Entries in Sales (43)
Have you noticed the ongoing concern regarding auto loans. Consumers are getting in perhaps precarious situations with auto loans.
Agreed loans have increased appreciably during the past few years in pace with increased auto sales in Canada, accompanied by the increased participation of banks.
The old model was based on ownership and equity. Under these antiquated perspectives auto loans are out of control and are headed for a day of reckoning.
A couple of years ago, and it still resonates we shared our thoughts with Money for the Deal. As we say...we don't follow we lead, we were prescient back then as to where it was headed. While no longer subscribing to the old ownership and equity model.
Lets look at a few relevant points from back in the day:
- Financial services are an intrinsic part of the auto business. In addition to being lucrative to the providers of these services.
- Back in the day when these services were provided by "captive" (owned by the manufacturer) serive providers, the model was based on ownerhip and equity.
- The advent of leasing, especially for luxury cars (to improve the affordability) initiated a change.
- A myriad of forces constatntly trying to keep Canadian banks out of the mainstream financing upheld the conservative status quo.
The Canadian consumer enabled and empowered by manufacturers, and financial service providers has evolved from owenership to mobility, from equity to cash flow. There is no desire to own a technologically complex vehicle beyond the warranty period. With a limited desire to invest/spend money maintaining a vehicle.
Lets look at a few relevant points from today:
- Manufacturers subsidise the financial services although money is cheap, its even cheaper for autos loans and leases.
- Although the finance terms are longer, the trade cycles are a constant, as well as the monthly payments.
- Negative equity is manageable within the current parameters.
- There is an uptick in leasing penetration to alleviate the longer finance terms.
- Monthly manufacturer incentives erode the value of used vehicles.
- Manufacturers and dealers require recent model trade ins/lease return to uphold their CPO programs.
Until we view the auto business and the financial services from the old perspective of ownership and equity the current model makes little sense and is a recipe for disaster.
Under the current model of mobility and cash flow. The pressure is on the manufacturers to provide relevant financial services that are responsive to consumers. More important to uphold the trade cycle of 36 months.
From our perspective the Canadian consumer is WINNING. While the new model has generated record sales in Canada.
What do you think?
February generated spectacular near record Canadian auto sales...a Wow moment.
Lets take a closer look at the results, and while most folks compare numbers. This morning we are taking a different perspective.
Its was a record year in Canada with 1.85 M vehicles sold a truly remarkable achievement.
The executives at the various manufacturers in the waning months of 2014, looking ahead to 2015 are reflecting on how to improve on a record year. Its an auto business mantra that you always have to achieve higher numbers.
To make it interesting there is increased volatility in the air, with a tinge of uncertainty.
How much more do you improve on 1.85 M? At best probably a few percentage points (< 5%).
The astutes are grasping that mobility at a monthly payment is surpassing ownership.
Financial services (free flowing money) will continue in 2015.
The weak players (manufacturers) will adhere to their tried and true (stale) play book. The stronger players will need to displace "someone" in one fashion or another to increase sales. Other players have fortresses and moats around their market segment.
Hopefully all manufacturers condensed their voluminous big data to uncover market segments with a strategic advantage.
We could keep on going but you surely grasp that for any manufacturer planning for 2015 offered opportunities and posed challenges.
Strong Start - In the auto business its a given that you start strong, in drag racing its known as a "hole shot" a strong start in January provides an advantage and creates quick momentum. Especially with increased volatility in the Canadian landscape.
Conquer New Customers - If one manufacturer conquers another loses, need we say more.
The Migration to SUV/CUV - Which manufacturer will generate a "utilities" strategy to provide a quick start, and advantage.
February 2 Months Into 2015
Its an understatement to say that the auto business is competitive and unforgiving. If anyone misses a month its a salvageable situation. If anyone misses 2 months especially if they blinked due to a competitor its an arduous challenge and task to overcome a 2 month miss.
"The climate was just awful in eastern Canada we held back on programs till March, watch us now." Its a good PR line to deflect reality that they are in deep yogurt.
At the end of February sales in Canada are ahead by 3% a stunning achievement especially after a record 2014, and a strong December.
Who Caught Our Attention
MerBimAu - we would have been shocked if Mercedes-Benz, BMW, Audi did not continue increasing their sales.
Toyota - made it clear from the start of 2015 that they are more aggressive.
Korea - these folks have enjoyed their windows of opportunities a few years ago, and are facing unrelenting competition.
Detroit - they are collectively waiting for March to overcome the Alberta effect.
Subaru - the niche is expanding.
Nissan - the Micra effect endures.
Honda - a serious blink after only 2 months.
VW - the momentum continues.
It will be interesting to see how March and the first quarter develops.
Its November, there is snow, its cold, and also rain, while Christmas is around the corner (sort of). As we near the end of the year we start looking ahead while also looking back.
Stuff that continues to grasp our attention.
We will have record auto sales in Canada this year, just imagine the various opinions from the various pundits, experts, executives, professionals. It will be interesting...
Manufacturers have retreated from the initial social media euphoria to going backwards. All manufacturers seem to have a rationale of convenience to justify their position which by now is entrenched in the past...
Are we witnessing an inexorable shift in the ownership of vehicles? Is mobility for a monthly fee surpassing ownership?
Z28 / GT350:
Satisfying to see Camaro and Mustang recreate the "good ole days" of Trans Am racing with serious versions of the cars. Really cool...
We mentioned Premium Economy a few months ago, we have been observing, we have been patient, prior to sharing further thoughts. We are almost there....
Are we seeing the last days of the manual transmission with a clutch pedal? The new multi speed automatics with software controls are phenomenal. In addition many folks have no clue how to drive a car with a manual.
Old School / New School:
The mechanical aspect (old school) of vehicles makes them durable, the technology aspect (new school) makes vehicles disposable. Think about this for a moment...
Its Friday, its moving day for us, its the Vroom Room, and its the 13th, come in make yourself comfortable, join the conversation.
Agreed...Port Dover is a busy place today.
In case you missed the entire report on the GM ignition switch, scroll down. Its back to doing the right thing which at times seems impossible to do. From the Al Pacino speech in Scent of a Woman "That's called courage. Now that's the stuff leaders should be made of. Now I have come to the crossroads in my life. I always knew what the right path was. Without exception, I knew. But I never took it. You know why? It was too damn hard."
Would it be fair to conclude: the low interest rates that are fueling the real estate market, are also fueling the auto market in Canada by providng easy and ongoing incentives for the deal. What do you think?
Le Mans is tomorrow...
There is a majority Liberal government in Ontario.
Our usual old race cars from the SVRA Brickyard Invitational...enjoy.
For the past few weeks we have been experiencing different vehicles, from different manufacturers. If you follow us in one platform or another you have an idea of the vehicles we have been experiencing.
We often tell anyone that seeks our opinion that "all cars (vehicles) are good" we truly believe that all vehicles are intrinsically good. In many instances there are subtle differences that have different appeal to different personal preferences.
Since most manufacturers are inexorably diminishing the number of platforms they use for their various models, the components are good, the performance is good. Obvious when the components are not good, it leads to massive recalls.
Folks today want to be inspired, we want to be inspired. This is a real challenge for manufacturers, when they create, or refresh a model with good components, often benchmarking the competition, its supposed to be a good vehicles, which it is.
At times this good vehicle that does everything well, is diligently bench marked against the competition, is missing a little something...its not inspiring.
Is it only us that finds this vehicle "dull" and uninspiring?
Looking at the sales figures for Canada, how it compares in its segment. We arrive at the conclusion that its not only us that finds the vehicle uninspiring. Or it answer the question that on a spreadsheet, and powerpoint its very competitive...in real life its uninspiring.
We could have a lengthy discourse on what makes a vehicle inspiring...and for each vehicle it will be a different aspect that will light up the inspirational fire.
Increasingly vehicles must be inspiring to have a competitive advantage, be it brand, features, performance, utility, and many others...vehicles must pass the inspiration test.
Its Friday, its the Vroom Room come in enjoy the cappuccino and biscotti, join the conversation, leave a comment.
Agreed...Spring is in the air.
With all the talk on the various media platforms of a brutal, never ending winter, auto sales for the first quarter are up by 1%...go figure...its easy everyone does their "vehicle shopping" through technology, only visiting the dealer to close a deal.
Mind you its still brutal for dealers who coped with the snow and cold.
Our quarterly ebook on Canadian Sales continues to gain popularity and momentum, if you think its worthwhile please pass it along to your friends.
If you are curious to see what the actual "ignition switch" and the small spring looks like, the folks at Machine Design have conveniently taken one apart.
Lately we getting a lesson on the frailty of technology...its paradoxical that technology can be empowering, and also frail and vulnerable. We have always urged you to be your own editor, which also implies to have your own sense of direction, discretion, security, when it comes to technology.
With gas at $1.50 a liter for premium we arrive at the "pain treshold" it will be revealing to see how the pricing of gas develops in the coming weeks. Especially the impact on vehicle selection.
Yes...we conveyed our thougths and prayers to the family of @JimFlaherty on Twitter.
Our usual old race cars from Goodwood.