Feb 5 2014, 4:04pm CST | by Forbes
It’s curious, isn’t it, that January’s wintery weather affected some carmakers more than others?
General Motors, Ford Motor and Toyota Motor all saw substantial sales declines for the month. “January was off to a solid start, but the weather conditions slowed industry sales in key markets late in the month,” said Bill Fay, Toyota division group vice president and general manager, after reporting a 7.2 percent sales decline. Ford’s sales fell 7.5 percent and GM’s declined 11.9 percent compared to a year ago.
But the snow and frigid temperatures didn’t seem to bother others, like Chrysler or Nissan. Both reported healthy sales increases in January, up 7.6 percent and 11.8 percent, respectively. Nor did it affect Subaru, which specializes in all-wheel-drive cars that are well-suited for winter driving. It had the biggest gain of any carmaker, up 19.3 percent.
Regional differences no doubt explain some of the results. Asian carmakers outsell domestic brands in large West Coast markets where bad weather wasn’t a factor so generally speaking, their customers weren’t hunkered inside like many GM and Ford buyers. If that’s true, does that mean Chrysler shoppers are just heartier, then – more willing to brave the elements?
A closer look at the sales figures shows there were other factors at play. And they serve as a warning sign, perhaps, that competitive pressures are intensifying, with dangerous consequences for automakers that make the wrong move.
In January, Chrysler benefited from incremental sales of the new Jeep Cherokee as well as the updated Dodge Durango, heavily pitched on TV by the fictional anchorman Ron Burgundy. But Chrysler was also the only manufacturer to sweeten consumer deals from the prior month, according to JD Power PIN data. In the hotly contested pickup market, for instance, Chrysler was the highest spender on incentives in January, which helped fuel a 22.5 percent gain for its Ram pickups. It also boosted lease incentives on its mid- and large-sized passenger cars, and gave dealers bonuses for selling more vehicles.
Why did GM suffer a bigger decline than Ford? One reason: GM sold 10,000 fewer rental cars in the month, a 40 percent drop. It’s only temporary, though – GM expects its sales to rental companies to be about the same as 2013.
Fleet sales – not just to rental companies, but also to businesses and government agencies – played a big role in the success that Nissan Motor and Hyundai Motor saw in January. Both carmakers hiked their sales to fleet customers by more than 25 percent. Without an extra 4,000 vehicles sold to fleet buyers, for example, Hyundai wouldn’t have been able to eke out a 0.7 percent gain for the month.
Overall, Ford had the highest incentives for the month, both in terms of dollars ($3,699 per vehicle), and as a percentage of average transaction price (12.3 percent). (Industry-wide, the average incentive was $2,813 per vehicle, or 9.5 percent of average transaction price.) About 80 percent of the F-150 pickups Ford sold in January were leftover 2013 models, with incentives as high as $4,800. But that’s to be expected as Ford manages the sell-down of the current generation F-series in preparation for the launch of its redesigned 2015 pickup late this year.
All of which is to say that with a flurry of new models coming, and the industry’s torrid growth pace leveling off, competition has never been tougher. And automakers will have to decide whether to fight for market share or protect their profit margins. It’ll be interesting see which strategy they pursue.
Source: Forbes Auto
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