Global Insight Perspective | |
Significance | Reductions in fleet sales are being blamed for year-on-year drops in overall sales for December for Ford and GM, with sales to daily rental companies down across the board. Retail sales, however, have trended higher, with GM showing stronger performance in the fourth quarter. |
Implications | The Toyota juggernaut continues to dominate gains, capitalising on its spectacularly popular light trucks and crossovers to post another month of double-digit gains. Chrysler has managed to hold on by loading huge incentives into every sale in an effort to clear out unsold 2006 inventory, and managed to nearly eliminate the controversial sales bank. |
Outlook | The final 2006 results for the Big Three show continued market loss, but glimmers of stabilisation are occurring at GM where the trends of increased transaction prices, reduced incentive spending, and continued popularity of high-profit trucks give hope of a strong start to 2007. But will it be enough to counter Toyota's domination? |
December turned out to be a dismal month for the U.S. Big Three, as sales fell nearly across the board for the domestic automakers. The market overall finished strongly, with the eighth consecutive finish above 16 million units for the year, and gains were certainly to be had—but they all came from import nameplates.
Top Six Market Leaders | Dec 2006 | Dec 2005 | % Change Dec | YTD 2006 | YTD 2005 | % Change YTD |
GM | 334,501 | 384,620 | -13.0 | 4,065,341 | 4,454,385 | -8.7 |
Ford | 231,618 | 266,136 | -13.0 | 2,901,090 | 3,153,875 | -8.0 |
Toyota | 228,322 | 203,279 | 12.3 | 2,542,525 | 2,260,295 | 12.5 |
DCX | 218,579 | 220,681 | -1.0 | 2,390,585 | 2,529,254 | -5.5 |
Honda | 131,778 | 132,800 | -0.8 | 1,509,358 | 1,462,472 | 3.2 |
Nissan | 91,775 | 91,253 | 0.6 | 1,019,249 | 1,076,669 | -5.3 |
Source: Automotive News | ||||||
Ford Falters
Arguably the carmaker in the most trouble at the moment, Ford saw its December sales fall 13% from December 2005, which it blames largely on three specific models: the F-Series pick-up, Taurus sedan, and Freestar minivan. The F-Series continues to struggle, which Ford blames on economic conditions continuing to provide a significant headwind. Ford sales analyst George Pipas attributes the continued struggles of the F-Series to a continued soft housing market and higher gas prices instead of any competitive pressure. Both the Taurus and the Freestar have been discontinued; both provided a decent chunk of fleet sales for the automaker. Ford announced earlier that the Freestar minivan line, which was scheduled to resume production in February after a temporary hiatus at the Oakville (Ontario) plant to focus on Edge/MKX launch, will not be restarted (see NAFTA-Canada: 3 January 2007: Ford Freestar Production Ends).
Ford's annual sales results put the automaker off 8% for the year, a nearly 250,000 unit decline that Ford says is split nearly half from sports-utility vehicle (SUV) reductions and half from F-Series pick-up reductions. Pipas pointed to strong growth in the company's retail passenger car sales, with the Fusion posting a 63% annual increase, the Milan up 36%, and the MKZ up 78%, as proof that the passenger car segment is likely to be stronger than trucks for at least the first half of 2007.
GM Juggles
However, if the truck market is as soft as Ford says it is, apparently nobody has told General Motors (GM). The automaker posted lower results for December, down 13% as Ford was, but posted its best-ever month for the redesigned GMT900 full-size SUVs. The redesigned Silverado/Sierra pick-up continues to sell strongly, and is fuelling a 7% average transaction price increase for GM. The company is claiming a 90% retention rate for the full-size pick-up and expects its model mix for 2007 to continue to prominently feature trucks, with a total industry volume anticipated of 2.5 million pick-ups. GM is quick to point out that the combined Silverado/Sierra pick-up outsold the Ford F-Series in 2006 by nearly 70,000 units.
Annually, GM did not fare as well, selling 9% less in 2006 than the previous year. GM attributes the drop to an engineered reduction in daily rental fleet sales, which it is trying to slow in order to boost residual values of various models. There were some bright spots, with the Hummer and Saturn brands posting best-ever sales years (up 26% and 6%, respectively), and boosted sales of the Pontiac G6 (up 26%) and Chevrolet Impala (up 18%).
Chrysler Climbs
Chrysler Group had the best performance of the domestic trio, but it came at quite a price. Sales were largely flat, up just 1.0% according to the company, as incentive spending reached extraordinary levels in an attempt to clear out a huge dealer inventory and a controversial "unassigned vehicle" sales bank (the table above shows performance for the whole DaimlerChrysler (DCX) group, including Mercedes-Benz). The strategy seems to have worked, however: inventory is down 50,000 units from the December 2005 levels, and the sales bank is currently less than 10,000. However, a sizeable portion of 2006 models (21% of an inventory of 538,000 units, and of that almost 80% trucks) still remains. Chrysler plans to combat this with a continuation of the massive dealer cash incentive spending that was initiated in December.
Chrysler was able to point to some highlights, as sales of its crossover-utility vehicles (CUVs) and new small SUVs seem to be doing well. The Wrangler sold 61% more in December 2006 than the previous year, two-thirds of the sales volume being the popular new four-door model. The Compass, Caliber, and Nitro all posted sales increases from November to December as well, as did the big Chrysler Aspen full-size luxury SUV.
And Toyota Trounces
Again, Toyota is the company to beat. It posted a record sales year for 2006, both for Toyota and Lexus brands (up 13.8% and 6.8%, respectively). The Camry has become the best-selling passenger car for the fifth straight year (up 4.2% from 2005), the Lexus brand retained the luxury sales crown for the seventh consecutive year, and Toyota Trucks posted a best-ever year with sales up 15.6%. Overall, Toyota group sales totalled over 2.5 million vehicles, a record year, and an increase from 2005 of 12.9%.
Outlook and Implications
Cars are showing strong sales for December, and are likely to continue to be strong sellers into 2007. But continued strong sales of GM full-size trucks and SUVs and Toyota light truck models demonstrated that the truck market is far from dead, and in times of difficult economic headwinds, the difference between sales success and failure is simply the right product. The success of the GMT900 pick-ups at GM and the continued strength of CUVs from GM, Toyota, and Honda show that the segment still has life and will continue to be an important part of the overall North American automotive market for 2007.
Ford is in a particularly difficult spot. Incentive spending will need to continue on the F-Series for the foreseeable future as GM enjoys full price on its hot new pick-ups, record sales months for the full-size SUVs, and Chrysler counters with huge rebates on the Ram pick-up. Ford can ill afford to keep putting money on its main profit centre when its full-size and mid-size SUVs continue to falter.
The real story for 2006 has been Toyota. It is safe to say that the company is running away with the North American market, and can seemingly do no wrong. The only weak point in the line-up is the hybrid Prius, which has seen sales begin to slow as gasoline (petrol) prices have eased and new fuel economy measures have proven it to not be the mileage champ that it was originally marketed as. Even the ageing Corolla compact has seen sales for 2006 of over 387,000 units, more than double the volume of the equally aged Ford Focus. Only the large SUVs and the Matrix compact, none of which have not seen an update in some time, have been a spot of lacklustre sales. But even those shortcomings will be addressed soon.