JUNE 2016 €¦ · JUNE 2016 Don’t be surprised or particularly alarmed at all the red numbers in...

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JUNE 2016 www.mediacenteronline.com

Don’t be surprised or particularly alarmed at all the red numbers in the page 4 master table of May 2016 auto sales. The cause of the decrease among various brands and the total decrease is likely to be the two fewer selling days during the month, 24 instead of the 26 of May 2015. Despite that, the total of 1,535,670 for May is a 1.9% increase over April’s 1,506,431.

That being said, May 2016 incentives increased 7%, compared to May 2015, suggesting a potential softening in sales growth. Jeep was one (of few) bright spots, with a 14% increase in sales, which equates to more than 90,000 units, the first month that has ever happened.

On the flip side, General Motors attributed its 18.0% decrease to more than fewer selling days, as fleet sales were significantly less and it said it didn’t have enough new-model inventory. Even those automakers in positive territory barely squeaked over the line, with FCA/Chrysler Group at +1.1%, but Hyundai-Kia had an exceptional month with a 6.3% increase.

ACCURATELY READING THE RED-NUMBERS TREND

EXPIRING LEASES FLOODING USED CAR LOTSAll the leasing activity of the past few years will result in 3.3 million vehicles being added to the used-car market during 2016. Although one industry expert is concerned that high-end vehicles will suffer the most depreciation, another expert thinks they won’t lose much value because manufacturers and dealers have excellent certified pre-owned programs.

This second industry analyst thinks midsize vehicles are apt to lose the most value because so many of them were leased and are returning to dealers; and seemingly everyone wants to buy a CUV instead. High-end pickups, such as the Chevy Silverado High Country, Ram Laramie Longhorn and Ford F-150 King Ranch, could be challenging, especially if gasoline prices were to increase faster than anticipated.

CREDIT ISN’T A BARRIER TO AUTO SALESAuto sales, especially for May, may not be as spectacular as many recent months, but neither manufacturers, dealerships nor consumers can blame the credit market. According to the Federal Reserve Bank of New York, the $1.07 trillion in total outstanding auto loans and leases at the end of Q1 2016 was the fourth consecutive quarter of a +$1 trillion balance.

New- and used-auto loans originating during Q1 total $123.9 billion, or 5.9% more than Q1 2015. An even more important stat is that 90-plus days delinquencies were a relatively low 3.5%. For Q1 2015, it was 3.3%, which puts it closer to the all-time low of 2.0% during Q2 2005 than the all-time high of 5.3% during Q4 2010.

Leasing activity was just as robust during Q1 2016, totaling $76.9 billion, an all-time record, and 28.6% more than Q1 2015’s $60 billion.

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MAJOR SPORTS EVENTS DRIVE RISE AND FALL OF AUTO TV ADVERTISINGAccording to Standard Media Index (SMI) data, auto advertising on broadcast networks and for spot TV buys has been on a bit of a roller coaster ride from 2013 through the first two months of 2016. Automakers, dealers and media sales reps shouldn’t be concerned, however, as the “volatility” seems to relate directly to major sports events, including the most competitive of “sporting events,” politics.

During 2013, there were no major sports events like the Olympics and the World Cup, which were attractive to automakers for both sales and tie-in promotions when they filled the airwaves during summer 2014. Spot TV’s 2014 increase was attributed to the midterm elections when most political advertising was local.

The source of this story did not explain why cable TV’s numbers were essentially the exact opposite of the broadcast network and spot TV segments, nor did it cite specific reasons for cable’s January-February 2016 decrease or the other two segments’ increases. Broadcast networks and spot TV likely benefited from the presidential primaries, but one would think cable TV would have too.

Another reason for this somewhat dizzying trend is that automakers are requiring dealers to use more of their co-op ad dollars in the digital channel. During this same period, auto digital advertising increased by double digits each year – 2013, +24%; 2014, +10%; 2015, +19%; and January-February 2016, +36%.

AUTO DEALERS FIRST IN CUSTOMERS’ EMOTION RATINGSThe Temkin Group’s Q1 2016 Consumer Benchmark Survey measured US Internet users’ emotional response to a new purchase on a scale of 1 to 7, with 1 signifying an “upset” consumer and a 7 a “delighted” consumer. In the same survey, Temkin compared consumers’ emotional rating with a rating for customer service interactions.

As the following chart shows, auto dealers scored the highest percentage of positive emotional responses for a new purchase, but were only in the middle of pack for customer service interactions.

MARKETING FORWARD

AUTO TV ADVERTISING SPENDING TREND, 2013–2016

TV Segment 2013 2014 2015Jan/Feb

2016

Broadcast networks

-9.0% +10.0% -7.0% +5.0%

Spot TV -3.0% +7.0% -9.0% +7.0%

Cable TV +7.0% Flat +4.0% -9.0%

Media Village, April 2016

AVERAGE EMOTIONAL RATINGS OF US INTERNET USERS FOR VARIOUS INDUSTRIES, Q1 2016

IndustryNew

PurchasesService

Interactions

Auto dealer 69% 34%

Computer manufacturer 64% 35%

Hotel 64% 44%

Wireless carrier 63% 30%

Appliance manufacturer 62% 37%

Bank 61% 41%

Credit card issuer 60% 38%

Airline 58% 32%

TV/Internet provider 55% 6%

Auto insurer 50% 42%

Health plan 29% 18%

eMarketer (Temkin Group), May 2016

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ELECTRIC CARS ARE NOT SO ELECTRIFYINGAlthough low gasoline prices have had a negative effect on the sale of all-electric and hybrid vehicles, the average consumer’s lack of knowledge about these vehicles and how they would benefit from driving one may be also contributing to low sales. Currently, these vehicles account for less than 3% of all light-vehicle sales.

According to a Harris Poll release during late May 2016, 76% of respondents said they didn’t know anyone driving one of these vehicles. When asked about the range of a plug-in hybrid fully fueled and charged, the same percentage (76%) of

participants estimated less than half of the actual range. They thought the range was 260.8 miles.

A 2016 University of Michigan study found that driverless technology received a rather lukewarm response from its survey participants, as more than 50% said they still prefer to operate a motor vehicle.

The Ford Motor Co. commissioned the Harris Poll and is certainly interested in consumers’ perceptions and attitudes. The company is investing $4.5 billion to bring more plug-in hybrid, all-electric and hybrid models to the marketplace during the next few years.

As so often is the case when technology dramatically changes an everyday, familiar product, Ford and other automakers are implementing aggressive educational programs and hosting consumer events to increase their knowledge and provide more test-drive opportunities.

BEWARE OF THE SHINY, JUICY APPLEElon Musk may be receiving most of the press coverage as an auto industry disruptor with his Tesla Motors models, but Apple is likely to be the major challenger to the traditional auto industry during the future. After all, Apple is sitting on $153 billion in cash, which is more than the coffers of the world’s 14 top auto manufacturers hold.

According to calculations and numbers from a Morgan Stanley technology analyst, Apple invested $4.7 billion in R&D during the past three years in addition to the $6.6 billion invested during 2014, and another $8.1 billion during 2015. Given Apple’s secretive nature, it’s not known if that extra $4.7 billion is earmarked for the development of shared mobility, but Apple’s R&D investment trend during the past 15 years makes it likely a large portion is for this purpose.

Prior to the introduction of the iPhone and iPad, Apple’s R&D spending was $1 billion and prior to the iWatch, $2 billion. Everyone in the auto industry and beyond knows Apple has an electric car on the drawing board, but few if anyone thinks they would actually manufacture an e-car. Instead, like Google, Apple’s goal is likely to provide vehicles for the sharing economy on a widespread basis to convince many consumers that they don’t need to own a car, just a subscription to an on-call transportation service.

ROAD SIGNS

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RANK AUTOMAKER MAY 2016 % CHANGEYEAR TO

DATE% CHANGE

MAY 2016 MARKET SHARE

YTD MARKET SHARE

#1 Ford 224,941 -6.6% 1,061,586 +3.6% 14.6% 14.9%

#2 Toyota 185,998 -10.6% 842,217 -2.9% 12.1% 11.8%

#3 Chevrolet 169,331 -18.6% 825,503 -5.4% 11.0% 11.6%

#4 Honda 133,547 -2.9% 585,998 +7.1% 8.7% 8.2%

#5 Nissan 122,668 -1.3% 603,641 +8.2% 8.0% 8.5%

#6 Jeep 90,545 +13.7% 384,440 +16.4% 5.9% 5.4%

#7 Hyundai 71,006 +11.6% 306,549 +1.0% 4.6% 4.3%

#8 Kia 62,926 +0.8% 265,755 +3.5% 4.1% 3.7%

#9 Subaru 50,083 +1.1% 232,860 +2.1% 3.3% 3.3%

#10 Ram 43,613 0.0% 215,736 +10.7% 2.8% 3.0%

#11 GMC 43,395 -14.3% 211,602 -2.8% 2.8% 3.0%

#12 Dodge 42,837 -5.4% 226,921 +6.2% 2.8% 3.2%

#13 Mercedes-Benz* 32,147 -0.6% 146,981 -0.7% 2.1% 2.1%

#14 BMW 29,017 -6.4% 124,581 -8.7% 1.9% 1.7%

#15 Volkswagen 28,779 -17.2% 125,205 -13.1% 1.9% 1.8%

#16 Mazda 28,328 -4.3% 119,166 -9.6% 1.8% 1.7%

#17 Lexus 26,682 -10.1% 125,785 -5.2% 1.7% 1.8%

#18 Chrysler 24,276 -18.5% 112,625 -19.2% 1.6% 1.6%

#19 Audi 18,728 +1.6% 78,489 +4.2% 1.2% 1.1%

#20 Buick 15,625 -22.1% 87,632 -1.3% 1.0% 1.2%

#21 Acura 13,561 -20.4% 67,642 -5.5% 0.9% 0.9%

#22 Cadillac 12,099 -16.0% 58,968 -12.5% 0.8% 0.8%

#23 Infiniti 10,828 +3.4% 53,920 -0.7% 0.7% 0.8%

#24 Lincoln 9,807 +6.9% 44,488 +14.7% 0.6% 0.6%

#25 Mitsubishi 9,025 -5.7% 43,911 +5.6% 0.6% 0.6%

#26 Scion 6,659 +38.6% 31,541 +49.5% 0.4% 0.4%

#27 Volvo 5,536 +10.2% 28,066 +20.0% 0.4% 0.4%

#28 Land Rover 4,950 -8.0% 30,943 +11.8% 0.3% 0.4%

#29 Mini 4,595 -21.2% 20,230 -16.0% 0.3% 0.3%

#30 Porsche 4,578 +7.3% 22,226 +6.3% 0.3% 0.3%

MONTHLY AUTOMOBILE SALES CHART

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RANK AUTOMAKER MAY 2016 % CHANGEYEAR TO

DATE% CHANGE

MAY 2016 MARKET SHARE

YTD MARKET SHARE

#31 Fiat 3,045 -18.9% 12,054 -18.5% 0.2% 0.2%

#32 Jaguar 1,087 +0.7% 6,084 +12.4% 0.1% 0.1%

#33 Maserati 1,066 +0.6% 3,316 +10.9% 0.1% 0.1%

#34 Smart 466 -2.9% 1,766 -12.3% 0.0% 0.0%

#35 Bentley 110 -54.5% 372 -52.4% 0.0% 0.0%

#36 Alfa Romeo 60 +57.9% 229 -10.2% 0.0% 0.0%

General Motors 240,450 -18.0% 1,183,705 -5.0% 15.7% 16.6%

Ford Motor Company 234,748 -6.1% 1,106,074 +4.0% 15.3% 15.5%

Toyota Motor Corporation 219,339 -9.6% 999,543 -2.2% 14.3% 14.0%

FCA/Chrysler Group 204,452 +1.1% 955,186 +6.5% 13.3% 13.4%

Honda Motor Company 147,108 -4.8% 653,640 +5.7% 9.6% 9.2%

Hyundai-Kia 133,496 -6.3% 572,304 +2.1% 8.7% 8.0%

Nissan Motor Company 133,496 -1.0% 657,561 +7.4% 8.7% 9.2%

Volkswagen Group† 52,197 -9.5% 226,404 -6.2% 3.4% 3.2%

BMW/Mini 33,612 -8.8% 144,811 -9.8% 2.2% 2.0%

Daimler 32,567 -1.9% 149,167 -1.1% 2.1% 2.1%

Jaguar/Land Rover 7,114 +8.0% 39,191 +14.3% 0.5% 0.5%

--- TOTAL 1,535,670 -6.1% 7,129,281 +1.1% --- ---

Source: Automakers & ANDCRed font indicates declining year-over-year volume.* Excluding Sprinter/Metris: decreased 1.0% to 29,299 for May, decreased 2.0% to 134,304 YTD.† Does not include LamborghiniAutomotive News estimates May sales for Tesla of 2,250, a 7.0% increase, and 10,975 year-to-date, a 5% increase.

Forbes Website:http://www.forbes.com/sites/jimhenry/2016/05/31/credit-environment-still-looks-good-for-auto-loans-leases/#39f1399433da

http://www.forbes.com/sites/joannmuller/2016/05/31/why-automakers-should-fear-apple-not-tesla/#1069c704723b

WardsAuto Website:http://wardsauto.com/f-i/which-vehicle-segment-will-take-biggest-residual-hit

http://wardsauto.com/many-americans-clueless-about-new-auto-technology-poll

Media Village Website:https://www.mediavillage.com/article/smi-auto-advertisings-bumpy-ride/?utm_campaign=nl-daily&utm_medium=email&utm_source=Airport+Advertising+is+Ready+for+Takeoff

eMarketer Website:http://www.emarketer.com/Article/How-Brands-Meeting-Exceeding-Customer-Expectations/1013967?ecid=NL1001

Good Car Bad Car Website:http://www.goodcarbadcar.net/2016/06/usa-auto-sales-brand-results-may-2016-ytd.html#more

JUNE 2016 €¦ · JUNE 2016 Don’t be surprised or particularly alarmed at all the red numbers in...

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