Automotive Retail - US - May 2009

Table of Contents

• Scope and Themes
• What you need to know
• Definition
• Data sources
• Sales data
• Consumer survey data
• Abbreviations and terms
• Abbreviations
• Terms
• Executive Summary
• New car dealership revenues forecast to decline 21% in 2009
• Domestic automakers losing share over ten years
• New vehicle sales dominate revenue, but losing market share
• Used vehicle sales increase market share
• Older cars on the road leading to increased share of service/parts
• Banks creating tighter credit market, resulting in slower sales
• President Obama' s automotive task force forcing cuts in dealerships
• Consumer findings
• Market Size and Forecast
• Key points
• After gradual declines, revenues plummet starting in 2008
  • Figure 1: Total sales at new car dealerships, at current prices, 2003-09
  • Figure 2: Total sales at new car dealership, at inflation-adjusted prices, 2003-09
• Competitive Context
• Third-party online sites selling or auctioning new vehicles
• eBay experimenting with selling new cars at discounted prices
• Costco brokering both new and used vehicles in auto program
• Growth in scooter sales suggesting potential threat to automotive market
• Segment Performance
• Key points
• U.S. dealership units in continual freefall over the past 21 years
  • Figure 3: Number of U.S. new car dealerships, 1987-2008
• New vehicle sales dominate, but losing share to used
  • Figure 4: New car, used car, and service and parts revenues, 2005 and 2007
• Segment Performance--New Vehicles
• Key points
• New vehicle revenue declining, corresponding to rising sticker price
  • Figure 5: Number of new vehicles sold and average selling price, 1997-2007
  • Figure 6: U.S. sales of new vehicles at new car dealerships, 2001-07
• Segment Performance--Used Vehicles
• Key points
• Dynamic between new, used vehicles dependent on supply, demand
  • Figure 7: U.S. sales of used vehicles at new car dealerships, 2001-07
• Segment Performance--Service and Parts Sales
• Key points
• Service and parts revenue increasing as consumers hold on to cars longer
  • Figure 8: U.S. sales of service & parts at new car dealerships, 2001-07
• Market Drivers
• Lenders raising down payment rates
• Excess inventory of older models, shuttered brands, hurting dealerships
• Automakers offering rebate programs, dealer cash to help move old stock
• President Obama' s automotive task force pressuring automaker cuts
• Obama stimulus package includes incentives to drive up car buying
• "Cash for Clunkers" bill expected to award consumers with cash for going green
• Used vehicles boost dealers although increased prices threaten longevity
• Leading Companies--Domestic
• Key points
• Domestic automakers losing share to imports over ten years
  • Figure 9: U.S. new vehicle unit sales and market share, by domestic manufacturer, 1997-2008
• General Motors
• Chrysler
• Ford
• Leading Companies--Imports
• Key points
• Import U.S. unit sales increased 56% between 1997-2007
  • Figure 10: U.S. new vehicle unit sales and market share, by import manufacturer, 1997-2008
• Toyota
• Honda
• Nissan
• Brand Qualities
• Luxury dealers target clientele through full-purpose Manhattan showroom
• GM provides incentives to dealerships to move old inventory
• Mitsubishi dealers given green light to cut costs through shared space
• BMW invests in U.S. showrooms through renovation, expansion
• Innovation and Innovators
• AutoNation bolsters consumer confidence with payment loan program
• Smart USA launches program to streamline inventory to expectant buyers
• Start-up steps in to help automotive dealers restructure financing
• Online research site targets women through tailored features
• Dealership website launched to help stem consumer financing fears
• Advertising and Promotion
• Ad spends declining since 2003; newspapers struggle to retain media lead
  • Figure 11: Dealership media spend, by segment and annual total, 2002-07
• Interactive media allow dealerships personal relationships with buyers
• Redesigning websites for the portable screen
• Creating special sites that cater to niche consumer groups
• Dealerships forced to combat public negativity/media misinformation
• Ford dealerships launch campaigns to rectify consumer perception regarding bailout
• Analysis of television commercials
• Heritage, patriotism emphasized over brand to help massage consumer perception
  • Figure 12: Northern California Auto Dealers ad, 2008
• Turning recessionary fear into a positive by promoting recession-based deals
  • Figure 13: Greater New York Automobile Dealers Association ad, 2008
• Dealership associations emphasize Obama stimulus plan incentives for consumers
  • Figure 14: National Automobile Dealers Association ad, 2009
  • Figure 15: Colorado Automobile Dealers Association ad, 2008
• Fuel efficiency tops incentives to get consumers motivated to purchase new
  • Figure 16: Bob Rohrman' s Arlington Nissan ad, 2008
  • Figure 17: Acura of Pembroke Pines ad, 2008
• Automotive Retail--Consumer Preferences
• Key points
• Brand loyalty drives buys at dealerships, but economic crisis threatens
  • Figure 18: Source of last new vehicle purchased, by gender, February 2009
• Youngest consumers most open to non-traditional channels
  • Figure 19: Source of last new vehicle purchased, by age, February 2009
• Highest household incomes prefer branded dealerships
  • Figure 20: Source of last new vehicle purchased, by household income, February 2009
• Automotive Retail--Trade-In Experience
• Key points
• The largest group of new-vehicle buyers don' t trade in at all
  • Figure 21: Trade-in experience, by gender, February 2009
• Buyers aged 18-24 least likely to trade-in
  • Figure 22: Trade-in experience, by age, February 2009
• Households earning the least are also the least confident making trade-ins
  • Figure 23: Trade-in experience, by household income, February 2009
• Automotive Retail--How Consumers Prepare
• Key points
• Most respondents prefer independent resources over retailers' information
  • Figure 24: Research sources used before buying last new vehicle, by gender, February 2009
• Respondents aged 25-34 more tech-savvy and open to retailer marketing
  • Figure 25: Research sources used before buying last new vehicle, by age, February 2009
• Lowest-earning households least likely to research
  • Figure 26: Research sources used before buying last new vehicle, by household income, February 2009
• Automotive Retail--Reasons To Visit Other Than Vehicle Purchasing
• Key points
• Men more likely to return to dealerships following purchase
  • Figure 27: Reasons for visiting dealership other than vehicle purchase, by gender, February 2009
• Respondents aged 18-34 more likely to return for dealer service
  • Figure 28: Reasons for visiting dealership other than vehicle purchase, by age, February 2009
• The likelihood of service repair increases steadily with household income
  • Figure 29: Reasons for visiting dealership other than vehicle purchase, by household income, February 2009
• Automotive Retail--Consumer Attitudes
• Key points
• Nearly half of all respondents expect more incentives
  • Figure 30: Attitudes towards new car incentives, by gender, February 2009
• Most think retailer facilities should be more comfortable
  • Figure 31: Attitudes towards dealership facilities, by gender, February 2009
• Respondents less into fun, more into facts
  • Figure 32: Attitudes towards entertainment factor at dealerships, by gender, February 2009
• Respondents tend not to see sales people as obnoxious
  • Figure 33: Perception of new car sales personnel as obnoxious, by gender, February 2009
• Personnel judged on an individual basis
  • Figure 34: Attitudes towards trustworthiness of new car personnel, by gender, February 2009
• Price and service most relevant issues for majority of respondents
  • Figure 35: Attitudes towards disclosure of price and service information, by gender, February 2009
• Automotive Retail--Factors Influencing Purchasing
• Key points
• A good ear -- and a customized pitch -- help make the sale
  • Figure 36: Factors influencing new car purchasing, by gender, February 2009
• Test drive and financial incentives most important to younger respondents
  • Figure 37: Factors influencing new car purchasing, by age, February 2009
• Lower-earning households value warranties more than time, efficiency
  • Figure 38: Factors influencing new car purchasing, by household income, February 2009
• Race and Hispanic Origin
• Key points
• Whites most likely to buy at branded dealership
  • Figure 39: New vehicle distribution channel preference by race/Hispanic origin, February 2009
• Blacks and Hispanics least likely to trade in used vehicles
  • Figure 40: Trade-in experience, by race/Hispanic origin, February 2009
• Hispanics more active in internet research
  • Figure 41: Use of research, by race/Hispanic origin, February 2009
• Blacks more likely to use repair and quick services
  • Figure 42: Reasons for visiting dealership other than vehicle purchase, by race/Hispanic origin, February 2009
• Blacks most likely to view sales personnel favorably
  • Figure 43: Attitudes towards new car sales personnel, by race/Hispanic origin, February 2009
• Hispanic mistrust sales personnel significantly more than other groups
  • Figure 44: Attitudes towards trustworthiness of new car personnel, by race/Hispanic origin, February 2009
• Convenience of location a bigger factor for Hispanics
  • Figure 45: Factors influencing new car purchasing, February 2009
• Appendix: Trade Associations