Fewer Incentives, Fewer New-Vehicle Sales · 2018-11-06 · Trying to Make Sense of the...

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NOVEMBER 2018 www.mediagrouponlineinc.com

Despite a continuation of the softening trend in light-vehicle sales since July, October 2018 sales increased a somewhat unexpected 0.4%, which calculates to a SAAR (seasonally adjusted, annualized rate) of 17.59 million units, the largest of the year.

Although October sales are a bright spot, analysts state a combination of factors will likely dampen sales through the end of the year and into 2019. Fewer incentives is probably the primary factor, but it creates a Catch-22 for dealers: less showroom traffic leads to fewer sales, but improves their bottom line.

Robust truck sales will offset some of this conundrum, as forecasters think October could be the first month ever when trucks account for more than 70% of all light-vehicle sales. As consumers purchase fewer passenger vehicles, it follows the average incentive for them would decrease, which they have, or $143, from October 2017.

Increasing interest rates and vehicle prices have and will continue to suppress showroom traffic; plus, many more low-mileage used vehicles recently returning from lease.

Trying to Make Sense of the Used-Vehicle Market, Part 1The automobile industry just can’t seem to escape from the effects of the Great Recession. Because so few new vehicles were produced during those years (compared to today), vehicles of less than four years and 17 years and older dominate used-car sales.

Although sales of used vehicles have increased 3.4 million since 2014, with “newer” used cars increasing 2.6 million and “older” used cars increasing 1.7 million, those in the mid-range of years – 5 to 8 and 9 to 12 – have decreased 700,000 each.

Because of this trend, franchise new car dealers have a significant advantage over independent used-car dealers, since many more of the more than 25 million vehicles of four years and younger are available to the former and not the later.

This situation is even more evident when viewing a table of the fastest-selling late-model used vehicles (2015–2017), according to a recent study from iSeeCars.com, an automotive research firm.

Fewer Incentives, Fewer New-Vehicle Sales

FASTEST-SELLING LATE-MODEL USED VEHICLES, JANUARY–JULY 2018

MODEL AVG. DAYS ON MARKET

Toyota Prius C 29.6

Tesla Model S 32.4

BMW i3 33.4

Toyota Prius 33.4

Chevrolet Volt 34.3

Volkswagen Golf R 34.4

Honda Civic 34.7

Toyota Corolla 34.9

Honda Accord 35.5

Hyundai Veloster Turbo 36.0

Video Advertising Bureau, August 2018

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According to Borrell’s October 2018 Automotive Advertising Outlook, total ad spending is forecast to decrease 7.3% for the year, to $34.4 billion, and with broadcast TV taking the biggest hit, at -37.6% by manufacturers, -27.7% by dealers and -24.3% by dealer associations.

Before you head for a deep cave because you think the sky is falling, Nielsen’s Auto Marketing Report 2018 reveals TV (as well as radio) are absolutely critical to creating brand awareness among consumers during the initial phase of the auto path-to-purchase funnel.

In fact, according to the Nielsen research, “TV drives the highest level of ad recall of all channels by a wide margin – more than 2x greater than print, the next highest channel in terms of ad recall.” (Keep in mind, this conclusion is based on national auto brand advertising recall.)

Interestingly, direct mail had the largest impact for purchase consideration, followed by mobile, theater, billboard and digital.

TV ad recall does decrease 18% as consumers move closer to making an actual purchase, but, at more than 71%, TV still is substantially ahead of the next four channels: magazines, 25%; newspapers, 22%; and radio and digital a bit more than 18%.

Maybe the most important finding from the Nielsen report is the combination of TV and social media use increases purchase considerations among both heavy and light TV viewers, reinforcing the point we’ve made repeatedly that you have an advantage selling the best one-two media punch.

TV Advertising Still Critical for Auto Path-to-Purchase, Part 1

MARKETING FORWARD

Service-Department Customers Have Their SayWith the service department a significant source of profit for dealerships, they must understand consumers’ perspectives on their service experiences and the 2018 Cox Automotive Service Industry Study provides many interesting findings.

One of consumers’ misconceptions dealers must correct is that consumers think service from a dealership will cost more than other service options, which is reflected in the following table about an oil change.

Another important variable for consumer satisfaction with vehicle service is how much time they spent waiting at the dealership. Consumers who waited less than 2.5 hours said they would bring their vehicle to that dealership again. At 3.0 hours of waiting, consumers are still somewhat positive about the dealership, but once the wait time reaches or exceeds 3.7 hours, they are unlikely to return.

COMPARISON OF OIL-CHANGE CHARGE AMONG VEHICLE SERVICE OPTIONS, 2018

SERVICE OPTION CHARGE

Retail auto service $58

Quick lube $60

Dealership where vehicle was purchased $61

Tire store/Repair chain $75

General repair/Service station $77

Automotive News (Cox Automotive), October 2018

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According to a recent survey from VR Intelligence and ZeroLight, 82.3% of the respondents totally agreed with the statement, “I would like to see, explore and configure a car to my preference at scale using immersive technology (virtual reality/augmented reality) prior to purchase.” Only 4.8% strongly or somewhat disagreed.

As expected, younger adults agreed the most, at 77.3% among those 18–24; 89.7%, 25–34; and 86.6%, 35–44; however, 61.1% of those 55+ were agreeable to using immersive technology to enhance the car-shopping/-buying process.

Despite the benefits and “gee-whiz” aspect of using immersive technology, 58.6% of survey respondents said AR/VR would be just one of other technologies they would use, such as Web search.

Although survey participants’ responses were based on how immersive technology would be used during 2027, dealerships must act quickly to offer such immersive technology, because a majority of participants said it would motivate them to visit the dealership.

More Consumers Ready to Shop with AR/VR

ROAD SIGNS

» Because no one automaker has the resources to develop electric-vehicle and autonomous-driving technologies, the number of alliances and joint ventures continue to grow. Honda has already announced a $2.75 billion investment in autonomous-vehicle technology with GM. Ford and Volkswagen may be forging a similar partnership, but Ford is definitely planning to join with Mahindra Group, one of India’s largest car companies, to develop these technology as well as building new vehicles.

» Waymo, the self-driving division of Alphabet, parent company of Google, has received approval from the state of California to put fully autonomous cars on public roads near its headquarters, including Mountain View, Sunnyvale, Los Altos, Los Altos Hills and Palo Alto. These vehicles will have no drivers, but Waymo said it would continue to test its technology and move slowly and cautiously.

» Lyft’s new all-access subscription plan is clearly an attempt to persuade people they don’t need to own a vehicle. Subscribers will receive as many as 30 rides per month for an initial fee of $299, with each ride the equivalent of a standard $15 charge. Lyft claims passengers could save as much as 59% of the cost of owning a car each month, based on AAA’s Your Driving Costs report, but the savings would vary from city to city.

Forward into the Brave New World of Personal Transportation

LIKELIHOOD OF ACTIONS IF A DEALERSHIP OFFERED IMMERSIVE TECHNOLOGY, 2018

ACTION PERCENT

Visit the dealership 64.7%

Explore of the dealer’s range of vehicles 49.9%

Experiment with optional extras 40.3%

Tell a friend about the experience 29.0%

Buy a vehicle from the dealership 24.6%

None of the above 9.6%

ARtillry (VR Intelligence and ZeroLight), October 2018

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RANK AUTOMAKEROCTOBER

2018% CHANGE FROM

OCTOBER 20172018 YEAR TO DATE

% CHANGE FROM 2017 YEAR TO DATE

#1 Ford 184,108 -3.5% 1,992,434 -2.8%

#2 Toyota 168,385 +1.7% 1,874,795 +5.5%

#3 Honda 108,558 -5.3% 1,200,805 -2.4%

#4 Nissan 98,082 -13.0% 1,117,515 -6.5%

#5 Jeep 72,800 +8.5% 818,994 +18.8%

#6 Hyundai 64,146 +25.2% 556,937 +1.7%

#7 Subaru 55,394 +2.5% 558,812 +4.9%

#8 Ram 54,542 +14.0% 471,203 +1.0%

#9 Kia 45,102 +1.6% 497,144 -1.0%

#10 Dodge 33,872 +38.4% 393,600 +0.9%

#11 Mercedes-Benz* 29,474 -18.3% 284,172 -15.4%

#12 Volkswagen 29,000 +4.6% 295,217 +5.4%

#13 BMW 23,262 +0.2% 248,327 +2.0%

#14 Lexus 22,716 -0.8% 236,332 -2.3%

#15 Tesla 20,325 +347.2% 140,317 +252.0%

#16 Mazda 18,673 -10.3% 253,795 +5.3%

#17 Audi 16,056 -16.1% 180,890 +1.8%

#18 Acura 13,624 +7.3% 128,107 +1.0%

#19 Chrysler 13,289 +20.6% 140,445 -9.3%

#20 Infiniti 11,880 +15.4% 117,129 -5.6%

#21 Mitsubishi 8,002 +8.4% 101,400 +17.1%

#22 Land Rover 7,846 +43.3% 72,979 +22.6%

#23 Volvo 7,627 +8.8% 77,608 +21.5%

#24 Lincoln 7,574 -15.0% 82,854 -9.6%

#25 Porsche 4,817 -5.8% 49,357 -1.7%

#26 Mini 3,166 -13.7% 37,359 -2.9%

#27 Jaguar 2,648 -8.4% 23,595 -29.4%

#28 Alfa Romeo 1,737 +44.2% 19,897 +132.5%

#29 Fiat 1,151 -34.9% 13,235 -42.5%

#30 Maserati 950 -16.7% 9,363 -15.9%

MONTHLY AUTOMOBILE SALES CHARTNOTE: General Motors has decided to announce light-vehicle sales quarterly instead of monthly, eliminating Chevrolet, GMC, Buick, Cadillac and GM from 8 of the monthly tables. GM will next announce sales data January 3, 2019.

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Source: Automakers and ANDC

* Includes Mercedes-Benz vans

† Includes Audi, Bentley, Porsche and Volkswagen brands, but not Lamborghini

‡ Industry total includes Automotive News figures/estimates for brands, such as Tesla and other low-volume, high-priced manufacturers.

§ Based on Automotive News’ calculations

© 2018 Media Group Online, Inc. All rights reserved.

Sources:

Automotive News Website:

http://www.autonews.com/article/20181030/RETAIL01/181039980/october-sales-expected-to-dip-as-incentives-keep-falling

http://www.autonews.com/article/20181101/RETAIL01/181109991/u-s-sales-edge-up-saar-hits-highest-level-of-year?cciid=email-autonews-weekly

http://www.autonews.com/article/20181101/RETAIL/181109994/used-car-sales-hole-dealers

http://www.autonews.com/article/20181022/RETAIL05/181029992/shop-limits-balky-customers-challenge-fixed-ops-growth-study-suggests?profile=1434

http://www.autonews.com/article/20181101/RETAIL01/181109991/fca-toyota-advance-behind-trucks-ford-nissan-honda-slip

iSeeCars.com Website: https://www.iseecars.com/slowest-selling-cars-2018-study

Borrell Website: https://www.borrellassociates.com/cart

Nielsen Website: https://www.nielsen.com/us/en/insights/reports/2018/auto-marketing-report-2018-automotive-media-strategy-car-buying-path-to-purchase-intent-awareness-measurement.html

ARtillry Website: https://artillry.co/2018/10/01/data-point-of-the-week-car-shoppers-hungry-for-xr/

CNBC Website: https://www.cnbc.com/2018/10/19/automakers-turn-rivals-into-frenemies-to-share-cost-of-new-technology.html

The Verge Website: https://www.theverge.com/2018/10/30/18044670/waymo-fully-driverless-car-permit-california-dmv

Venture Beat Website: https://venturebeat.com/2018/10/16/lyft-launches-299-subscription-for-30-rides-a-month/

Good Car Bad Car Website: http://www.goodcarbadcar.net/2018/11/u-s-auto-sales-brand-rankings-october-2018-ytd/

RANK AUTOMAKEROCTOBER

2018% CHANGE FROM

OCTOBER 20172018 YEAR TO DATE

% CHANGE FROM 2017 YEAR TO DATE

#31 Genesis 372 -79.2% 9,281 -45.0%

#32 Bentley 165 -12.2% 1,642 -11.7%

#33 Smart 95 -32.1% 1,054 -62.0%

Ford Motor Company 191,682 -4.0% 2,075,288 -3.1%

Toyota Motor Corporation

191,101 +1.4% 2,111,127 +4.6%

FCA/Chrysler Group 177,391 +14.8% 1,860,477 +6.7%

American Honda Motor Company

122,182 -4.1% 1,328,912 -2.1%

Nissan Motor Company/Infiniti /

Mitsubishi117,964 -9.5% 1,336,044 -5.0%

Hyundai-Kia Automotive Group

109,248 +12.2% 1,062,990 -0.4%

Volkswagen Group† 49,873 -4.4% 525,619 +3.1%

Daimler AG 29,569 -18.4% 285,226 -15.8%

BMW Group 26,428 -1.7% 285,686 +1.4%

Jaguar/Land Rover 10,494 +25.4% 96,574 +3.9%

TOTAL‡ 1,361,355 +0.4%§ 14,303,045 +0.5%§

Fewer Incentives, Fewer New-Vehicle Sales · 2018-11-06 · Trying to Make Sense of the...

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