How Will Higher Petrol Prices Impact Market Segmentation and Competitive Strategies in the U.S. Market?

Transcription

1 How Will Higher Petrol Prices Impact Market Segmentation and Competitive Strategies in the U.S. Market? George M. Magliano Director, Automotive Industry Research Americas

2 Market Overview Not a Bad Start to the Year April SAAR of 16.7m actually somewhat better than Feb/March Cars do very well with a rate of 8.0m, light trucks struggle at 8.7m High gasoline prices impacting segment mix more Fleet and incentive activity moderated in April Sales held up in April despite GM s performance Year-to-date even with 2005 Ford and Chrysler announce new incentive initiatives Inventory remains balanced High oil price profile hurts sales forecast NA production pegged at versus last year 2

3 U.S. Sales by Type (Units in Thousands) '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 CAR - L LCV - L Total LV Sales - R

4 U.S. Sales Market Share Big 3 Are Not That Big Anymore 70% 60% 50% 40% 30% 20% 10% 0% BIG 3 ASIAN EUROPEAN 4

5 Outlook Summary First quarter will mark high point in sales Market will play in the 16.5m range through 2008 Employee price deals make shift to value pricing difficult Pricing on new models not aggressive enough Big question mark is how long can GM stick with its pricing strategy? Pressure to promote will mount in July when faced with a comparison against a 21.0m unit SAAR High oil prices and pricing hurt sales this year and next Union and bankruptcy issues add turmoil to the automotive business environment GM and Ford continue to lose market share, keeping the pressure on pricing Longer term demographics and consumer tastes shape the market Dynamic and exciting products are a plus for sales 5

6 High Petrol Prices and the Impact on Market Segments and Competitive Strategies in the U.S. Market 6

7 The B-Segment Buzz By MY2009, most major OEMs will be offering at least one subcompact, or B-size car in the U.S. market This is initially surprising given the historically poor sales performance of these vehicles in the U.S. In the past, consumers have shunned B-sized cars because: Consumers do not really care that much about fuel economy B-size cars are perceived as too small in a sea of pickups and SUVs Similarly priced used cars offer more value and prestige But today, OEMs believe that demand for B-size cars will increase significantly due to: Rising fuel prices The emergence of Generation Y 7

8 The Fuel Price Effect Many suggest that rising fuel prices will spur demand for B-size cars But, historically, consumers have demonstrated that even with high fuel prices, few people are willing to drive B-size cars If gasoline were to stabilize at $3.00 per gallon, many consumers will shift downward in powertrain size, but likely not all the way down to B size models 8

9 Demographic Shifts Baby Boomers Drive Current Market, Gen X and Y Key to the Future Assuming people enter the market at age 16 and leave by age 80: Depression Generation: : 55 million people First ones enter the driving population in 1931, last ones exit in 2014 Quiet Generation: : 30 million people First ones enter the driving population in 1951, last ones exit in 2025 Baby Boomers: : 76 million people First ones enter the driving population in 1962, last ones exit in 2044 Generation X: : 45 million people First ones enter the driving population in 1981, last ones exit in 2057 Generation Y: : 75 million people First ones enter the driving population in 1994, last ones exit in

10 Generational Group Behaviors & Population Size 300 Because generations come and go, the generational makeup of the market is constantly changing At the present time, the Depression Generation is exiting and Generation Y is entering All of the generational groups are moving through different lifestages Self-centered: Look at Me Practical, fit-in, value classics and tradition Competitive, self-centered, seek control Trusting, altruistic, seek perfection Practical, survivors, status-driven (In millions) Depression Quiet Baby Boomers Gen X Gen Y Gen Z 10

11 Growth in Driving Age Population Ages 16 to Baby Boomers Started Coming Into the Market in 1962, Adding Well Over 2.5 Million Drivers Per Year Millions Gen Y Started Coming Into the Market in 1994, Adding Nearly the Same 2.5 Million Drivers Per Year Year - to- Year Change Veh Per Driver 11

12 The Gen Y Effect 75 Million Strong Historically the auto industry has made the assumption that young entry level buyers want small cars Usually, this assumption is far from true With Generation Y, the industry needs to be particularly careful Generation Y is an in your face, look at me group that aspires to Hummers, Escalades, and Navigators And some B-size cars lack the attitude demanded by Generation Y Cute B-sized cars that may have been successful in other markets have no guarantee of success here in the U.S. But, some of the upcoming B-Cars have real attitude and could very well connect with Generation Y 12

13 U.S. Light Vehicle Sales Subcompact Cars B Segment 0.6 Units/MM Percent 3.0% % % % % % % Volume - L Share - R 13

14 U.S. Light Vehicle Sales Compact Cars 2.2 Units/MM Percent 13.0% % % % % % % % % Volume - L Share - R 14

15 The Expanded Truck: Why Are We Not Buying Cars? 15

16 Definitions of Utility Vehicles Offered in the U.S. Recognizing the wide variety of sport utility type vehicles on the market, Global Insight has divided the utility market into three primary segments: Sport Utility Vehicles (SUVs) Traditional body on frame truck Crossover Utility Vehicles (CUVs) Built on a car platform, trade off-road for MPG & ride Sport Touring Wagons (STWs) Modern station wagon 16

17 Why Are SUVs Popular? SUVs are a nearly perfect fit with Baby Boomer me first values: Command seating position Go anywhere, do anything capability Get out of my way look in your rear view mirror Bigger than you for safety Because of this perfect fit, SUV sales will be more robust than some are forecasting, although they will decline Generation X uses full size SUVs as family haulers: They purchase more SUVs per capita than any other group They provide an alternative to embarrassing minivans 17

18 U.S. Light Vehicle Sales Sport Utility Vehicles (SUVs) Units/MM Percent 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% Between , SUV sales decline 23% as consumers shift to other vehicle concepts Consumers will be hardpressed to give up the utility, driving position, and road presence to move back to sedans But, passenger space, towing capacity and 4x4 does support volume ENTRY SUV MID SUV FULLSIZE SUV PREMIUM SUV SUV SHARE 0% The CUV and STW segments are likely to be the largest benefactors 18

19 Why Are CUVs Popular? Well-executed CUVs provide consumers with many of the benefits of an SUV, but minus the disadvantages: Better fuel economy Better chassis dynamics Better ergonomics The most successful CUVs are indistinguishable visually from SUVs: Ford Escape Chevrolet Equinox Honda Pilot Even Baby Boomers will make the switch to well executed CUVs, thinking they are continuing to buy an SUV 19

20 U.S. Light Vehicle Sales Crossover Utility Vehicles (CUV) Units/MM Percent % 16% 14% 12% 10% 8% 6% 4% 2% 0% ENTRY CUV MID CUV LARGE CUV ENTRY PREMIUM CUV MID PREMIUM CUV LARGE PREMIUM CUV CUV SHARE Between , CUV sales are expected to bloom from less than 440,000 units to nearly 2.85 million units Successful CUVs provide a near perfect combination of expressive, muscular design and AWD without the stiff ride and poor gas mileage of SUVs New models and demographics drive the growth 20

21 Why Are STWs Popular? STWs are the classic station wagon brought up to date STWs provide the comfort, dynamics, and economy of cars, with some of the functionality and style of a CUV Ultimately, the STW could become the mommy mobile of Generation Y: Generation Y will not want the minivans their parents used when they were kids Properly executed, the STW can provide Generation Y with a kid hauler tailored to their unique values Entry STWs like the Dodge Caliber appear poised to substitute for compact sedans for other generations as well Consumers used to the versatility of SUVs and minivans will appreciate the enhanced usability of an STW vs. a small coupe or sedan 21

22 U.S. Light Vehicle Sales Sport Touring Wagons (STWs) Units/MM Percent ENTRY STW MID STW PREMIUM STW STW SHARE 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Between , sport touring wagons grow from under 90,000 units to nearly 800,000 units While the growth is impressive, it still is fairly limited for a truck sector It s still a bit questionable whether this body style appeals to consumers Is it aggressive enough? Is the seating position high enough? Is it sexy? 22

23 U.S. Light Vehicle Sales Pickup Trucks Units/MM Percent 20.0% 19.0% 18.0% Entry pickups are losing market share as models grow in size Only Ford Ranger and Chevy Colorado/GMC Canyon remain in entry % 16.0% 15.0% Midsize pickups grew dramatically when the Toyota Tacoma and Nissan Frontier moved up last year and the Honda Ridgeline debuted ENTRY PICKUP MID PICKUP FULLSIZE PICKUP PICKUP SHARE 14.0% 13.0% Fullsize pickups continue to dominate the market and are a preferred vehicle for Gen Y males 23

24 U.S. Light Vehicle Sales Mid Vans (MPV) Units/MM Percent Minivans are purely 9.0% practical, unemotional 8.0% purchases MINIVANS MPV SHARE 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Consumers usually buy them because their lifestyle demands it kids, pets, grandkids It is not an aspirational concept Consumers leave the MPV segment as soon as possible There is minimal demand for a premium MPV wealthy people view SUV s as kid haulers 24

25 That Thing Got a Hemi? or a CVT? or a Hybrid? Chrysler Group s Hemi engine has revitalized the Dodge brand, even with today s high gas prices Thanks to displacement on demand, the 8 cylinders drop off to 4 cylinders for highway driving, resulting in pretty terrific MPG With Continuously Variable Transmission (CVT), a V6 engine gets very competitive fuel mileage as well Dodge Magnum R/T w/awd Hemi 5.7 liter/345 cu. in. 340 HP@5000 rpm Nissan Murano SE w/awd V6 3.5 liter/214 cu. in. 245 HP@5800 rpm Toyota Highlander Hybrid w/awd V6 3.3 liter/201 cu. in. 268 HP@5600 rpm 24 MPG $32, MPG $31, MPG $39,290 25

26 How Are GM and Ford Coping With the SUV Decline? GM and Ford are both dependent upon the full size SUV and Pickup platforms for profit GM s newly launched GMT900 SUV lineup averages 20 MPG versus 18 MPG on the previous versions (GMT800) In addition, GM and Ford are both introducing large CUVs GM s Lambda CUVs and Ford s D3-based Fairlane Saturn Outlook has a 302cm (118.9 ) wheelbase and a 198cm(78 ) overall width, which is similar to the 2007 Chevy Tahoe (295cm wheelbase, 201cm overall width) While the dimensions are still undetermined, the Ford Fairlane is likely to be similar in size to the Saturn Outlook 26

27 Summary Consumers are entrenched in buying trucks whether CUVs, SUVs, STWs or Pickups over cars Smaller cars (like B size) are lost amongst the fullsize SUVs and pickups that dominate the roadways Despite high gas prices, the utility, functionality and overall preference for trucks overshadows the expense of gas, since gas is still relatively cheap Consumers are more likely to move down a powertrain size than a segment size Powertrain technology like displacement on demand allows consumers to stay within trucks without forfeiting gas mileage 27

28 Thank You George M. Magliano Director, Automotive Industry Research Americas