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May 15, 2012
Spurned in China, Subaru Plans Big N. America Push
After stumbling in China, Subaru is doubling down on North America. The brand has abandoned a plan, rolled out just 10 months ago, to start building cars in China by 2016. Instead, Automotive News reports that Subaru will pour its efforts into expanding in the United States, its biggest market. The overhauled strategy, unveiled at the company's May 8 earnings press conference, calls for boosting output at its Indiana plant and possibly adding North American production capacity in the form of a new line or even a new factory. Meanwhile, Subaru has lifted its U.S. sales target to 380,000 vehicles a year by its 2016 fiscal year, from a goal of 350,000 last year. The shift follows Subaru's failure to win approval from Chinese authorities to set up a local joint venture with Chery Automobile Co. Subaru plans to sell 324,000 vehicles in the United States in the current fiscal year ending March 31, 2013. That would be a 16 percent increase over 280,400 sold in the fiscal year that just ended. Subaru wants a quick boost in North American output from Subaru of Indiana Automotive Inc., its assembly plant in Lafayette, Ind. For more on Subaru’s plans, click here.
Toyota, Honda Slide in Supplier Survey a Surprise
Count John Henke among those shocked by Toyota and Honda’s continued slide in his company’s survey of supplier-auto maker relations. “I was, quite frankly, very surprised,” says the president of Birmingham, MI-based Planning Perspectives, which yesterday released the results of its 12th Annual North American Automotive OEM-Tier 1 Supplier Working Relations Index (WRI) Study. The survey asks supplier executives to rate their relationships with six OEMs based on such things as level of communication, profit opportunity, overall quality, and whether the auto maker is more of a help than a hindrance. The survey of 564 supplier personnel from 439 companies, representing 62 percent of the top six auto makers’ annual buy, indicates Toyota and Honda remain the best at supplier relations. But the gap is closing, and the group as a whole is “converging toward mediocrity,” Henke tells Wards. Click here for a graph mapping supplier working relations since 2002. Just 48 points on Planning Perspectives’ WRI separates top-performer Toyota (296) from bottom-ranking Chrysler (248), a gap that was 276 points in 2006. Honda (293) is a fraction behind Toyota, followed by Ford (267), Nissan (256) and General Motors (251). For more on these numbers, click here.
Spark in Sales of Cars and Trucks Drives U.S. Economy
Auto purchases have exceeded a 14 million annual rate in each month this year, the strongest performance since early 2008. Government data show motor-vehicle output contributed half of the first quarter’s 2.2 percent economic growth. The resurgence – from assembly lines and dealerships to steelmakers, freight lines and loan providers – signals the U.S. is headed for lasting, robust growth, says Joseph Carson, director of global economic research at AllianceBernstein LP in New York. “We’re starting to see the spark in the auto sector that was missing initially” during the recovery from the recession, Carson told Bloomberg. “It tells you there’s a certain momentum. A whole host of areas could see the multiplier effect. We’re at the beginning of a very long and durable cycle.” Even if the industry’s rebound continues, sales haven’t returned to the pre-recession pace of 16.1 million in 2007, and its share of GDP is well below the record 4.8 percent in 1968. “We still have a ways to go, but there’s progress,” said George Magliano, senior principal economist at IHS Automotive in New York. For more on the auto industry’s impact on the economy, and the upcoming election, click here.
Automakers Rein in Incentives as Sales Increase
For consumers, one unfortunate byproduct of strong sales in the new-car market is that automakers’ are able to rein in their incentive spending. According to Edmunds.com, incentives — including cash rebates and cut-rate financing — are at their lowest levels in nearly seven years. New-car sales incentives averaged $2,071 in April, which is down 2.2 percent from March and 1.8 percent less than last April’s figures. “This is the clearest indication yet that consumer motivation is high and that automakers feel little pressure to rely on incentives in order to keep sales churning,” Edmunds.com senior analyst Jessica Caldwell told MSNBC. “We’ll likely see incentives linger at these low levels until auto sales ease off the torrid pace we’ve seen so far in 2012.” Click here for the Forbes.com slideshow of the 10 best new-car deals for May. Among them is an unbelievable $100,000 direct-to-dealer rebate on the Maybach Type 57 and Type 62 ultra-luxury sedans. Given the cost of gasoline and other economic factors, you won’t find many great deals among the smallest and most fuel-efficient models. Models in the large car segment boasted the deepest discounts last month, selling at an average 13.2 percent off MSRP. Click here for the full story.
Customs and Affordability Determine What Sells in China
Automakers are learning that what sells in the U.S., Europe or Japan won't necessarily sell in China. According to the Detroit Free Press, China has been the largest auto market since 2009 and continues to grow in importance. To tap this huge pool of potential profits, automakers are already changing vehicles to cater to Chinese tastes. "As the largest market you have to adapt," said Joe Hinrichs, Ford's president of Asia Pacific and Africa. "You can't ignore it when developing new products." Automakers are stretching cars to create bigger backseats for affluent owners, including government officials, who hire a driver and usually ride in the backseat. Certain models are bringing back ashtrays. Some manufacturers such as General Motors are creating new brands for the less wealthy who are looking for more basic transportation. It is not just a matter of developing a few regional products. Appealing to China requires understanding culture and history. Audi became a premium sales leader with its first made-for-China sedan in the late 1990s. China is the biggest market now for rival BMW, which used this year's Beijing auto show to debut a long-wheelbase 3-Series. For more on what sells in China, click here.
Last Chance to Register! Build Confidence On-The-Go: Free Webinar, Hosted by CARFAX
Is your dealership up to speed on how to use vehicle history with mobile devices to maximize your bottom line? Mobile devices can help you access more information to run your business effectively: online, in the lane, and on the lot. On the flipside, vehicle history delivered to your customers on-the- go could be the difference between making a sale or not. Join us this Thursday, May 17 at 11 a.m. EDT for a free, 30-minute informative webinar. Chad Goodson, Process Improvement Manager for CARFAX, will demonstrate new approaches and techniques for getting the information you need in a mobile world. A former car dealer in the family business, Chad has been with CARFAX for over 3 years working with top dealer groups to evaluate their used car processes and present best practices. Join us to look in-depth at consumers’ shopping habits today, learn what is most important to customers shopping for a used vehicle, and gain key insights to crossing paths with consumers in the mobile market. Vehicle history delivered through mobile devices can be one of your most important tools to acquire, advertise and sell your vehicles smarter and more profitably. Register now!
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