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Entries in Auto Sales (19)

Monday
May042015

Canadian Sales - April 2015

An amazing month, the best April in recent history.

By now all manufacturers know the routine and increase the level of advertising during the second part of the month. April merely followed along...

The environment:

Gas is not that cheap.

The Canadian dollar no longer buys as much,

Money remains inexpensive and free flowing.

What caught our attention:

  • GM decided to move iron in April and displace FCA for the month.
  • We continue to scratch our heads with Ford.
  • Lexus gaining additional momentum with the NX
  • Is it fair to say Porsche powered by Macan?
  • The Micra continues to make a difference for Nissan. 
  • MerBimAu as usual showing continued increases.
  • The endless migration towards SUV/CUV increases and endures.

One more thing:

Its very competitive and CMS (Citizen Main Street) is the big winner.

 

 

 

Thursday
Mar262015

Making Car Buying Less Loathsome

If you are in the auto business perhaps its not new, but its a must read.

If you are considering purchasing a vehicle, its a must read.

We urge you to take the time and/or bookmark the page.

 

 

 

 

Monday
Mar162015

March Sales Update

Weekly payment amounts.Its mid month March, lets take a look at the auto sales front.

Since last week most if not all manufacturers are offering one deal or incentive piled up on top of another and it all ends on March 31, 2015. Every incentive promotion has a "marketing name" to heighten the awereness.

The end of the first quarter is only 2 weeks away, needless to mention that everyone is seeking to conquer sales along with everyone else.

Yes...the auto business is hyper competitive.

CMS (Citizen Main Street) is sitting back and watching this advertising frenzy in print, TV, radio, online.

Perhaps...getting confused by all the deals, promotions, incentives. Certainly conclcuding that its a case of dynamic pricing run amock.

Needles to mention that whoever had a strong start to 2015 is in a dramatically better position than the manufacturers seeking to conquer in the last 2 weeks of the month.

Before we forget, many dealers are piled up with new vehicle inventory, while others have vehicles temporarily stalled in snow at Autoport (Halifax).

Some indicators:

  • The "nothing down" deals are getting scarcer.
  • The loan terms are extending at a faster rate than last year.
  • The transaction price is higher than last year.

Although interest rates are marginally lower, the Canadian dollar is dramatically devalued (in the dumpster) compared to last year.

The manufacturers that waited till March to throttle up, are in a less favorable position that the one that did a "hole shot" in January.

Let's see what month end will bring.

 

 

Wednesday
Jan212015

The Ongoing Oil Conversation

You have surely noticed the various conversation, opinions, thoughts from a wide spectrum of pundits on the price of a barrel of oil, and gas at the pumps.

Lets take a look at this from a Canadian perspective:

Price of Oil:

Its not a good thing for Canada, cheap oil has more negative than positive implications for Canada. Alberta is the 3rd largest auto market after Ontario and Quebec. We all know where vehicle sales in Alberta are headed. 

Lower Canadian Dollar:

The lower Canadian dollar is a minor buffer for the lower price of oil. On par $100 US was $100 Canadian now $50 US is $57 Canadian (rounded amounts). At the same time the lower Canadian dollar is increasing prices of a myriad of items that a family requires, from food, clothes, even iTunes. 

Its possible that with the imminent closing of Target, other retailers will be very tempted to raise their prices to compensate for the lesser competition, and cheaper gas.

Savings at the Pump:

Agreed we are all saving at the pump, but CMS (Citizen Main Street) is astute to quickly grasp that the savings at the pump are required elsewhere with price increases from the lower Canadian dollar. Save at the pump and pay more everywhere else.

Utility Vehicles:

The auto market is inexorably shifting from sedans to utility vehicles, especially smaller versions. Is it the price of gas or a consumer preference? Its easy to correlate cheaper gas with increased sales of utility vehicles especially when the market is already headed in the direction of utility.

Pick Ups:

If pick up sales remain the same in 2015, we can says that cheaper gas perhaps was a motivator. At the same time how much of an influence is cheap gas on the enduring pick up love affair?

Disruption:

The oil sands and fracking in the US have disrupted the established order of oil. Target was a disrupter in Canada signaling its vector, strategy to the competition. The same with oil sands and fracking. The competition gets aggressive and disruptive in its own fashion. 

Finite Resource: 

There is not an infinite, endless supply of oil on the planet. Technology has enabled disruption. A fracking well has a life expectancy of 12 months. The oil sands have been there for centuries...in both cases they make sense at a certain price level. In the meantime oil remains a finite resource...with over time an escalating price.

Who Wins?:

Not Canada, not the Canadian consumer, not Alberta, not the Canadian oil industry, not the Canadian auto industry. Canadian retailers will win further...developing economies will win.

 

 

Wednesday
Jan072015

December Canadian Sales

Usually December in Canada is a slower auto sales month since at some point everyone starts competing with Santa Claus.

This past December from the activity in online, radio, TV, print advertising one could sense that most if not all manufacturers were motivated to generate a strong month. Literally break from recent tradition, especially in light of several events, the price of oil being one.

December concludes 16% ahead of the previous year, the strongest December in the past 10 years with 131.4K units for the month.

Think of this...1.85 Million vehicles were never sold in Canada in any year.

From our perspective its gratifying to see all manufacturers throttle up, get hyper competitive. We had not seen such competitiveness in several years.

How do you power sales?

New Product: Its still the major part of the equation.

Incentives: They are a compelling motivator to finalise decisions.

Free Flowing Money: What can you say...2014 was a watershed year in money powering sales.

Pick Ups: The love affair continues, not the cheap gas, the enduring love affair with pick ups.

Chrysler and Ford were trading paint to who would finish as number 1 in Canada. December was the deciding month with Ford winning by a bumper.

The Koreans and Japanese have their ongoing scrap for market space.

When everyone gets competitive, the incentives are strong, the money flows, fascinating to see how much iron can be moved in Canada.

Its a beautiful thing...

 

Wednesday
Oct292014

Auto Loans

Have you noticed when the mainstream media catches on to "something" everyone has an opinion, several did a study, and suddenly we are close to hitting the alarm button.

This past week auto loans have captured the imagination of numerous pundits, with a myriad of pedestrian opinions.

Sometime time ago we shared our thoughts on the entire auto financial services in Canada with Money for the Deal.

The picture painted today by the mainstream media is that CMS (Citizen Main Street) is highly leveraged and if interest rates increase auto loans will default before mortgages. In addition to the longer loan terms extended on auto loans.

Lets consider a few points:

Cash Flow: In the glory days of leasing in Canada over 40% of new vehicles sold were leased, and afforded on cash flow. Extended term loans are the replacement of leasing enbling CMS to still drive with cash flow.

Consumer Risk: CMS is astutute in letting manufacturers with their incentive programs relieve them of the value risk of the vehicle they "own" by trading it in on a new vehicle.

36 Months: Remains the magic number for the auto industry to function at its best. The loan might be 96 months but the trade cycle remains 36.

Loan Interest Rate: The low rates down to 0% are supported by the manufacturer, its always a cash incentive of "xyz" or a rate of 0%. In most instances CMS picks the rate.

Lender Risk: Have you noticed...since major Canadian banks are more active with auto loans more vehicles are sold in Canada. Are manufacturers supporting a "risk factor"?

Big Data: Permits manufacturers and financial service providers to calibrate the monthly offers, incentives, to maximise sales.

Dynamic Pricing + Incentives: Manufacturers and financial service providers make extensive use of dynamic pricing and incentives to increase sales and capture new customers from competing makes. This strategy will endure.

Technology: Permits the dealer and CMS to quickly and efficiently close a deal on the basis of a "monthly payment".

Maintenance: CMS has a limited appetite for performing maintenance on a vehicle beyond replacing the wear items. Yes...maintenance can quickly devour several months of payments, in addition to being unpredictable at times.

Paradigm Shift: From vehicle ownership to vehicle usage for a monthly fee. If CMS is in a "trap" of monthly payments, manufacturers are in a "trap" of constantly enabling CMS to trade, and roll over deficiencies.

 

 

 

Monday
Dec092013

Social Selling > Part 1

Think about how fragmented the showroom process has become. If 20 years ago we knew that eventually the showroom would be disintermediated, the knowledge base would gravitate to the Internet. 

How come its so fragmented? Could it be that everyone is focusing on a specific aspect since they have expertise or technology in the "specific aspect" and in some way obfuscating the big picture. Agreed the picture by now is immense, and fraught with peril...or is it?

The astute dealer...

Lets not go back 20 years, or even 10 year, lets focus on the emergence of "social media" going mainstream in late 2009 and early 2010...lets say 4 years ago.

Imagine that this dealer 4 years ago committed to acquire an advantage in cyberspace, through the Internet, and social media. The dealer made an enduring  commitment to finally have a digital dealership comparable to his brick and mortar business. 

This same astute dealer did not buy a web site from one suppliers, SEO from another supplier, BDC/CRM from again another supplier, and so on. Put aside the technology fatigue, and the rampant digital immaturity. This dealer went out and did it himself, with his people, and acquired "pieces" he needed to control his execution.

Now in 2013 this astute dealer has a compelling digital presence, is proficient in social media, is proficient in generating content for his customer base, is socially involved with his customers and prospect at his brick and mortar dealership, and at his digital dealership. The dealer paid more attention to actually building an enduring digital dealership, than trying to measure ROI on social media, conversation rates on leads. Stopped complaining that it costs too much, feeling nickle and dimed at every turn, needing a ton of suppliers to presumably achieve an online presence. 

This dealer controls his destiny, and makes his luck.

This same dealer endured a bunch of his peers telling him he was crazy, that he should buy a piece here, a fragment there, that he should wait another 15 years to see how it will develop, just in case.

That this dealer tells his peers how its done, and what they should do, in the meantime he has a 4 year head start, his content makes him the darling of search engines, is engaged with his customers and prospects.

This dealer "fooled around" with the Internet for 15 years, tried a bunch of stuff, endured a myriad of vendors and suppliers, improved his knowledge base, and finally made a commitment after 15 years to finally build his digital dealership from the foundation up.

Imagine for a moment the dealer that made a comitment 10 years ago...

In a group meeting he tells his peers "Guys I finally started building my digital dealership, I have a digital lot boy, I have a digital editor/content generator, I have a digital receptionist/greeter"....his peers look at him and question his sanity.

Someone in the back of the room comments "If I undestand this, you went against the flow, stopped talking about it, have a well executed digital dealership, and are well positioned for the future" 

We will continue...

PS: The first Social Selling

 

 

Thursday
Sep052013

Risk Shifting

The other day we were reading an opinion from an auto pundit on the length of auto loans, and were taken aback by the naivete of several statements. It seems that some folks in the competitive atmosphere that is the auto business prefer to have a brief and narrow focus.

If you are in the auto business at some point the thought of how long will these low interest long term loans keep on going, and how much deficiency can we roll over on many deals; must have surely crossed your mind.

Almost 6 years ago, agreed its an eternity in this business we wrote "Wash Out" our white paper on washing out of trades, leasing, and residual values. Those were the days when the Canadian dollar was finally climbing out of the basement, and suddenly prices of vehicles in Canada were high. 

If you remember leasing at the time was extremely popular in Canada with a penetration of over 40%, obvious that lowering prices would impact and heighten the residual risk carried by the various manufacturers. Manufacturers were concerned, dealers were muzzled, consumers were incensed.

About a year later a couple of manufacturers were tethering on the brink of disaster, were bailed out, and what a great excuse for a lot of manufacturers to get out of leasing, and further shift the value risk to the customer.

It was a brilliant move, lets lengthen the terms of the loans (to make vehicles affordable) and lets shift the value risk to the customer. At the outset it was simple enough, lets go from 60 to 72 months, lets go from 72 to 84 months (to compensate for the what would have been a value risk to now a deficiency). Finally lets step on the gas and go from 84 to 96 months to try and get every deal with any and every deficiency.

Its a successful formula...vehicle sales are on the rise. At the same time lets go from 96 to 108 does not make sense, everyone knows that the ceiling is at 96, and 0 percent...which was reached some time ago.

During the turmoil in the market, some manufacturers elected to continue leasing and assume the residual risk, remarket the lease returns, strengthen their nascent CPO efforts of the time, and literally continue to have an excellent flow of used vehicles. While making money twice on most vehicles, which remains an appealing aspect of leasing.

We all know that financial services are an intrinsic part of "moving iron", and balancing the risk is the fine art of the financial services offered...a few months ago we published Money for the Deal depicting the fine art and evolution of financial services.

What is the current reality?

Manufacturers offer finance terms up to 96 months at 0 percent interest simply to be in a position to actually do business, since the customer in many instances is in a deficiency position with the trade in. At this point its become a vicious circle. The customer know that he is deficient and seeks out the best terms and monthy payments to actually do a deal. The lenght of the term is somewhat irrelevant, its the monthly payment that is important.

If you actually believe that the terms are longer, because vehicles are more reliable...its your choice!

The manufacturers that continued to lease during the turmoil, and continued to assume the residual risk are in a different position and ensured a better flow of repeat business and loyalty.

In most instances the customer will trade one vehicle for another for a comparable monthly payment that fits in the budget. Obvious that the customer assumes the value risk of the vehicle, while the manufacturers assist the customer in rolling over the risk from one vehicle to another.

Why is leasing emerging again, its the plan B to compensate for the limit of the 96 month terms.

Its how much for the trade, and how will you shift the risk to the next vehicle, and stay within my budget.

 

 

 

Wednesday
Aug282013

Persuasion in the Showroom - I

Click for larger ImageWe constantly hear about the well informed customer...yes the customer used the Internet, social media, mobile devices to gather information and empowerment.

Lets rewind a few decades...yes a few decades.

Back in the day when a customer was considering a "muscle car" that prospective customer was infinitely well informed on the product through various buff publications of the time...similar to the Internet of the past few decades. 

Often that customer knew more than the sales person about the product, often that customer had a circle of "muscle car" friends that exchanged information (sounds like social media of today) and knowledge. 

Perhaps similar to today some dealers embraced "muscle cars" similar to dealers embracing the internet and social media, and other dealers for whatever reason did not get it, and were not interested in getting it. 

Is it much different today, with dealers embracing the internet and social media, and other dealers lukewarmly participating perhaps to keep the manufacturer content, and have a better allocation of vehicles.

Needless to say that dealers that embraced muscle cars back in the day, had enthusiastic and passionate personnel that was persuasive with a prospective customer...reflect on this for a moment. Enthusiasm, passion, persuasion...its human, not technology.

The other day a dealer received a very special modern muscle car delivered in an enclosed trailer by a specialised carrier...the trailers that are similar to race car carriers. The showroom momentarily emptied of all sales consultants to go look at this car, to take photos, and to comment among themselves. Fascinating in an age of technology, to observe a display human auto passion.

Perhaps its a coincidence that this dealer is the biggest in its market area for the brand. 

Spend a moment reviewing the image of How Millennials Shop for a Car, the press release is here.

Yes...perhaps they are seeking and not finding persuasion in the showroom.

 

 

Monday
Jul152013

Canadian Sales First Half 2013

Our thoughts on Canadian sales for the first half of 2013...