Fighting Chance is the only information service that thinks you should know how the make and model are doing in the marketplace when you're ready to negotiate the price. In every auto market there are winners, losers and in-betweeners. As an example, 2006 was no exception. (I realize that 2006 is not the most recent sales information. The purpose here is to illustrate the kinds of insights we share in our current Big Picture analyses for the nameplate(s) you are shopping — insights no one else seems to take the time and effort to provide.
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Overall, new vehicle sales were down 2.6% on 2006 (16,515,878 sold vs. 16,946,611 in 2005). Driven importantly by the escalating price of gasoline, cars gained 2.2%, but trucks fell 6.8%. (Any vehicle that's not a passenger car is classified as a truck, including minivans, SUVs and pickups.) Trucks accounted for 51.2% of total sales, down from 53.5% in 2005. And Detroit lost another 3.3 share points to the import nameplates. (The domestic nameplates of GM, Ford and Chrysler accounted for 53.6% of sales vs. 56.9%
in 2005.)
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Here's a brief overview of 2006’s highlights, midlights and lowlights. (This analysis is focused on the overall performance of the several different nameplates, not on the performance of individual models. Again, our objective here is simply to illustrate the kind of insights we share in our Big Picture summaries for each make, which provide more current details on the specific model(s) you're shopping for, as well as information on actual transaction prices reported by our customers. In the interest of a little brevity, not all nameplates are covered here.)
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| The Good
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Toyota continued its relentless surge toward its objective of becoming the world's volume leader, increasing its U.S. sales by 14.0% (2,047,431 sold vs. 1,795,916 in 2005). The Camry gained 5.5% and has been the country’s best-selling car for eight of the last nine years. Corolla sales jumped 18.6%, as many folks moved down to more fuel-efficient cars. RAV4 sales more than doubled, propelled by the all-new 2006 model. These gains more than offset some losses on the truck side of Toyota’s business. (Sequoia sales were off 25.2%, as many consumers shunned gas-guzzling full-size SUVs.) The key long-term question for Toyota: How big can the company get before it loses its edge on quality control?
Mercedes-Benz gained 10.6% (247,934 sold vs. 224,269 in 2005). Most of that gain came from the redesigned 2007 S-Class and the introduction of the R-Class sport wagon. But this is one nameplate for which the consumer's perception of quality is well behind the reality on the road. Mercedes was ranked #18 of 37 nameplates in J.D. Power's 2006 Dependability Study of 2003 models — embarrassingly below even Ford, Pontiac, Subaru, Chrysler and GMC and just barely ahead of Chevrolet. (Mercedes was #1 in Powers’ first dependability study, conducted in 1985.) If you're considering any Mercedes vehicle, be sure to check the latest reliability predictions of Consumer Reports in the April Annual Auto Issue. It was not a pretty picture for 2006 models in the April 2006 publication, where the 2006 C-Class, CLK-Class, E-Class, S-Class and SLK Class were rated either worse than average or much worse than average. (There were no ratings listed for any other Mercedes models because the 2006 models were new and there was no information available.)
Audi was up 8.5% (90,116 sold vs. 83,066 in 2005), fueled by the introduction of the 2007 Q7 AWD sport wagon. Audi is a brand on the move. It sold just 12,000 vehicles here in 1991, but has moved up smartly in recent years, carving itself a nice little niche based on its Quattro AWD system.
Kia gained 6.7% (294,302 sold vs. 275,851 year-ago). The major increases came from the Spectra hatchback sedan and the Sportage compact SUV. Kia is a Hyundai subsidiary. The Koreans are building much improved vehicles and will become a more significant factor in the U.S. market over the next few years.
Lexus, the industry's perennial quality and reliability leader, strengthened its stranglehold on leadership of the luxury car segment, gaining 6.5% (322,434 sold vs. 302,895 in 2005). The main engine driving the increase: the redesigned IS sedan Series, which has become a credible alternative to BMW’s 3-Series. The RX 350 is the Lexus volume leader; the average dealer sold a whopping 42 per month in 2006! The Lexus juggernaut continues to solidify its #1 position. (In my next life, I want to be either one of my wife's dogs or a Lexus dealer.)
Volkswagen sales were up 4.9% (235,140 sold vs. 224,195 in 2005), spurred by the Passat and the Rabbit (a Golf replacement). VW makes cars that are fun to drive. The big issue with VW: Its consistent long-term position at or near the bottom of the quality and reliability rankings.
Honda sales increased 4.4% (1,308,129 sold vs. 1,252,856 in 2005). The major contributors: the all-new 2007 CR-V and the Honda Fit compact car. Accord sales slipped 4.0%, but it was still the second best selling passenger car in the U.S. Honda is a very strong nameplate, with a reputation for quality and reliability comparable to Toyota’s.
Mazda gained 4.0% (268,786 sold vs. 258,341 in 2005), spurred by the introduction of the CX-7 sport wagon. But Mazda sold 344,600 vehicles in the U.S. in 1993, so its market share has dropped significantly. Among the Asian brands, where Toyota and Honda are in Tier 1 and Nissan is by itself in Tier 2, Mazda remains in Tier 3 with all the others.
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BMW sales increased 3.1% (274,432 sold vs. 266,200 year-ago), with the redesigned 2006 3-Series leading the way. This is a very healthy nameplate. BMW sold only 51,000 cars here in 1993, but has registered substantial sales gains ever since, based on both product and positioning that appeal to a consumer constituency that actually enjoys the process of driving.
Subaru sales increased 2.4% (200,703 sold vs. 196,002 year-ago). boosted by a 22.3% gain from the Impreza. Subaru offers the only complete line of all-wheel drive cars in its size and price class, Its core sales areas are the snowbelts in the Northeast, the Midwest and the Northwest.
Hyundai sales were only flat in 2006 (455,520 sold vs. 455,003 in 2005), but Hyundai has become a brand to be reckoned with. Some people may still think HYUNDAI is an acronym for "Hope You Understand Nothing's Driveable And Inexpensive." But Hyundai's quality has improved substantially in recent years, and it offers consumers an attractive vehicle lineup that appears to be an excellent price/value relationship. Hyundai is a serious long-term player here that will only get stronger over the next few years.
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| The Bad
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Lincoln slipped just 2.2% in 2006 (120,476 vs. 123,207 year-ago), thanks to incremental sales from its new Zephyr/MKZ entry-level sedan. For perspective, 231,700 Lincolns were sold in 1990. Lincoln’s big problem: Few people under 50 years old are opting for the "old person" stigma of the Lincoln nameplate. Lincoln will survive only if it can create a lineup of exciting new vehicles that will change that image among younger prospects. That won’t be easy.
Cadillac sales edged down 3.4% (227,014 sold vs. 235,002 in 2005), buoyed somewhat by strong sales of the DTS sedan and the redesigned Escalade SUV. Cadillac shares Lincoln’s problem: Its image as a vehicle of choice for AARP members. The nameplate sold only 170,400 vehicles in 1996, so it’s made some progress in the last ten years. But the brand’s future will depend on its ability to shed that "geezer" image.
Jeep sales slid 3.5% in 2006 (460,052 sold vs. 476,532 in 2005), as the incremental sales of the new Commander and Compass models almost offset the sales drops of the Grand Cherokee and the Liberty. The higher price of gasoline has depressed sales of SUVs, and SUVs are all Jeep has to sell.
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Acura sales were down 4.4% (201,223 sold vs. 209,610 in 2005), but this is essentially a very healthy luxury brand. With virtually a total revamp of its line over the past several years, Acura has finally changed its previous well-earned image as "the Integra company." (The $16,000-$22,000 Integras were 63% of sales in 1995 - hardly the hallmark of a luxury car franchise.) The impact of the late-2006 introductions of the 2007 RDX crossover sport wagon and an all new 2007 MDX SUV should move Acura sales ahead again in 2007.
Nissan dropped 4.5% in 2006 (898,103 sold vs. 940,268 year-ago). The two key reasons: (1) The higher price of gasoline depressed sales of the full-size Armada SUV and the large Titan pickups, and (2) Altima sales dropped substantially, as many prospects postponed purchase, waiting for the early 2007 arrival of the all-new 2007 models. Nissan has separated itself from the Tier 3 Japanese nameplates (Mazda, Mitsubisi and Subaru), but it hasn't developed a solid consumer brand franchise in the same league as those of Toyota or Honda. Which means it will continue to be easy to deal on all of their vehicles.
Saab fell 5.2% (36,349 sold vs. 38,343 in 2005). Saab is a tiny player whose quirky cars may be getting too expensive for all but the most well-heeled individualists. (Most Saab buyers are previous Saab owners.) It's also a big money loser, 100% owned by GM, which should have put the cash in a CD instead. GM has expanded Saab's product lineup with the 9-2X compact car (a Subaru WRX with a nose job) and the 9-7X SUV (based on the Chevy Trailblazer, a vehicle that GM plans to eliminate) Those vehicles have been greeted by the sound of one hand clapping. Saab needs vehicles that deliver the drive and feel of a Saab, which is known for its sporty handling and performance. It’s doubtful that Saab will have a bright future as just another GM brand.
Volvo sales were off 6.3% (115,807 sold vs. 123,587 year-ago). This Ford-owned subsidiary is profitable. But it no longer has an exclusive lock on the "safety position," as all automakers have added airbags, anti-lock brakes and other safety elements. Nevertheless, Volvo still remains a favorite among safety-conscious families.
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Pontiac sales fell 6.3% in 2006 (410,229 vs. 437,806 in 2005). Those numbers are a far cry from the 616,400 cars Pontiac sold in 1999. GM positions Pontiac as a "performance" brand. The key to a healthy Pontiac future lies in a continuing procession of appealing new cars. In 2006 the stronger performers were the G6 sedan, coupe & convertible, the Solstice roadster and the Torrent compact sport wagon.
Chrysler sales dropped 6.8% (604,874 sold vs. 649,293 year-ago), with most of the negative numbers coming from the Town & Country minivan, the Sebring family and the Pacifica. One reason for the weakness: The Chrysler Group (which includes Dodge and Jeep) has a product mix heavily weighted to gas-guzzling vehicles.
Mercury continued its long-term decline in 2006, falling 7.7% to 180,848 from 195,949 in 2005. I see little hope for a Mercury rebound because all its offerings are thinly-disguised clones of Ford vehicles. The Grand Marquis is the Ford Crown Victoria. The Mariner is the Ford Escape. The Mountaineer is the Ford Explorer. The Montego is the Ford Five Hundred. The Milan is the Ford Fusion.
You can bet that no automaker today would launch a separate nameplate that sold cars that were virtually identical to those in its flagship brand’s lineup. You can also bet that it will continue to be very easy to deal on anything with a Mercury badge as long as Mercury is just another name to put on Ford vehicles. For more than two decades, Mercury has been a solution in search of a problem. For Ford today, it’s a problem in search of a solution — which may end up being its dissolution.
Ford sales fell 8.3%% (2,383,218 sold vs. 2,600,043 year-ago). This performance was much worse than it looked. While Ford’s car business was up 9.2%, its truck business plunged 15.3%, wounded severely by the higher price of gasoline. And trucks (mainly pickups and SUVs) account for over two thirds of Ford sales and probably 90 percent of its profits. The Ford corporation has been losing billions of dollars each year and isn’t expected to post a profit in North America until 2009.
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Dodge sales were down 8.6% (1,077,579 sold vs. 1,179,008 in 2005). This brand suffered from the same disease as Ford: Its car sales edged up 1.4%, but truck sales fell 12.2%. Pickup sales dropped by 64,319 units, and the Durango SUV lost another 44,833 sales. With trucks accounting for 70 percent of Dodge sales and the bulk of its profits, it’s no wonder that the Chrysler Group (Dodge, Chrysler and Jeep) went from black ink to red ink in the last half of 2006.
Another significant problem: In the second half of 2006, the automaker produced — and forced its dealers to buy — vehicles with strange configurations that didn’t suit consumer tastes and were very difficult to sell. Significant numbers of those vehicles were still on dealers’ lots at year-end.
Chevrolet dropped 9.6% (2,396, 234 sold vs. 2,651,125 in 2005). Car sales were flat (-0.4%), but trucks plunged 14.3%, buffeted by a strong headwind in the form of higher gasoline prices. Pickup sales fell by over 104,000; SUV sales were down over 86,000 units. Considering that (1) Chevy represents almost 60 percent of the GM Group’s sales volume, and (2) trucks account for over 60 percent of Chevy sales and probably 90 percent of its profits, GM took a big hit last year from the nameplate’s poor performance.
Infiniti fell 11.2% (121,142 sold vs. 136,399 in 2005). About of half this sales drop came from Infiniti’s SUVs (hurt by high gasoline prices), while the other half came from the G35, where many prospects postponed purchase until the all-new 2007 sedan arrived. Nevertheless, Nissan’s luxury-car division has a reasonably bright future in the U.S. because it’s finally getting its product strategy act together well enough to rate consideration as a bona fide luxury nameplate. For over a decade Infiniti's offerings were just gussied-up versions of Nissan vehicles, which were greeted by the sound of one hand clapping and required Guiness-record incentive levels to move off dealers' lots.
Introduced almost simlutaneously with Lexus, Infiniti's weaker product lineup failed for years to generate similar cachet, despite its top-tier quality and reliability ratings. Infiniti now has the unique products needed to move the brand ahead. Reality check: Lexus sold 322,434 vehicles in 2006.
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| The Ugly
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Continuing its long-term decline, Buick plunged another 14.7% in 2006 (240,657 sold vs. 282,288 in 2005). Buick is now selling about 3 cars for every 10 it sold in 1986. That’s particularly disappointing because Buick has always scored near the top in quality and reliability ratings. Buick's biggest challenge: shedding its image as a "geezer's nameplate." Whereas the average age of the buyer of premium midsize sedans is 48, the typical Buick owner has been an AARP member for years. It doesn’t seem to matter what new vehicles with new names Buick introduces, they don’t attract a significant number of younger buyers.
This nameplate has way too many dealers for the sales volume it now delivers. In 2006 GM sold an average of only 88 new vehicles per Buick dealer. By contrast, the Toyota brand sold an average of 1,685 per dealer (excluding Scion sales). Over time, GM plans to combine Buick with Pontiac and GMC under one sales channel. But the Buick nameplate may eventually be eliminated if it can’t find a way to capture younger prospects.
Sales of GMC’s all-truck lineup dropped 15.1% in 2006 (456,565 sold vs. 537,571 in 2005. In the first half of this decade, GMC rode the gravy train of SUV and truck popularity, pushing its sales to 582,734 in 2004. But the escalating price of gasoline has taken its toll on this brand. Most stores selling GMC also handle one or more other GM nameplates — Pontiac in most cases. But pity the poor dealer with an exclusive, stand-alone GMC store. He’s in for a rough ride over the next few years.
Jaguar sales plummeted 32.0% in 2006 (only 20,683 sold vs. 30,424 in 2005), and it’s quickly becoming an irrelevant nameplate in the U.S. (For perspective, Toyota sold 20,683 Camrys every 17 days in 2006.) Jag sold 61,204 cars as recently as 2002, but it has spiraled downward fast since then. Even in its best sales year, it was a big money loser for Ford. As Ford's senior executive in Europe was quoted in The Wall Street Journal. "In Jaguar, we have a great brand, but a lousy business." Jaguar builds gorgeous cars of consistently poor quality and reliability. There is serious speculation that Ford will sell the Jaguar brand.
Mitsubishi is surely sliding on a slippery slope to the scrap heap of U.S. automotive nameplates. Sales fell a modest 4.4% in 2006 (118,558 sold vs. 123,995 in 2005), but Mitsubishi sold 345,111 vehicles in the U.S. just four years ago, in 2002. That’s a 66% sales drop in just four years! DaimlerChrysler owned 37.3% of Mitsubishi, but decided in April 2004 that it would not sink any more money into the ailing nameplate and that it would sell its stock in the company. (Mitsubishi needed a $7.5 billion capital injection to fund a restructuring plan to help it recover from heavy losses.)
Japan's Mitsubishi Group provided $4 billion for a bailout plan they hoped would make the company profitable by the year ending March 31, 2007. That’s an unlikely outcome, given Mitsubishi’s weak market position, its lack of exciting new products and its limited marketing budget. At best, Mitsubishi has been a weak Tier 3 Japanese company selling so-so products of questionable quality. Given the severe financial constraints the company must now live with, it's difficult to see how it can be an effective future competitor in the brutal U.S. automobile market. This nameplate appears to have one foot in its final resting place. The issue is no longer "if," but "when."
Truck-only Isuzu can hear the final nails being pounded into its coffin. With only 8,614 Isuzus sold in 2006, we should be reading the obituary for this brand soon. You'd have to be a cockeyed optimist to buy one of the few new Isuzu vehicles left on a dealers’ lots.
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These are just some of the insights we share with our customers in the Fighting Chance information package.
Ask yourself these two questions:
Isn't it obvious that knowing this kind of information can change the way you feel about a given nameplate and enhance your leverage in negotiating the price of a new vehicle?
If the answer was "yes," then why has no other new-car pricing service told you about this stuff? Not Consumer Reports, not Edmund's, not AAA, not Kelley Blue Book, not USAA . . . . . . not anyone, on the Internet or anywhere else. This is public information that's published in many places. In essence, these other guys are clueless about what’s happening in the retail automobile market today. They’re still providing just the same information they were pushing when we were all in diapers. By contrast, we're providing insight, not just data.
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