferies & Co., wrote in a recent report.
Automakers have been concerned that their sales would be hurt in the final months of 2012 by uncertainty related to the so-called fiscal cliff, when many Americans would feel the effects of tax increases and government spending cuts that are scheduled to take effect. Ford Motor Co. Executive Chairman Bill Ford last week said resolving the fiscal cliff is "vitally important for the economy."
The industry has been buoyed by reports of productive discussions on Capitol Hill aimed at preventing economic activity from slowing suddenly.
"At this point it seems less and less likely that we're going to go sailing over the cliff," said Lacey Plache, the chief economist for Edmunds.com. "Consumers are feeling more upbeat."
(Source: Automotive News, 11/26/12)
||Gap Between Luxury, Mainstream Cars Shrinks
The day could be fast-arriving when a new breed of car buyer considers a new generation of cars, and wrestles with a choice something like: "Hmmm, $30,000. Should I get that loaded Ford Focus, or this new mini-size entry BMW?"
Absurd? Not necessarily.
Luxury auto brands already are making a living in the U.S. on their smaller models -- BMW's 3-series is the best example. Now, they're easing more into the compact and even subcompact-size market segments and have begun to show teaser versions of remarkably small cars on the auto show circuit.
At the same time, mainstream automakers -- Ford Motor premier among them -- are adding equipment to their smaller cars and trying to boost the prices. Detroit makers, especially, hope to increase small-car profits enough to make up for losing some of the huge earnings they've gained through the years from big trucks and SUVs, which are less popular now.
Thus, the luxury brands' move down in size and price is a direct threat.
Buyers more and more will decide whether they value a premium brand name enough to sacrifice size and possibly features they could get for the same price on a larger, well-equipped, non-luxury-nameplate car.
"It's a weird area. Absolutely it puts a ceiling on what mainstream brands can charge," says industry expert Jim Hall at 2953 Analytics. At the same time, it's treacherous ground for pure luxury brands. A very small car that's relatively inexpensive "may not work, and taint, or depreciate, the value of the luxury brand by making it less exclusive."
The Los Angeles Auto Show, which begins with press previews today, will host debuts of several high-end and mainstream small cars, illustrating the industry's battle for dominance in the fuel-efficient segment.
Ford thinks that design and execution, rather than the status of a high-end badge on the hood, can carry the day.
The automaker says its redesigned 2013 Fusion midsize sedan, for example, has been luring a notable number of trade-ins from Acura, BMW and Audi owners. Half of Fusion's early sales are to non-Ford owners, and most of those are former luxury brand customers, the automaker says.
Referring to the top version of the Fusion, the Titanium model, Frank Davis, executive director of Ford's North American product programs, says, "Our Titanium buyer is the luxury buyer -- the Acura, the Audi, the BMW buyer."
The Fusion Titanium midsize starts at about $31,000 and can tickle $40,000 loaded with options and fitted with optional all-wheel drive. A size down, Ford's Focus compact has a Titanium model, too, for nearly $30,000 with all options.
BMW's 128 small coupe starts at about $32,000 by comparison. And a new line of smaller BMWs is in the wings, based on a front-drive chassis shared with the brand's Mini models. Those might be designated 1-series models, making the current 1, in effect, a 2-series.
Name aside, a front-drive BMW would be radical for the brand with rear-drive religion.
A bit embarrassing, too, as BMW a few years back made fun of front drive in ads. BMW, in fact, acquired the British-based Mini brand precisely to give the German maker entree into the front-drive subcompact segment without resorting to a front-drive BMW-branded car.
Such a switch would be a dramatic demonstration of how desperate the high-end makers are to play in the lower end. They'll need to in order to meet U.S. mileage rules that require a company's vehicles to average 54.5 mpg in 2025, about twice the current level. And it's a way -- risky for the image, perhaps -- to boost sales.
Mercedes-Benz' latest-generation A-class subcompacts rolling out in Europe are U.S.-bound and likely to spawn a variety of spinoffs as even the brand known for its big, stolid sedans shoulders into the mpg-oriented small-car segment.
Audi has a line of A1s, about Mini Cooper size, that it has said will include a U.S. version in the future, but timing's murky.
"The luxury market has become a blur," says Art Wheaton, auto expert and industry education specialist at Cornell University. Already, in his view, "There's small difference between Honda and Acura. Maybe nicer leather seats."
Honda bristles at such characterization, but it's undeniable at its Acura brand's lower reaches, where the ILX entry sedan is a jazzed-up Honda Civic. That's well known, and effectively ensures that Honda couldn't successfully field a high-end Civic.
Some elements that will affect how the battle plays out between low-luxury and high-mainstream models:
Regional preferences. "In areas such as L.A. and New York and big metropolitan areas, which are image-driven, the entry-luxury models do pretty well," says Jesse Toprak, industry analyst at TrueCar.com. Though it's less so in Middle America, the coastal ethic "puts a premium on the brand. People want to be seen in a BMW, in a Benz. Even though from a value perspective, you're better off getting a non-luxury vehicle."
That presages success for the new low-luxe entries because of the status badges they wear.
Toprak believes automakers are expecting regional strength rather than nationwide success and have factored that into their business plans.
"It's mainly to get people into the brands" in areas where they're likely to stick with those brands, he says.
Luxury backlash. "There are buyers who don't want premium cars because they come with premium maintenance, and a premium image that some people don't want," says Rebecca Lindland, director of research at consultant IHS Automotive.
Research by General Motors' Buick unit -- which considers itself a luxury brand -- found a deep pool of potential buyers who "were unpretentious. They were successful, could afford to buy any car they want, within reason. But they didn't want to make an overt statement," says Craig Bierley, Buick's marketing chief.
Buick hopes to be a home for those people it sees as luxury buyers in disguise, but others, such as Lindland, see them as more likely to opt for well-equipped mainstream models.
Premium purgatory. Lower-end models from luxury brands risk being considered not-quite-real-luxury; more like "premium." And that, at least according to Bierley, is "where brands go to die."
"You're either a luxury brand and appeal to those customers on the level of features and treatment they want. Or you don't. There's nothing in the middle," he says. That's why Buick decided to define itself as a luxury brand and match the way those brands operate -- emphasizing leasing, for instance.
On the other hand, he sees no contradiction between small size and big image. "Luxury doesn't have to be big. Luxury is really a personal thing, how a customer defines it," Bierley says. If they are done right, the new small low-luxe models can upset entirely "the perception that if it's small, it can't be luxury."
Will size actually matter?
In the end, whether the small, high-mileage, highbrow, low-luxe cars have a future in the U.S., and whether they threaten some mainstream brands' plans to get rich on high-end models, might depend on history more than anything.
Americans' historical preference has been and continues to be for bigger cars, for their greater comfort and ability to swallow the country's vastness in relative ease.
"No American is asking for a smaller car," says Hall, whether it's a silk-stocking brand or not.
"Americans want better fuel economy" and car companies that confuse the two -- mileage and size -- do so at their peril, he says.
The first manufacturer, luxury or otherwise, "that can make a midsize sedan, or one perceived as midsize, that gets 40 real-world miles per gallon on the highway, without being a hybrid, that's probably the guy who'll own the market."
(Source: USA Today, 11/26/12)
||Survey: 1 in 5 New-Vehicle Buyers Skips Test Drive
One in five U.S. new-car buyers and lessees did not test drive a single vehicle, a new IBM Corp. auto-retail survey shows. But pollsters disagree about what will become of test drives in the future.
The survey found 21 percent did not test drive a single vehicle, while more than half test drove only one or two vehicles other than the one they purchased or leased.
"Fifty percent of the marketplace zeroed right in on the car they wanted, took it out for a drive, then went out and bought it," said Kalman Gyimesi, industrial-automotive leader for IBM. "One of the key parts of the dealership process has always been the test drive."
The IBM results show more buyers skipping the test drive than a similar survey by Maritz Research. Maritz's June survey, the most recent one available, found 11 percent of U.S. new-car buyers did not test drive the vehicle they purchased.
Chris Travell, Maritz vice president of strategic consulting, agreed that more Americans are skipping test drives but said surveying methodology may be behind the different results: "It looks like IBM cast the net a little bigger." The IBM survey "would suggest that fewer American car buyers are test driving on the whole, which is a concern since so much has changed in vehicle technology from the last time they were in the market."
Travell said if IBM's survey is accurate, it means the problem is more serious than the Maritz survey shows.
In October, IBM asked 2,029 adult car buyers in the United States between the ages of 18 and 65 who had purchased or leased a new car in the past three years whether they took any test drives.
For its latest report, Maritz asked more than 120,000 people who had bought a 2012 model vehicle between October 2011 and June 2012 whether they test drove the vehicle they eventually purchased.
The pollsters disagree about what will become of test drives in the future. Gyimesi predicts the percentage of consumers forgoing the test drive will continue to rise, as reliable information sources such as Consumer Reports and Kelley Blue Book grow and improve.
Also, physical test drives will decrease as automakers step up their efforts to stimulate the car-buying experience through virtual automotive showrooms allowing the consumer to interact with a 3-D rendition of the vehicle on a video wall, he said. Gyimesi said Jaguar Land Rover, Audi and Nissan have begun experimenting with virtual showrooms, which eventually will expand to tablets and smartphones.
"These channels for attracting customers and selling to them are in their very early stages and will continue to grow," he said. "I expect all of this will make the desire for a physical test drive lower for consumers."
But Travell predicts test drives will make a comeback as dealers encourage consumers to experience new technology firsthand. The average new-car consumer is out of the market for six-and-a-half years between purchases, he said.
"It's in the customer's best interest to take the vehicles they are considering out for a test drive since there is no substitute for being behind the wheel and experiencing everything the vehicle has to offer," Travell said. "From the dealer's standpoint, they need to encourage it for the same reasons."
The IBM survey also found 40 percent of car buyers visited only one dealership -- the one where they purchased their vehicle.
In addition, 42 percent spent less than five hours researching their most recent vehicle purchase, and 24 percent researched only one car -- again, the one they purchased.
(Source: Automotive News, 11/26/12)
Daily Sales Tip: Two Words Salespeople Need to Use More Often
I am often contacted by people seeking advice, and in most cases, I am more than willing to provide a few words of feedback to help with a particular problem. In some situations, I will ask someone in my network to also provide their insight especially if it is a problem I can’t help with.
However, one thing surprises me.
The majority of people requesting the advice seldom say please and even fewer say thank-you.
Don't get me wrong...I'm not soliciting praise or demanding recognition. But, please and thank-you are two words that are appreciated by people.
Here are a few scenarios to consider:
Please and thank-you can go a long way in helping you stand out from your competition. In the upcoming week look for every opportunity to use these two words and watch how people respond.
- When you call a new prospect do you say, "Could you please connect me with Mr. Big?"
- Do you thank an executive assistant, receptionist or gatekeeper when they connect you with the person you are calling?
- Do you say please when you asking someone for a favor?
- Do you thank the person in your company who drops everything to help resolve a problem with a prospect or customer?
- Do you include the word please when asking for help?
- Do you thank friends, family, colleagues or customers when they refer business to you?
- Do you thank your boss for his or her feedback and direction?
Source: Sales author/trainer Kelley Robertson