As Expected, August 2010 Auto Sales Sink

All throughout the month of August, reports that the month’s auto sales would plunge surfaced time and again. This reporting was wholly unnecessary or at least overdone as an obvious factor was kicking in: August 2009 was “Cash For Clunkers” time, therefore any comparison with last year would be skewed by that federal government rebate program.

But, comparing month over month figures is how the industry rises and falls even when the numbers are skewed. One of the first to issue their sales report was Volkswagen who cut to the chase in the title of their news release: year to date sales are up by 21 percent. On closer scrutiny, Volkswagen revealed that monthly sales fell by 7.9 percent over August 2009.

Monthly Losers

Nissan went straight to the point with their news: sales fell 27 percent for the month although year to date sales are still up by 14 percent. Honda sales fell by 30 percent, but the Japanese automaker says that it is still ahead of last year’s pace though that lead narrowed to just 1.5 percent.

Toyota sales dropped by 31 percent which means that the world’s largest automaker has fallen behind last year’s year-to-date pace by 6,000 units. Blame all the recalls and bad publicity with having a net drain on Toyota whose position as the world’s largest automaker is in jeopardy regardless. Volkswagen, perhaps even GM, may unseat Toyota this year.

Fab 3

How did 2009′s winners do in August? That would be Subaru, Hyundai and Kia, the only automakers who saw their sales rise in a very depressed market.

Subaru’s sales fell by 22 percent, but they’re still up by 20 percent for the year. Hyundai reported that its sales fell by 11 percent, yet the Korean automaker is still up by 17 percent for the year and on pace to establish yet another sales record. Kia, Hyundai’s cousin, registered a 20 percent decline for the month, but they’re still up by nearly 10 percent year to date.

Detroit 3

The Detroit 3 reported mixed sales results with Chrysler sales increasing by 7 percent for the month and are now up by 10 percent for the year. Chrysler’s rise wasn’t a surprise as it basically had to sit out of  last year’s incentive programs as it recovered from bankruptcy and sought to restart production.

GM sales fell by 11 percent for its four surviving brands though the largest domestic automaker is still up by 5.4 percent for the year. Ford sales also fell by 11 percent, but the automaker is still up 18 percent for the year.

The Rest

Daimler reported sales up by 7.4 percent for the month, though when breaking things out by brand Mercedes was up 10 percent while Smart fell by 72 percent. Mercedes is capitalizing on Lexus’ woes and may regain the top luxury marque spot from its Japanese nemesis this year.

The BMW Group fell by 1.6 percent but is up 5.6 percent for the year. Mazda fell by nearly 26 percent, but they’re up by 7 percent year to date. Other manufacturers were still tabulating their figures when Auto Trends went to press with this article.

The Meaning

What does August 2010′s sales mean? Not a whole lot. Cash for Clunkers was a hard month to go up against, so a significant drop was expected. Going forward, a stale economy may keep sales down for the rest of the year, underscoring that the battered American consumer will be careful when and if they buy a car this year.

Sources: Automaker News Releases

Cars and iPods Are Different – Tesla’s Retail Strategy Is Flawed…and Arrogant

By Jason Lancaster

Based on an article from the July 26th edition of Automotive News, it seems that start-up automaker Tesla plans is to sell cars the same way that Apple sells iPods. Tesla won’t have dealer showrooms – they’ll have manufacturer-owned “galleries.” Tesla won’t have service departments – they have field technicians called “Tesla Rangers.” Tesla’s stores won’t have a lot full of new cars to choose from – they’ll have a couple of floor models to sit in, a demo unit for test drives, and a website to visit when it’s time to buy.

Unfortunately, all of this means that Tesla won’t have much success with sales, especially once big automakers bring out their own electric cars. Until they recognize the limitations of their strategy, they will be nothing more than a small, niche manufacturer that will probably be swallowed up by a larger automaker down the road. Here’s why:

1. Instant gratification can’t be ignored, and no inventory means no urgency. Ask any auto dealer and they’ll tell you that people don’t like to wait for their car. Because Tesla dealerships won’t have any cars in-stock, there is a real risk that some consumers will opt to buy a competing vehicle rather than wait for their Tesla to arrive.

There’s also the fact that a lack of inventory means there’s no urgency – if a consumer is told “this is the last red one on the lot,” they feel some pressure to consummate a transaction right away. If they’re told “sign here and your car will arrive in 6 months,” they’re much more likely to investigate alternatives. The bottom line is that dealers need inventory to maximize sales, and without ready-to-buy inventory Tesla dealers will be at a disadvantage compared to the local Ford, Toyota, Honda, and Nissan dealers with in-stock inventory.

2. Larger dealers are more effective. Tesla’s plan centers around small little dealers in select markets. However, larger dealers are more capable of selling and marketing vehicles. Specifically, larger dealers can:

• Justify larger marketing and advertising budgets, including brand-level ads
• Afford to invest in long-term marketing strategies
• Expend the resources to be active and visible in the local community (things like baseball team uniforms and sponsoring local events)
• Offer consumers more on trade-in (more on that below)

3. Apple doesn’t sell used iPods, but Tesla will sell used cars. Trade-ins are an especially important aspect of the retail automotive business, and represent a significant flaw in Tesla’s strategy. Since many consumers aren’t able to buy a new car without getting rid of their old one, the average Tesla dealer is going to have to take trade-ins. These dealers can either try to market these trades to the limited number of visitors they get, or they can auction these trades off to other dealers. Auctioning off trades (which will mostly be gas powered) seems like the most likely option for Tesla dealers specializing in electric cars.

Of course, if Tesla dealers are going to the auction, they’ll be forced to offer customers auction value. Large dealers, with thousands of visitors and a wide variety of cars, rarely auction off trade-ins because they can usually sell anything they get. As a result, large dealers can afford to offer a consumer more than auction value for their trade to facilitate a transaction…and that gives them a financial, transactional advantage over Tesla’s small dealers. What if Tesla dealers, as a result of this fundamental disadvantage, gain a national reputation for under-valuing trade-ins? That’s not going to do much for the brand.

4. Manufacturers probably can’t sell cars. In the late 1990′s Ford conducted a dealership experiment. Beginning in 1997, Ford bought back all of their franchises in five markets – San Diego, Tulsa, Oklahoma City, Rochester, NY, and Salt Lake City. These franchises were formed into “auto collections,” and once these dealers were all under Ford’s control, they began to “fix” all the problems that consumers had with dealers.

A little less than three years later, Ford’s auto collection experiment was deemed a failure. According to an Automotive News article from 2002, one of the stores that Ford “fixed” saw a sales decline somewhere between 75-90% over the three years that Ford ran the show, forcing Ford to give up or lose their presence in these vital markets.

While it could be argued that Ford’s factory-owned dealership failures were a result of poor management or a poor market, consider this: The only remaining independent Ford dealer in Salt Lake – Butterfield Ford – saw tremendous sales increases every month while Ford’s Salt Lake Auto Collection suffered. Ford’s corporate stores sank while a local independent in the exact same market thrived. Is a large corporation like Tesla really going to be better at selling cars than a local franchise with ties to the community and very little overhead?

According to Tesla, one of their advantages over bigger automakers is their small size. If Tesla really does understand the value that a small company with low overhead can bring to the table, why do they reject a franchise strategy?

The other irony here is that Tesla has promised to “revolutionize” the auto industry before. Tesla claimed that they could shorten the development cycle of the automobile and bring technology to the consumer faster than their bigger rivals. When they launched the Tesla Roadster in 2006, it was supposed to be the beginning of a new era. Four years later, Tesla has squandered much of their technological advantage, failed to produce more than about 1,000 vehicles, and lost buckets of money. Yet despite this humbling experience, Tesla remains arrogant, assuming that they can re-invent the auto industry in every respect. Good luck.

Author Information

Jason Lancaster is a nine year veteran of the car business and the president of Spork Marketing, a dealership Internet marketing firm.

Is GM Committing Social Media Suicide?!

Critiquing the 2011 Buick Regal

General Motors and the Ford Motor Company are duking it out for top social media honors.

Earlier this week, Ford introduced its 2011 Ford Explorer to the world via Facebook, side-stepping the usual very public auto show or media event to showcase their SUV turned Crossover model. By all accounts, the Explorer Facebook debut was successful at least for helping to create a lot of buzz for a vehicle months away from its showroom debut.

Buick Regal

General Motors, in a bid to inject fresh life into its aged Buick brand, has chosen to mix things up for the 2011 Buick Regal by allowing people to post comments–good, bad and ugly–about its new midsize sedan to its Moment of Truth website. GM has promised to share all comments and though most are overwhelmingly positive, they also include the usual critical pronouncements including:

“Garbage, I’ve personally driven the Autobahn and this won’t cut it….”

“I wouldn’t RIDE in dat thing…It looks like a Volkswagen:”

Buick Speaks

In a statement coinciding with the website’s launch Buick advertising director Craig Bierley had this to say: “We are inviting consumers to find out on their own that Regal is a true performance sedan and worthy of their consideration. We are making it easy for the consumer to get unbiased opinions in one online location.”

Risky move, indeed. But it just may pay off.

Social media is a significant force, one that can propel or bury most any brand. Toyota learned earlier this year that they need to work on staying ahead of the news cycle curve when recall and potential cover-up information was aired online. People are going to say whatever they want about your product, so why not try to capture those thoughts to one place?

Four Ways

GM is offering four sections on it Regal critique site for your review:

1. What the expert’s think — Reviews from automotive columnists and critics.
2. What everyone’s saying — Facebook and other comments.
3. How Regal stacks up — A combination of comments across the board.
4. What Buick is saying — Responses from Buick managers and dealers along with Flickr photographs of the sedan.

GM is working diligently to reshape the Buick brand to attract younger, sophisticated buyers. The automaker is positioning Buick to compete with entry level Lexus models while Cadillac takes on the rest of Lexus, BMW, Mercedes, Infiniti and Audi.

New Models

Right now, Buick is in transition with the Lucerne soon to make an exit and a C-segment model in the works. Along with the Enclave crossover and LaCrosse sedan, Buick hopes its model line attracts a fresh group of new buyers.

The Buick Regal is currently being built in Europe where it is sold as the Opel Insignia. By early 2011, a Canadian factory will start to produce the sedan, allowing GM to cut costs accordingly.

Source: GM Corp.