Tuesday, 18 March 2008

Low payment, short duration car payment appeal pushing lease rates up

The percentage of new car buyers choosing the lease option continues to grow. According to an Automotive News report, 19.3 percent of new vehicle sales in 2007 were lease contracts, up from 14.3 percent just four years ago. And in 2008, the rate has climbed to nearly 22 percent. It’s not just consumers who are seeking low payments and short-term commitments; OEMs and dealers are pushing these deals in the face of an industry wide decline in sales.

Automotive News notes that many “upside-down” owners – those who owe more money on a car than the vehicle is worth outright – are turning to leasing as an attractive way flip right side up. Take an affordable lease – the $199/month deal on a 2008 Honda Civic, for example – and bundle whatever outstanding loan on a previous car into the monthly lease payment. The result? New car reliability and comfort with affordable payments. At the end, the buyer does not own a car, but at least is financially square. Which of course means they'll be ready to purchase again soon.

Source: Automotive News [Subscription required]

Posted by industry at 12:14 PM in Financial and business strategy news
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Wednesday, 27 February 2008

German automakers seek cost reductions, hope to increase use of North American based parts

With a Euro-dollar exchange rate that continues to shift in the direction of weaker American currency, German automakers are understandably searching for methods of shifting costs away from the strong Euro. Why buy parts and manufacturing at Euro prices and sell finished product for American dollars?

Of course, German car companies will continue selling at American prices – and competitive ones if they hope to succeed. So the strategy now is to substitute more dollar based North American parts (and manufacturing processes) in place of expensive Euro-sourced components. According to an Automotive News report, SUVs like the Mercedes-Benz ML, Mercedes GL and next generation Audi Q7 are potential candidates for American parts applications. Both Mercedes models are already built in Tuscaloosa, Alabama.

Source: Automotive News [Subscription required]

Posted by industry at 10:43 AM in Financial and business strategy news
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Wednesday, 7 November 2007

Ford seeking global design expression, shedding PAG brands

Ford Motor Company’s Chief Creative Officer J Mays is ready to push global stylistic boundaries at the Blue Oval. Recently, Ford has implemented a double-barreled approach to design; domestic customers are offered “Bold American” inspired products, while Europeans enjoy the exclusive “kinetic” styling language. But according to Mays in an interview with Automotive News, both of those approaches will soon be dated. The company, therefore, is planning a single global strategy.

Part of Ford’s “way forward,” at least in terms of design, involves the release of its Premier Automotive Group brands. The company recently sold Aston Martin and is considering offers for Jaguar and Land Rover. Volvo remains under review. "Until we sold Aston Martin, there we were with eight brands, and my job was described as an inch deep and a mile wide," explained Mays. "And now it's an inch wide and a mile deep."

U.S. enthusiasts repeatedly covet Ford of Europe products, a recent example being the attractive Euro Ford Focus. A single vision will certainly support a leaner operating structure, although the risk is far greater. Minus the slight regional aberrations, every cutline and crease that Ford commits to production will be judged by the worldwide marketplace.

Source: Automotive News [Subscription required] via Left Lane News
Image: Ford media [European 2004 Ford Focus]

Posted by industry at 3:53 PM in Financial and business strategy news
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Friday, 2 November 2007

SEMA show emphasizes the power of vehicle customization

Note to car dealers: custom accessories increase profit margins. Okay, we all know that, but every year when the Specialty Equipment Market Association (SEMA) show rolls around, we’re reminded just how strong the aftermarket industry is. Think somewhere around $37 billion dollars in retail sales annually, with $4.5 billion of that going to wheel sales alone.

Dealers are then presented with an incredible opportunity – especially those selling makes and models with strong enthusiast followings. According to a recent Automotive News article, for example, a Subaru dealer in Rockland County, New York increased monthly sales from 5 news cars per month to over 180 by adding custom items such as wheels, sunroofs and special leather upholstery to its inventory. It’s not always about competing with other automakers – sometimes in-brand competition is just as intense.

HUMMER buyers tack on an additional $1,000 to $2,000 on average, according to Automotive News, while Ford customers enjoy modifying Mustangs, Tauruses and F-series trucks. According to DTC Retail Consulting’s Tom Carre, 50 percent of car buyers will buy accessories when given the opportunity. Carre recommends marking accessory prices clearly, rewarding salespeople for selling accessories, mixing up showrooms with recently modified vehicles and selling gift certificates to shoppers that may be redeemed later.

Sources: Automotive News and SEMA
Image: Ford media [2008 Ford F-150 FX2 Sport]

Posted by industry at 4:23 PM in Financial and business strategy news
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Thursday, 27 September 2007

J.D. Power and Associates discovers that car buyers rarely cross shop imported and domestic vehicles

If you look at new vehicle sales numbers of domestic versus imported vehicles in the United States today, you’ll find a nearly even 50/50 split. One could interpret this as a product of intense competition where buyers find themselves considering various brands, both foreign and domestic, before making their ultimate decisions.

But according to J.D. Power and Associates’ recent “Escaped Shopper Study,” almost 80 percent of new car buyers shop either only domestics or exclusively imports. Various reasons are cited for preferring one to the other, including price, incentives, perceived reliability, fuel economy and potential resale value.

The study surveyed 31,355 new vehicle buyers between May and July of 2007, and its results are striking. Let’s assume that the 80 percent of inflexible buyers is split evenly between imported and domestic vehicles. That means that for every automaker, 2 out of 5 shoppers will not even consider your brand, based on country of origin alone. Then again, 2 out of 5 will favor your brand due to its origin (or from where it doesn’t originate). But it makes you wonder, are automakers really competing with others across the industry, or are they all struggling among their respective factions?

Source: PRNewswire

Posted by industry at 1:11 PM in Financial and business strategy news
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Monday, 13 August 2007

The New York Times asks, “where have all the car guys gone?”

Chrysler’s recent appointment of Robert L. Nardelli, former chief executive of Home Depot, to the position of CEO has left a lot of people wondering just how important an automotive background is in running a major car company. Sure, Nardelli likes Chrysler products – he owns a Jeep, Plymouth Prowler and Chrysler PT Cruiser – but he does not have the “motor oil in the veins” type of enthusiasm that has traditionally defined previous auto executives, according to The New York Times.

But Chrysler is not alone in its outsider appointment. Last year Ford Motor Company named Alan Mulally, former Boeing CEO, to the top company position. GM’s Rick Wagoner has been with the company for 30 years, but has not been directly involved (i.e. designing, engineering or marketing) in creating products on the road today. The Harvard MBA-holding Wagoner was appointed Chief Financial Officer at the age of 39 back in 1992 after beginning as an analyst in the treasurer’s office.

Furthermore, Toyota’s chief executive Katsuaki Watanabe has a background in economics and is considered an expert in purchasing. Many other top executives at Toyota are business leaders before auto enthusiasts. The philosophy at the Japanese manufacturer is one of collaboration, and the lone opinion of a “car guy” is not considered valid. “The days of just a car guy running with their gut feeling probably are, today, pretty difficult to do,” remarked Jim Lentz, Toyota executive vice president.

So what does the shift away from motor head executives signify in the auto business? First, American businesses especially have required new strategies in recent years to rebound from sliding market share and large financial losses. Experts outside of the industry can bring unbiased philosophies, treating the companies as businesses that need to be fixed and not as great American icons of the past.

But what might really be happening is that American consumers are treating vehicles more like everyday products and less like prized possessions that signify enthusiasm. Price and quality matter, as do ergonomics, fuel efficiency and reliability. The auto industry needs innovative and risk-taking leaders, regardless of their backgrounds.

Source: The New York Times
Image: Chrysler

Posted by industry at 12:32 PM in Financial and business strategy news
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Friday, 27 July 2007

Chrysler lifetime powertrain warranty arrives, with exclusions of course

In an effort to one up the competition, the Chrysler Group announced yesterday that nearly all new 2006, 2007 and 2008 Chrysler, Dodge and Jeep models sold from now on would include a lifetime powertrain warranty, available to the original buyer, for the extent of ownership. No OEM manufacturer has ever offered this type of coverage, although the trend in the industry has been toward longer warranty periods. Engine, transmission and drive system components are covered.

Exclusions apply, of course. SRT models are not included, so don’t expect your Dodge Viper SRT-10 to be rebuilt after 200,000 miles of spirited driving. Diesels also don’t make the cut, an exclusion that seems odd until one considers that the Chrysler Group does not build its own compression motors. Ram trucks use a Cummins diesel powerplant, and the Jeep Grand Cherokee CRD gets a Mercedes-Benz engine. Dodge Sprinter, Ram Chassis Cab and select fleet vehicles also do not benefit from the coverage.

The warranty is not transferable, and the percentage of Chrysler Group buyers who keep their vehicles beyond a typical warranty period is likely pretty low. Still, if you’re a young family who likes to travel and is looking for a Dodge Grand Caravan for the long haul, the coverage is nice. Also, drivers who log very few miles per year will retain their powertrain warranties, whereas before the 3-year limit could exclude them before ever hitting the mileage mark.

General Motors extended 5-year/100,000-mile powertrain coverage to all new vehicles last fall, and has recently followed with the same warranty on Certified Used models. Chrysler’s program places them at the forefront of the industry, a good move that should solidify confidence in some consumers. The infinity sign logo is pretty cool as well.

Source and image: DaimlerChrysler media

Posted by industry at 10:08 AM in Financial and business strategy news
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Monday, 23 July 2007

Diesel engines worth the investment, according to Automotive News

Choosing and paying for options when purchasing a new vehicle can be a formidable task. Which ones are needed, and which will payoff during resale time? As The View from Inside has reported previously, certain items such as navigation systems do not hold their value well.

According to Automotive News, however, diesel engines have been a good investment over the last couple years. Several diesel vehicles are now commanding premiums in the used marketplace higher than the additional fees attached to the original MSRPs. For example, a 2005 Mercedes-Benz E-Class (E320 CDI) cost approximately $1,000 more than a comparable gasoline E320 when new. Now, ’05 E320 CDI Benzes are commanding about $2,500 more than 2005 E320s at wholesale auctions. That’s an increase of 250 percent on an unadjusted basis, and even more considering that vehicles inherently lose value after two years but the diesel option has increased in worth.

Others are performing above their MSRP premiums as well. When considering 2005 models, Automotive News found five other diesel vehicles commanding more dollars today for the powerplant option than when new. Volkswagen’s Jetta GLS TDI has retained 164 percent of its diesel premium, while the New Beetle GLS TDI has held 121 percent. Both have benefited from VW removing diesels from the 2007 lineup due to emissions compliance, and thus making the TDI selection scarce.

Large trucks have also fared well, as the diesel option is returning more than 100 percent in the Ford F-250 (127 percent), Chevy Silverado (117 percent) and Dodge Ram 2500 (104 percent). Finally, the Jeep Liberty diesel is not far beyond, with oil-burning models selling for $2,200 over gasoline Libertys, representing an 82-percent share of the original Liberty CRD markup.

Source: Automotive News
Image: DaimlerChrysler media

Posted by industry at 1:42 PM in Financial and business strategy news
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Friday, 13 July 2007

Domestic and import vehicles nearing 50/50 in U.S. market share

Over the last several years countless hours have been invested in the research and analysis of the Detroit Three automakers' declining market share in the United States. That is, Chrysler, Ford and General Motors have seen their own sales plummet while witnessing the rise of Japanese, South Korean and some luxury-oriented European manufacturers. At this point, there is little that can be said that someone hasn’t already postulated or theorized on before.

This week, however, a psychological turning point in the industry was analyzed extensively: the anticipated drop below 50 percent market share for U.S. automakers in their home territory. In June of 2007, domestics held on to a scant 50.2 percentage of the U.S. new-vehicle market. Last June that number was 56.0 percent.

For the first six months of 2007, domestics accounted for 51.9 percent of new vehicle sales, down from 54.6 percent last year and 54.9 percent from January to June of 2006. The progression has been gradual, but steady. In 2005, Americans held a full 57.0 percent of the market.

Even though General Motors has committed to seeking profitability rather than market share primarily, you can bet that the Americans will make necessary adjustments to retain the majority of the marketplace, at least in the short term. We’re already seeing cash-back and financing incentives being extended through the summer months. But current incentives still fall below the summer 2006 offers in terms of dollars per vehicle for each American automaker.

As expected, Japanese automakers have accounted for much of the lost American market share, as their 36.5-percent claim from January to June of 2007 was a serious improvement over the 33.8 percent held last year during the same time period. Additionally, Toyota, Honda and Nissan are using incentives to boost sales; the new Toyota Tundra full-size pickup, for example, already includes offers topping $5,000. Industry analysts see Toyota’s behavior with the Tundra as unusual, and the incentives have certainly thrown American companies for a loop.

Source: Automotive News [Subscription required]

Related posts:
Japanese vehicles outsell American cars and trucks in California this year [December 27, 2006]
Edmunds.com reflects on 2006 U.S. auto industry, predicts 2007 trends [December 21, 2006]

Posted by industry at 3:08 PM in Financial and business strategy news
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Tuesday, 29 May 2007

BMW to buy Volvo? That’s the rumor

A few weeks ago a report surfaced from Autocar suggesting that BMW has been seriously considering the acquisition of Volvo from Ford Motor Company’s Premier Automotive Group. The German automaker apparently requested detailed information regarding Volvo’s financial situation earlier this year from an investment bank in Europe. Volvo’s expertise in safety and full lineup of front-wheel-drive vehicle platforms are apparently attractive to BMW, especially as the Bavarian company seeks to expand its MINI vehicle portfolio.

Neither Volvo nor Ford has commented on the situation, both referring to the report as “speculation” and thus not worthy of remark. Should a deal be struck, however, some analysts believe midsize to large Volvo sedans and station wagons (S60, S80, V70) would eventually ride on versatile BMW platforms available in both front- and rear-wheel-drive configurations. Smaller models (S40, V50) could join MINI, remaining front-wheel-drive. BMW is apparently trying to ramp up MINI sales as justification for continued production of the niche brand.

Sources: Autocar, ABC News, The Detroit News

Posted by industry at 7:00 AM in Financial and business strategy news
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