Wednesday, June 5, 2013 | Edited by Daniel Moores
||U.S. Vehicle Sales Advance 8% as Nissan, Ford, Chrysler Set Pace
SAAR Rebounds to 15.3 Million Units on Big Pickups, Healthy Retail Gains
U.S. light vehicle deliveries rose 8 percent in May as the industry rebounded from a disappointing April amid a surge in pickup and compact crossover sales, and a rise in retail demand.
Nissan Motor Co., Subaru, Ford Motor Co. and Chrysler Group posted solid double-digit increases to lead the gainers. Honda Motor Co., General Motors and Toyota Motor Corp. recorded smaller gains, while Mitsubishi was the only automaker to fall.
The annualized sales rate, adjusted for seasonal factors, rose to 15.3 million from 14 million a year earlier. That was at the higher end of most forecasts. Prior to the April dip, the annual sales rate had topped 15 million for five straight months, the longest such stretch since the recession.
Healthy demand for large pickups and crossovers, as well as rising retail volumes, drove industry gains last month, automakers said.
Large pickup deliveries rose 25 percent in May and have risen 21 percent for the year. Small crossover sales jumped 24 percent in May and have increased 21 percent this year.
In a positive development for the industry's profit outlook, industry retail sales climbed 9 percent -- the best monthly showing since August 2007 -- and have now topped 1 million units for three consecutive months, said Bill Fay, general manager of the Toyota Division.
Retail sales, while often supported by incentives, tend to be more profitable than fleet and commercial deliveries. Fay said industry retail volumes were aided by falling unemployment, stable gasoline prices and low interest rates again last month.
"We see the industry being stable and consistent through the second half of the year," Fay said.
The industry's 8 percent rise for the month topped the 7 percent average estimate of 10 analysts polled by Bloomberg.
Overall, light truck deliveries climbed 11 percent last month, more than double the 5-percent gain in car sales. For the year, light vehicle volume has climbed 7 percent, with car demand rising 4 percent and light-truck deliveries advancing 11 percent.
Nissan tallied a May U.S. sales record of 114,457 units, a gain of 25 percent on redesigned models such as the Sentra, Pathfinder and Altima. Volume at the Nissan division rose 31 percent, offsetting a drop of 25 percent in deliveries at the Infiniti brand.
Analysts say Nissan also benefited from price cuts on seven models in early May as well as higher incentives.
"The actual prices were only about four percent lower than April's but the announcement clearly had a a big psychological impact to get sales moving," Edmunds.com senior analyst Jessica Caldwell said.
Nissan hiked incentives 5.8 percent last month, according to Autodata Corp. Kelley Blue Book estimated average transaction prices for Nissan cars and light trucks dropped 0.8 percent last month to $28,284 per unit compared with May 2012.
At Ford, sales rose 14 percent, with car volume up 9 percent, utility vehicle sales advancing 15 percent and truck deliveries jumping 18 percent. The company's retail volume advanced 17 percent and F-Series pickups surged 31 percent to 71,604.
Sales rose 15 percent at the Ford brand and 0.4 percent at Lincoln. Ford said separately it plans to build 740,000 vehicles in North America during the third quarter, an increase of 10 percent from the third quarter of 2012.
At Chrysler, sales rose 11 percent in May, with the company's car sales climbing 16 percent and light truck deliveries advancing 9 percent. It marked the 38th consecutive month that the automaker's U.S. sales have advanced.
"We continue to see strong retail sales throughout our product lineup," Reid Bigland, head of U.S. sales for Chrysler Group, said in a statement.
Sales rose 24 percent at the Ram brand, 23 percent at Dodge, and 1 percent at Jeep and Fiat, while volume at the Chrysler brand slipped 2 percent.
Ram pickup deliveries rose 22 percent to 31,672. SUV deliveries were also strong last month, with Jeep Grand Cherokee sales up 21 percent and Durango volume rising 24 percent.
Retail propels Honda
At Honda, May sales volume rose 5 percent, with deliveries at the Honda brand advancing 5 percent, offsetting a 1.5 percent decline at Acura. Retail demand for the redesigned Accord and Honda's light trucks were especially strong, the automaker reported.
GM, meanwhile, recorded a 3 percent gain. While GM's retail sales rose 9 percent, its car sales slipped 6 percent and fleet volume dropped 10 percent.
The company's truck sales climbed 15 percent and crossover demand rose 3 percent. Deliveries of the Chevrolet Silverado and GMC Sierra pickups advanced 22 percent or more.
"The pickup rebound is in full swing and we're seeing strong retail demand for our crossovers," Kurt McNeil, vice president of U.S. sales operations for GM, said in a statement. "These are all powerful signs that the gradual recovery in the economy is becoming more broad-based."
That would keep the U.S. light-vehicle market on pace for its best year since 2007.
Malibu slump continues
Volume rose 40 percent at Cadillac, 7 percent at GMC, and 1 percent at Chevrolet. Buick sales slipped 3 percent.
While demand for Chevrolet's small cars rose, Malibu deliveries slumped 36 percent and have now declined 18 percent for the year.
GM outsold rival Ford by only 6,875 units last month, though GM maintains a lead of more than 100,000 units for the year. Ford has outsold GM only twice -- in March 2011 and February 2010 -- over the last 15 years, according to the Automotive News Data Center.
Helped by strong Forester, Outback and Crosstrek demand, Subaru posted record monthly sales of 39,892 in May, an increase of 34 percent over May 2012.
Toyota's May sales edged up 3 percent, with volume up 2 percent at the Toyota brand, 4 percent at Lexus and 9 percent at Scion.
For the second consecutive month, sales at the Volkswagen brand slid, with May volume off 1.7 percent, despite an uptick in consumer traffic and closing rates, and new May sales records for Jetta and Passat deliveries. VW Group sales rose 4 percent, however, aided by double-digit gains at Porsche and Audi.
Mazda ended a four-month sales skid with a 19 percent gain in May deliveries on higher Mazda6 and CX-5 volume.
Strong dealer showroom traffic has automakers and analysts expecting overall industry sales to climb as high as 15.5 million vehicles this year, up from 14.5 million last year.
Pickups, crossovers hot
Rising consumer spending, attractive financing offers and a recovering housing market have buoyed demand for light vehicles, notably large pickups and crossovers. In addition, aging cars and trucks have forced many Americans into the market for replacement vehicles, analysts and industry executives said.
"There's still a great deal of pent-up demand that needs to work its way through the system," Gabelli & Co. auto analyst Brian Sponheimer said before automakers began issuing May results. "On the whole, we're still looking at another two years of outperformance for the auto industry as it relates to the broader economy."
The housing and construction recovery, relatively affordable gas prices and high inventory levels at the Detroit 3, along with nearly $5,000 or more in cash rebates on the Ford F-Series, Chevrolet Silverado and Ram, will keep pickup demand strong, Kelley Blue Book analyst Alec Gutierrez said last month.
New or redesigned models such as the Honda Accord, Cadillac ATS, Acura RDX, Toyota Avalon, Ford Fusion and Hyundai Santa Fe are also driving demand higher.
May U.S. sales at Hyundai increased 2 percent, the brand's second-best month ever. Vehicle inventory remains tight, yet Hyundai managed to post a 33 percent increase in Elantra compact sales, CEO John Krafcik said in a posting on Twitter.
Some dealers said May sales were helped by Memorial Day holiday deals that were extended through early June by some automakers. The early holiday this year also helped drive May sales, some analysts say.
At Phil Long Ford in Colorado Springs, Colo., new car sales manager Michael Gonzales said May was great for new vehicle sales, notably pickups.
"Memorial Day sales were wonderful," Gonzales said. "Our truck numbers seem to be moving enough." He cited Colorado's improving economy and Colorado Springs' stable military presence as factors driving volume.
Fuel economy also remains a top priority for consumers, Gonzales said, which is helping to drive sales of the Ford Focus small car, mid-sized Fusion sedan and C-Max hybrid.
Said Gonzales: "People are hopefully being more confident in the economy and spending a little more money."
(Source: Advertising Age, 06/03/13)
||Study Suggests Older Drivers More Likely to Buy New Vehicles
But Marketers Should Not Rule Out the Younger Generation
Automakers and dealers have the best chance of selling new vehicles by marketing to consumers ages 55 to 64, according to a University of Michigan study released last week.
The study looked at the likelihood of a licensed driver buying a new light vehicle based on the consumer's age.
Michael Sivak, a research professor at the university's Transportation Research Institute, compared U.S. data from 2007 and 2011.
Per licensed driver, people ages 55 to 64 in 2011 had the highest probability of buying a new vehicle compared with drivers ages 35 to 44 in 2007.
Lacey Plache, chief economist for Edmunds.com, said older consumers buy more vehicles because many of them are baby boomers, a large generation whose members are about 49 to 67.
Plache said the 35- to 44-year-old age group suffered the largest net worth loss during the recession, which affected their car-buying abilities.
Drivers in 2011 ages 18 to 24 were the least likely to buy a new vehicle -- one vehicle per 221.8 drivers. But Plache said automakers and dealers should not rule out younger drivers, particularly the large generation of millennials -- those consumers mainly in their 20s -- when looking for new-vehicle buyers.
"It's not so much they don't want cars. They have just had a delayed entry into the market because of the recession," Plache said.
Those ages 18 to 34 had a 10 percent growth in share of sales from 2011 to 2012, compared with an 8 percent decrease for those ages 45 to 54 and 4 percent decrease for those ages 55 to 64.
In 2011 overall, one vehicle was bought for every 19.7 drivers, according to the research.
"The present findings suggest that marketing efforts that focus on drivers 55 to 64 years old should have the highest probability of success per driver," Sivak said in a statement.
Plache said automakers are not wasting money by advertising to young drivers --- who are up-and-coming buyers getting to know brands.
Marketing aimed at an older audience might put off younger buyers, whereas advertisements for a younger audience might appeal to the younger and older buyer looking to feel young.
"Older people, they want to be young, so if something is hip and appealing to younger people...older people could end up buying it," Plache said.
Sivak wrote in an e-mail that the findings of the study might interest vehicle suppliers, manufacturers and dealers.
Plache said automakers and dealers should see the study as an opportunity to hit an expanding generation and an older generation that is buying more vehicles.
"You can't just look at 2011 and say this is the end of the story because things are still changing," Plache said.
According to the research, the shift in age of new-vehicle sales can be attributed to the economic downturn that reduced vehicle sales and fewer young people having driver's licenses compared with additional older people with licenses.
From 2007 to 2011, there was a 6.6 percent decline in the number of people between ages 35 to 44 with driver's licenses, and a 16 percent jump in licenses for those ages 65 to 74.
(Source: Automotive News, 05/30/13)
||Industry Analysts: 'Sweet Spot' for Car Buyers is Now
The current generation of vehicles is more fuel-efficient than the last. Engines pack a more powerful punch in a smaller package. And car loans can be stretched as long as eight years.
It's a great time to buy a car, industry analysts say, especially when considering what you'll get for the money in the not-so-distant future. The next generation of cars and trucks will weigh less, but cost more -- and in many cases, lose power and performance.
"We're at the absolute peak of what a normal, everyday car can do performance-wise," said Bill Visnic, a senior editor at Edmunds.com. "A lot of the low-hanging fruit, when it comes to fuel efficiency, has already been picked."
Automakers have already implemented many of the cheapest, most efficient ways to improve fuel efficiency -- turbocharging and dual-clutch transmissions -- that have saved consumers from spending significantly more on new cars.
According to automotive strategist Scenaria Inc., automakers have made greater fuel efficiency gains at less than half the cost than originally projected.
For instance, downsized turbocharged engines cost about $1,000 less in 2012 than was expected only two years earlier -- and at the same time fuel efficiency was improved by about 8 more percentage points above expectations, according to the National Highway Traffic Safety Administration and the Environmental Protection Agency.
And while new vehicles have increased in price over the last few years, the fuel efficiency savings over the life of the car have outpaced those costs.
Though that's been a benefit to buyers now, it will hurt pocketbooks down the road, as automakers will have to spend more -- a cost that will trickle down to consumers — to make even greater improvements to meet federal fuel-efficiency standards.
"Costs are going up," said Sandy Stojkovski, president of Scenaria. "And with the more efficient technologies with lower operating costs already in today's vehicles, now might be the sweet spot in terms of purchasing a new vehicle.
"I've even told my parents it's the right time to buy," she said.
Car-buying rate increases
The average cost of a new car now exceeds $31,000, according to market researcher TrueCar. That's an all-time high and is roughly $3,000 higher than it was three years ago.
Despite that, Americans are buying cars at a much higher rate than three years ago. That's because of two factors: the economy and readily available car loans -- specifically, long-term loans.
Market intelligence firm Experian Automotive has found that some vehicle loan terms now stretch as long as eight years. The reason: Cars are more expensive, and longer loans mean consumers can defer the cost of the car.
According to the most recent Experian data, the average vehicle loan during the fourth quarter last year reached an all-time high of 65 months, up two full months from the prior year. And loans for new cars with terms from 73 to 84 months increased 20 percent.
"If you have to push your payment out for that long, you really can't afford the car and should buy something less expensive," said Hank Hubbard, president of the nonprofit Communicating Arts Credit Union in Detroit, who oversees both new and used car loans.
From 2011 to 2012, the average car loan jumped $272 to $26,691, reflecting the rising cost of cars. Loan lengths will only get longer, analysts project, coinciding with the continued rise of car prices and compounding the total cost of a vehicle.
"I don't expect on the bank side to see lenders doing more than what they're doing today, which is offering low rate, longer term loans," said Melinda Zabritski, director of automotive credit for Experian Automotive.
Upgrades add costs
Automakers have plenty of ways to be more energy efficient today, but implementing them all simultaneously would boost vehicle prices and severely slow auto sales.
The best example of this is electric vehicles. Domestic automakers Ford Motor Co., General Motors Co. and Chrysler Group LLC all sell electric vehicles. And all three -- Ford's Focus electric, GM's Chevrolet Spark and Fiat's 500e -- are significantly more efficient when compared to their gas-powered variants or similarly sized cars.
But partly because of the extreme cost of those vehicles — batteries for the electric cars account for about half the cost of the car -- few can afford them and even fewer buy them, at least right now.
And from a performance standpoint, smaller engines -- though packing a greater punch today then their similarly sized predecessors -- will be limited in power compared to larger motors.
As 2017 and 2025 regulations draw nearer, expensive upgrades like higher-strength steel, aluminum and magnesium parts and engineering features like active, aerodynamic wheel shutters such as those shown on Ford's Atlas pickup concept, will continue to add costs.
(Source: The Detroit News, 05/31/13)
Daily Sales Tip: Analyzing 'Winning' Sales
Learning why a sale is won is almost as important as finding out why a sale is lost. But few salespeople ask a customer why they got the sale. They're happy they got the business and simply move on to the next deal.
If you focus only on why you lose, you may not understand why you win. Debriefing with customers who choose to work with you is a valuable yet often overlooked exercise. It's always important to understand why you win because this information acts as a powerful complement to the reasons you lose.
Researching wins as well as losses ensures that you receive a balanced perspective so you can continue practices that result in success and eliminate ones that lose sales. Prospects you've sold will often be candid about their reasons for giving you their business and provide you with feedback in areas where you might need improvement.
Source: Adapted from A Good Sales Call to a Great Sales Call, by Richard M. Schroder, president of Anova Consulting Group