Category Archive:

Atomization – Sales per New Vehicle Nameplate Will Drop

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 Atomization Continues Unabated  The American car and light truck market is undergoing atomization.  There are 313 car and truck nameplates on sale today in the United States.  By 2022 – just five years in the future – there are going to be 377.  A nameplate is a vehicle name like Ford Explorer, Renge Rover Evoque or Toyota Camry.

Car to Truck Shift Permanent  Manufacturers are adding new products to more tightly appeal to customers with more diverse tastes.  Buyers have shifted to crossover sport utility vehicles (XSUVs) in droves.  Automakers are adding more XSUVs to satisfy every whim.  Trucks began outselling cars in 2001, but since 2012 when cars last had 50% of the market truck sales have boomed.  Today, truck sales are about 61% of the market and AutoPacific forecasts that truck sales will reach 69% of the American light vehicle market by then.  In 2016 there were 178 car nameplates on sale.  Today there are 192.  In 2016, there were 147 truck nameplates on sales; now there are 153.  In 2022, there will be 199 truck nameplates and 178 car nameplates.

Atomization Means Fewer Sales Per Nameplate on Average  In 2016, sales per name were about 54,000 units each on average in a 17 million sales year.  This was up dramatically from the 2009 downturn year when there were 34,500 units sold per nameplate.  But the bad news is that all nameplates are not equal in sales.  Some sell in the thousands while others sell in the hundreds of thousands.

The top ten vehicles, led by the Ford F-Series pickups, accounted for 25% of the sales in 2016.  If you take the top ten sales out, average sales per nameplate in 2016 was 42,000 sales per year.  In 2022 it gets even worse.  AutoPacific is forecasting 16,200,000 sales in 2022, but there are 377 nameplates.  Taking the top ten nameplates out, the remaining 367 nameplates will sell only 32,700 each.  This puts average sales per nameplate in 2022 about the same as the downturn year of 2009.

Auto Marketing Wars to Continue  With so many individual nameplates on the market it will be difficult for auto marketers to support them.  Marketing budgets are not large enough to get this number of new nameplates in the car buyer’s consideration set.  As XSUVs continue to grow in popularity, traditional sedans will be allowed to languish or be dropped altogether.  At best, strong marketing support will be during the vehicle’s launch period and then taper off.  If a vehicle is a hit, it may continue to get TV time, but more and more targeted internet advertising will become the name of the game.  If a vehicle is not a hit, it will quickly become an unloved cash cow.

It’s no surprise that the Chief Marketing Officers at American automotive brands have a target on their back.  Failing to create the magic potion that will keep this huge number of nameplates moving off of dealer lots is hugely challenging.  Creative talent and huge amounts of money are required to continue succeeding in the upcoming more crowded vehicle market.

And… don’t forget the disruptive influence of electric vehicles, autonomous vehicles and the changing driving/vehicle ownership environment of the next ten years.


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Revenue Generator – Which Vehicles Generate the Most Cash?

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New car and light truck owners responding to AutoPacific‘s annual New Vehicle Satisfaction Survey, provide the price they paid for their vehicle.  That price is what the buyer pays the dealer.  A vehicle that is a strong revenue generator is golden to the health of a brand.  Of course the revenue is split into many smaller and smaller pieces.  Simplistically, the dealer buys the vehicle from the manufacturer and sells it at a profit.  And that is about as complicated as we are going to get, because that is not the story we are chasing.

We want to know which vehicles generate the most revenue.  This is analysis is rough.  We use the median price paid from AutoPacific’s research and multiply that times the numbers of vehicles sold in 2016.  Each of the top ten vehicles generated $10 billion or more of revenue.

AutoPacific Revenue Analysis by Vehicle Line

F-Series Top Revenue Generator  The top revenue generator was the Ford F-Series.  Not only is the F-Series the top selling vehicle in the market, about 30% of its sales are of very expensive Super Duty models.  Our rough estimate of the F-Series revenue is about $38.5 billion.  This may be low, because Super Duties may be under-represented because many are commercial use that are not included in the research.

Top Four in Revenue are Pickups  Following the F-Series, the top revenue generators are in order:  Chevrolet Silverado ($27 billion), Ram ($24 billion), GMC Sierra ($11 billion).  Combined, the Silverado and Sierra about equal the overall revenue of the F-Series.

Five Through Seven are SUVs  The top selling crossover SUV is the Honda CR-V and it is the first non-puckup on the list.  It generates almost $11 billion in revenue.  The sixth top revenue generator is the Toyota RAV4 at about $10.5 billion.  The CR-V and RAV4 are expected to be Honda’s and Toyota’s top sellers for 2017 outselling the Accord and Camry.  The Ford Explorer sells for about $12,000 more per vehicle than the CR-V, but sells 110,000 less vehicles.  Nevertheless it is 7th on the list generating about $10.4 billion.

Camry and Accord are 8th and 9th Top Revenue Generator  The previously top selling non-pickups were the Toyota Camry and Honda Accord.  By AutoPacific’s analysis, Accord generated $10.4 billion in revenue in 2018 while the Camry generated $10.2 billion.

Nissan Rogue Caps Off The Top Ten  The Nissan Rogue crossover SUV is tenth top revenue vehicle with about $9.7 billion.  Having shot above Altima in sales, Rogue is Nissan’s top revenue vehicle line.

 


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Mid-Year Review of Fuel Price Impact on American Drivers

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Fuel Price Impact on American Drivers Has Changed

Every two months, AutoPacific surveys drivers to determine the fuel price impact on their lives, their driving styles and their consideration for vehicle types in the future.  The fuel price impact today is dramatically different from the surprise price spike to $4.15 per gallon in June 2008.  Drivers reacted dramatically.  They abandoned large SUVs and bought high fuel economy small cars and hybrids instead.  Hybrid consideration peaked at 29% in September 2008.

Drivers took huge financial losses getting rid of their gas guzzlers, but they quickly rued that decision.  By December 2008 the price of gasoline had dropped to $1.67 per gallon.  (The value of $1.67 in 2008 is $1.94 in today’s dollars).  This began a roller coaster ride of gas prices.  By January 2011, gas prices had risen to over $3 per gallon and stayed there until December 2014.  Today, the national price of a gallon of gasoline is about $2.50.

American Driver Know Fuel Prices Will Change  The result is that American drivers do not trust the stability of gasoline prices.  In 2008, fuel price was among the top ten attributes people considered important when they bought a new car.  Now, fuel price is twentieth.  In fact, fuel price is considered less important now than power and acceleration and fun to drive.

At the last peak in 2011, almost 60% said gas prices had a (negative) impact on their standard of living.  Today, that number has halved to 30%.  More people are feeling they can afford a more expensive, less fuel efficient vehicle.  Of course, longer financing terms and increases in leasing also has stimulated their buying behavior.

Honda CR-V Top Selling Crossover SUV

Cars Losing, Crossover SUVs Winning  Consequently, trucks rule. Based on the results of the Fuel Price Impact Survey, consideration for cars has been steadily slipping since 2005. In December 2005, 67% of drivers would consider a car next time they bought.  In 2017, that number has fallen to  49%.  The vehicle segment with the strongest consideration is, surprise, SUVs and Crossover SUVs with 37% of drivers saying they would consider one next time they buy.  That is up from 21% in 2005.  Mid-Size Car consideration has dropped from 27% in 2005 to 12% today.  Hybrid, the fuel efficiency darling, has fallen from 29% consideration in 2008 to 13% today.

This change in vehicle type consideration has caught some automakers by surprise.  Hyundai is a notable example where sales are off substantially.  They simply don’t have enough SUVs to sell even though they have added extra capacity for the Hyundai Santa Fe Sport to their plant in Alabama.  Like Porsche when that German brand added the Cayenne SUV, Jaguar has seen its sales double after adding the F-Pace SUV to their lineup.

Regulations Forcing Automakers to Produce Vehicles That May Be Tough to Sell  Even though fuel price is lower on the importance list and buyers are flocking to Crossover SUVs, more and more hybrids and electric vehicles are being introduced every year.  The introduction of these new fuel efficient cars and trucks has been to meet the stringent government fuel economy regulations established by the Obama Administration.  As good and as fuel efficient as these new vehicles are, they will need a marketing push to sell them.  Automakers cannot expect “consumer pull” to get these vehicles on the road.  With the price of fuel staying relatively low, American new vehicle buyers are going to buy what they want.  This means continuing popularity for Crossover SUVs at the expense of Mid-Size Cars and Small Cars.

Potential changes to fuel economy regulations will impact how the auto industry reacts, but stopping or slowing the surge of hybrids, plug-in hybrids and electric vehicles is not in the cards.  Too many sunk costs and resources already.


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Tesla Tops Consideration and Vehicle Satisfaction Results

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Each year there are several surveys of Vehicle Satisfaction in the United States marketplace.  Two of the most respected are from Consumer Reports, the widely read consumer buyer guide and automotive-specialist research company AutoPacific.  Consumer Reports results were released on December 22, 2016.  AutoPacific’s Vehicle Satisfaction results were released on June 1, 2016.

The results are similar in some ways.  The differences between AutoPacific’s “Future Consideration” results and Consumer Reports “Would Buy Again” results can be dramatic.  AutoPacific’s “Future Consideration” measures owner loyalty.  That is what percentage of the brand’s present owners would consider the brand again?  AutoPacific also assumes vehicle buyers may be considering more than one brand in the future.  This makes the percentage of consumers considering any one brand usually higher than the more definite “will buy” results from Consumer Reports.

brand-consideration-comparison-vvTesla is tops in all three measurements from Consumer Reports and AutoPacific.  Then the comparisons diverge dramatically.  In AutoPacific’s consideration results, popular domestic brands Ford (4) and Chevrolet (6) are in the top ten.  In CR’s “will buy again” results Chevrolet is 9th and Ford is 15th separated by one percentage point.   Second ranked in CR’s results, Porsche is 8th in AutoPacific’s consideration.  Cadillac is second in AutoPacific’s consideration results but 22nd in CR’s rankings.

An interesting result in AutoPacific’s two measurements is that Ford and Chevrolet are very strongly considered while scoring below the industry average in their vehicle satisfaction scores.  This is testament to the strength of their brand image.

So how can consumers use these divergent messages?  Compare the brands at the top and the bottom of the list and see where there are similarities.  In both Consumer Reports and AutoPacific results, Fiat is at the bottom.  Ram, Fiat Chrysler’s truck-only brand has OK results from CR, but is on the bottom of the AutoPacific future consideration results.  Hot-selling Jeep is towards the bottom in all the measurements.  Should the buyer consider buying a Jeep a risk if owners are hesitant to buy another one?  Would a new Jeep get lower satisfaction scores?  Infiniti gets a pretty good satisfaction score from AutoPacific, but both CR “will buy” and AutoPacific consideration scores are very low.  Something is going on there.

For each brand there is a story.  Data compiled by organizations like Consumer Reports and AutoPacific can go a long way in helping consumers fine tune their consideration set when they are in the market for a new car or light truck.


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Auto Industry is Ahead of Fuel Economy Technology

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The Midterm Evaluation of Corporate Average Fuel Economy (CAFE) Standards report issued in July 2016 by the Environmental Protection Agency(EPA), National Highway Traffic Safety Administration (NHTSA) and the California Air Resources Board (CARB) set the stage for comments on 2022-2025 CAFE standards.  The comment period ends on September 30, 2016 and some congressional leaders have asked for a further 60 day extension to receive comment.  Reading the details of the report is very enlightening and has largely been overlooked by the media.

Fuel Economy to Double from 2012 to 2025  In the rules established in 2012, fuel economy is to double by 2025 and green house gas emissions are to be cut in half.  This would save 12 billion barrels of oil over the lifetime of 2012-2025 model year cars and light trucks and save consumers billions of dollars in fuel costs.

Report Under-Estimates Truck Percentage of Light Vehicle Market  At the time the initial rules were set, the truck mix was assumed to be 33% of the light vehicle fleet.  Given today’s low gas prices and the popularity of crossover SUVs, the light truck mix is over 60% of the market today and is projected to grow to over two thirds of the market by 2020.  In the Midterm Evaluation the government agencies show the highest truck mix to be 52% with low fuel prices continuing.  If fuel prices return to peak levels seen during the last decade (not projected), the light truck mix is assumed to be 38%.  Given the reality of the market, both of these estimates are conservative and very low.

Automakers Ahead of Schedule in Meeting Future CAFE Requirements  To date, the Midterm Evaluation concludes “auto manufacturers have over-complied with the program”.  This is a surprising statement from agencies that often accuse the industry with foot dragging in fuel efficiency and safety technologies.  They note that “fuel economy technologies are entering the market at rapid rates” and that the costs of adding these technologies have not been as high as estimated back in 2012.

Consumers Have Accepted Enhanced Powertrains  The report also notes that consumer acceptance of advanced fuel efficiency technology has largely been positive.  Ford’s EcoBoost turbocharged powertrain technologies have been well accepted (and strongly advertised).  Stop/Start technology is becoming more accepted according to AutoPacific’s consumer research.  Stop/Start shuts the engine off when stopped and then restarts the engine immediately when the accelerator is applied.  Some Stop/Start systems are seamless.  Others are rough on start-up. As the systems improve acceptance will improve.

Enhanced Gasoline Powertrains Can Meet 2025 CAFE Standards  To meet 2025 CAFE requirements, the agencies identify several technologies that will play an important part.  Most are enhancements to gasoline powertrains.  Tops on the list are transmissions with 8-speeds or more (70%) .  General Motors and Ford are working together to develop multi-speed transmissions.  More engines will be turbocharged (54%).  Stop/Start will become more commonplace (38%).  The most interesting fact is the report assumes less than 2% of the vehicle fleet will be full electric vehicles and less than 1% will be a plug-in hybrid.  Mild hybrids are estimated to be 14% and full hybrids will be 14% to meet 2025 CAFE.  There is only passing mention of fuel cell vehicles.

Substantial Cost Increases to Meet Future CAFE Standards  Improving fuel economy is not free.  Back in 2012, cost increases of over $3,000 per vehicle were estimated to meet 2025 standards. The cost is now estimated by the agencies to be around $1,250 (over a 2021MY vehicle).  Nowhere in the report does it mention how much the cost to get from 2012 to 2021 is.  The report estimates that meeting the 2022 to 2025 standards will increase lifetime vehicle costs by $87 billion.  This is estimated to be offset by fuel savings of $120 billion and other benefits of $55 billion.  The net benefit is estimated to be $88 billion.  Like many government reports, the arithmetic is vague and the conclusions are shaky.

AutoPacific’s bi-monthly Fuel Price Impact Study shows that consumers are not particularly willing to spend more for a vehicle that is more environmentally friendly.  Consumers also say that their present vehicle is clean enough and the focus should be on cleaning up other sources of pollution.  The Midterm Evaluation does not mention that there has been any research conducted to determine consumers’ willingness to pay substantially more for higher fuel economy vehicles.

Plug-In Electric Vehicles Not Needed to Meet Federal CAFE  Perhaps the most interesting conclusion in the report is that plug-in electric vehicles are not needed to meet the Federal 2025 CAFE standards.  This is not welcome news to Tesla’s Elon Musk or Nissan’s Carlos Ghosn.  The primary reason electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) will impact the overall vehicle fleet are to satisfy California’s mandate for zero emission vehicles (ZEVs) in the fleet.  California’s regulations also are shared with northeastern states.

Even Tougher Standards in the Future?  The report is very complimentary of the auto industry’s progress in adopting enhanced technologies to meet future fuel economy requirements.  While some might hope that this would lead to a reduction in future standards, it might result in even tougher fuel economy goals.


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“Trucks” to Continue to Outsell Cars – XSUV Segment

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500 wide Car Truck Sales 1987-2021500 wide Car Truck Mix 1987-2021AutoPacific, an automotive specialist research and product planning consultancy, forecasts that trucks, including XSUVs will be about 60% of the market for the foreseeable future.  In fact, reading the crystal ball for the next five years, this percentage of the mix may be low.  The charts above detail how cars and truck sales and market penetration have evolved since 1987 and the forecast for the future.

The hottest product segment in the American light vehicle market is the crossover SUV (XSUV).  A crossover SUV can be as large as a Chevrolet Traverse or as small as a Chevrolet Trax.  There are dozens of XSUVs in between.  And there will be more.

The XSUV segment has become so hot because this type of vehicle corrects the criticisms buyers had of traditional SUVs which sold very well, but were not optimal.  Buyers wanted products that were not hard-core off-roaders, but more civilized and city friendly.  The SUV market exploded in the early 1990s with the introduction of the Ford Explorer and Jeep Grand Cherokee.  It wasn’t until 1996 that the crossover SUV began slipping into the marketplace.  First the Toyota RAV4 and Honda CR-V appeared.  They were followed by the luxury crossover RX300.  Clearly the manufacturers were listening and reacting.

Here are just a few of the things we know about the evolution of the SUV market over the next five years…

Cadillac  Cadillac states that it has too few XSUVs (one, the upcoming XT5) and wants to add two or three more to its lineup while adding one more car as a range topper between now and 2020.

Buick  Buick is adding the small Envision XSUV to its lineup this Spring.  Envision is assembled in China.

FCA Drops Cars to Add XSUV and Pickup Capacity  Fiat Chrysler Automobiles is dropping its Chrysler 200 and Dodge Dart in favor of more capacity for XSUVs and pickups.  The Ram pickup will take over the FCA Sterling Heights, Michigan Plant when the Chrysler 200 is dropped.  FCA’s huge Belvidere, Ilinois plant will be populated by XSUVs when the Jeep Compass and Patriot plus the Dodge Dart fade away.

Toyota Pushing RAV4  Toyota Motor Sales has stated that they would not be surprised if the RAV4 XSUV overtook the Camry mid-size car as its best selling product.  Camry was the best selling car in the USA in 2015.

Lexus will add a 3-row XSUV above the RX350 in the next few years.500 wide SUV XSUV Sales 1987-2021500 wide SUV XSUV Mix of SUV 1987-2021

 

The charts above show the impact of crossover SUVs on the light truck market.  Huge volume increase and market share increase.

Hyundai Aggressively Adding XSUV Capacity  Hyundai is replacing 50,000 units of car capacity in its Montgomery, Alabama assembly plant with the Santa Fe Sport.  That drops capacity for the Hyundai Sonata and Elantra from 400,000 to 350,000 units per year.  Hyundai admits that they underestimated the demand for XSUVs years ago.  This capacity move reacts to market demand and dealer pressure to get Hyundai dealers more XSUVs that are easier to sell and require less incentives and discounting.

Hyundai will add 45,000 units to its Tucson compact XSUV volume this year.  Built in South Korea, Tucson has been limited because it is popular around the world and the vehicle was capacity constrained.

Hyundai also recognizes there is a hole at the bottom of their XSUV lineup and are adding a sub-compact B-Segment XSUV to fill that hole.  There is a possibility that a smaller A-Segment XSUV will replace the Hyundai Accent hatchback.


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Fun Controversy Around Cadillac Poolside Advert

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Brilliant Ad – Controversy Worth its Weight In Gold  Cadillac, once the Standard of the World, has aired an outstanding ad for the Cadillac brand and the Cadillac ELR electric coupe.  It was first shown on the American broadcast for the Sochi Winter Olympics and more recently for the Oscars that aired on Sunday, March 2.  And what a controversy has ensued.  Cadillac’s agency Rogue created the Cadillac Poolside ad to espouse unbridled American confidence and showcase what Cadillac stands for.  In the process, the spot has left leaners and right leaners sniping against each other on numerous websites.  On Thursday, March 6, arch-conservative pundit Rush Limbaugh (click on the link to be taken to the transcript of the Limbaugh show about the Cadillac ad)  devoted the top of his second hour to the controversy the ad has created.  The Cadillac Poolside ad pushed a button that allowed Limbaugh to rant for about a half hour.


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Patrick Paternie

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I probably was the last person to ride with Patrick Paternie on a new vehicle evaluation.  Patrick passed away on March 10 following a race in his classic Porsche.

Patrick Paternie: Volvo Chili Cook-Off, Scottsdale, March 8, 2010

I spent two days riding in Volvos with Patrick.  He had sought me out to be his co-driver and I looked forward to his commentary and stories.  I knew he was a good driver and would never take risks that so many of the hot-shots on these press previews sometimes take.

Patrick regaled me with stories of how he and his wife Linda towed a big trailer behind a Suburban in Arizona and there just wasn’t enough oomph in the big SUV to keep up with traffic with the trailer following behind.  He talked about how Linda had come to like riding  in his Ford pickup because of all the room in the cab.  He was especially complimentary about a drive with the Aston Martin Rapide in Alaska.  He said the Rapide was much more capable than he would ever have thought.  The folks at Aston Martin admit the car has been “placed at a considerable discount”.  He travelled widely for his passion.  I was jealous.

We talked about heart surgery I had undergone last November.  “How did you know you had a problem,” he asked.  “Sprained ankle,” I replied.  That got me to the doctor’s office and to get a physical my medical insurance provides every year.  Surgery followed a few weeks later.

Patrick never alluded to having a heart problem.  He looked fit and healthy.  He raced.  He finished.  He was 65.  We miss him.


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Chevrolet Traverse – 2013 What Were They Thinking?

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We have always liked the General Motors Lambda Platform crossover SUVs (XSUVs).  The Buick Enclave is the most elegant and chrome laden.  The GMC Acadia picks up sheetmetal from the now-dead Saturn Outlook for 2013.  That’s OK.  The Outlook wasn’t bad looking and GM likely saved bundles by using /modifying tooling for the “fresh” Acadia.  The Chevrolet Traverse was the last Lambda launched and was arguably the better looking of the three “mainstream” Lambdas – Traverse-Acadia-Outlook.  It carried the bold crossbar in its grille that has come to clearly identify a Chevrolet when seen in the rearview mirror.

Chevrolet Traverse Front End Goes Plain Jane

Now they’ve gone and ruined it.  For the 2013 mild freshening, Chevrolet has abandoned its bold and distinctive front end appearance for a milquetoast “car” front end look for its crossover.  This fits into the VehicleVoice category of “WHAT WERE THEY THINKING?”


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Jealous George – No Detroit Auto Show This Year

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North American International Auto Show Logo

An annual pilgrimage for the auto industry is to attend the press days at the North American International Auto Show in Detroit each January.  Unfortunately, this year I cannot attend because my physicians caution that I should not be heaving carry-ons into and out of overhead bins and baggage carousels.

So, I’m jealous.

One of the primary businesses of AutoPacific is to keep on top of what is the latest in the auto industry worldwide, so AutoPacific will still be well represented at Detroit.

I asked each of our staff members to remind me why I should or should not be jealous of them attending instead of me.  Read below the break for their input.


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