Car Prices Soar, Incentives Plummet

First Up 10/04/12

October 4, 2012

Luxury Push Targets GM, Toyota
Volkswagen AG's name translates as "People's Car.” Today, it's counting on profit from cars for the world's elite to gain an edge in its pursuit of General Motors Co. and Toyota Motor Corp. With the completion of its purchase of Porsche in August, VW controls an unrivaled slate of high-margin luxury nameplates including Audi, Lamborghini, Bentley, and Bugatti. If Porsche profit, which started flowing into VW's books this quarter, had been included in the first half, luxury brands would have accounted for 54 percent of VW's earnings, up from 39 percent in 2007. According to The Detroit News, a goal of the luxury expansion is to generate cash to fuel investment of $81.2 billion on vehicle development and factory upgrades over five years to overtake Toyota and GM in sales and profit by 2018. A key advantage for VW will be its luxury group, which sells about 1 million more high-end cars annually than either GM or Toyota. The luxury push should provide VW with a resilient profit machine. High-end nameplates typically endure economic swings better than mass-market brands because the wealthy are less prone to rein in spending in a slowdown. Read more about VW’s aim for the lead in the luxury segment.

Toyota Moves Up a Notch in Global Brand Rankings
Toyota, Mercedes-Benz, and BMW retained their ranking among the world's top 15 global brands, while Nissan made the biggest gain from last year among automotive brands in an annual survey. Toyota moved up a notch to No. 10 on Interbrand's 2012 Best Global Brands Report with a value of $30.3 billion, up 9 percent from 2011. Values are determined by a brand's financial performance, the role of the brand, and the brand's strength, reports Automotive News. The survey, which was released Tuesday, ranks the top 100 brands. Twelve auto brands made the cut this year, up from 11 in 2011. Kia was the newcomer. With the exception of Honda, every automaker increased or retained its ranking compared to last year. Mercedes followed Toyota at No. 11, up one notch from 2011 with a value of $30.1 billion, up 10 percent. BMW came in at No. 12, up three notches from 2011 with a value of $29.1 billion, up 18 percent. Honda fell two spots and landed at 21, with a value of $17.3 billion, down 11 percent. Read more about how automakers fared in global brand rankings by clicking here.

Of One Accord: Honda Bets Anew on its Iconic Nameplate
If Honda wants to double its worldwide car sales over the next five years as executives have said lately, they’ll require a very good Accord. That’s why they’re encouraged by the strong start for the 2013 Accord in the U.S. market, featuring robust sales demand out of the gate, quickly rising output at the plant in Ohio, and a fetching new advertising campaign aimed at American consumers. Forbes reports that sales of Accord in September were 57 percent ahead of a year earlier after the new version hit dealerships in mid-month. Great early returns and results for the new Accord are especially important for Honda. “Obviously, it’s important from an absolute sales standpoint – given the size of the segment it’s critical for us to participate in a meaningful way,” Mike Accavitti, CMO of American Honda, told Forbes. “But more important than that, Accord has been so tightly associated with Honda that this segment is even more important to us.” It’s the Accord that “defines Honda in a lot of people’s minds,” Accavitti said. There have been 11 million Accords sold in the U.S., “and that’s a competitive advantage for us.” Click here to read more about the importance of the Accord to Honda’s U.S. operation.

Car Prices Soar, Incentives Plummet
The good news is, car sales are soaring. The bad news is, that means demand for cars is high. And, reports The Car Connection, when demand is high, so are car prices, making good deals hard to find. According to TrueCar, transaction prices for most auto brands crept up between September 2011 and September 2012. The rise was steepest at Hyundai/Kia, where last month's average sale price was $22,245 – a very impressive 5.8 percent above last year. Chrysler, Toyota, and Nissan also edged north, with price gains of 2.4 percent, 1.9 percent, and 1.5 percent, respectively. In fact, the only automaker that saw transaction prices decline was General Motors, which fell a modest 0.7 percent. Across the board, the average transaction price last month was $30,282, up 0.9 percent from September 2011. Today's automakers don't need to offer many incentives to lure customers into showrooms. Hyundai/Kia has been offering the fewest incentives for shoppers. At the other end of the scale is Chrysler, which spent $3,256, or 11 percent of its average sale price, on customer incentives. Click here for more on rising car prices and decreasing incentives.

Death of the American Van As Styling Goes European
The full-size van faded long ago as a passenger vehicle as families gravitated to minivans and later sport-utility vehicles. But it has continued to be a daily workhorse for millions of plumbers, electricians, painters, and repairmen. Now even that run is coming to an end, reports The Wall Street Journal. Replacing the familiar work van are a coming generation of smaller, lighter commercial vehicles that are easier on gas similar to those spotted for years in Europe, navigating the narrow city streets. In place of the E-Series, Ford next year will offer the Transit, a tall, sloping truck built on a lightweight body instead of the heavy steel frame used in full-size vans. Nissan Motor Co. next year plans to begin selling its NV200 small van in the U.S. in addition to its current, full size NV van. Claus Tritt, who leads the North American commercial business for Mercedes-Benz, said the Sprinter van would thrive even with the coming competition from Ford and Chrysler's future car-basked van. The company has extensive partnerships in the U.S. with companies that refit the vans for use as limousines, ambulances, recreational vehicles, and mobile offices. Click here for more on how the traditional van is giving way to European styling.

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