Slower Sales in China Affect Brands, Segments in Different Ways

Tim Dunne

Passenger-vehicle sales in China were up just 2% in the first quarter of 2012, to 3.4 million units compared to the same period in 2011. This tepid growth has been attributed to factors including a cooling economy and higher gasoline prices nationwide, according to Tim Dunne, one of our China experts at J.D. Power.

He points out in a column for China Daily, the largest English-language business publication in China, that only time will tell if China’s vehicle sales pick up their pace during the rest of 2012. (Note: Last month, China’s automaker group said April total vehicle sales rose 5% from a year ago, and passenger-car sales rose 12.5% from last year when there were production disruptions following the March 11 earthquake and tsunami in Japan.)

To be competitive in this sluggish market, Dunne says that both domestic and international brands need to focus on what consumers want most—a quality product backed by superior customer service. A few excerpts from Tim Dunne’s column, “Slower Auto Sales Affect Segments and Brands Differently—Chinese Domestic Brands Negatively Impacted the Most” are featured.

It’s Not Time to Hit the Panic Button

“While the first quarter’s performance might seem worrisome, it’s not time to hit the panic button on China’s auto market just yet. Many automakers and industry experts say they expect full-year 2012 passenger-vehicle sales in China to increase some 9% over sales in 2011, which set a record with 13.1 million passenger vehicles sold.” Continue reading ›

Dealer Satisfaction with Bank Financing in Canada Rises Considerably

Lubo Li

Since Canada’s market has become more competitive, Canada’s auto dealers are using multiple lenders. This year, dealer satisfaction with banks, in particular, has risen a significant 25 points from an average index score of 847 in 2011 to 872 (on a 1,000-point scale), while financing satisfaction with automaker captive finance arms is up only 7 points to 840, according to our 2012 Canadian Dealer Financing Satisfaction Study.

Along with this higher level of dealer satisfaction with banks as lenders, we find that the volume of financing business that Canada’s dealers are conducting with banks has risen to 60.5%, which is up 4.7% from 2011, while the captive market share has slipped 1.5% to 36.3% from 2011, based on retail transaction data from our Power Information Network® (PIN).

A major reason for the increase in financing satisfaction with banks among dealers is that these providers are continuously improving their offerings and improving the dealer lending experience, which puts competitive pressure on all automotive lenders to focus on providing outstanding service to dealers in order to maintain or grow their share of the business. Speed in processing a loan or lease application is crucial for dealers and this is just one area where banks more frequently are able to provide funding in 24 hours or less in comparison to captive providers—84% vs. 56%, respectively. Continue reading ›

Late to the Party, Infiniti Looks to Make Up Ground in China

Tim Dunne

Nissan Motor Co. announced in late May 2012 that it plans to establish a global headquarters for its Infiniti luxury-vehicle division in Hong Kong. Nissan also is expected to name a new global head for the Infiniti brand at the new headquarters, as well as add some 100 positions in administration, sales and marketing.

The choice of Hong Kong as a global headquarters for Infiniti is an indication of the importance that Nissan places on the future potential of the luxury-vehicle segment in China. For centuries, Hong Kong has been considered the coordination center and launching point for exports into China, and this includes passenger vehicles, which started to flood into the country in the 1980s after China opened to global trade.

According to LMC Automotive*, nearly 600,000 luxury passenger cars were sold in China in 2011—which translates to about 5% of the total market—with an additional 150,000 luxury SUVs being snapped up by buyers in China. Of this total, Infiniti accounted for only 19,000 units, sold from just 25 Infiniti dealerships. To bolster its sales operations in China, Infiniti said it expects to grow its retailer base to 100 dealers in China by the end of 2012. Continue reading ›

Retail Auto Sales in May to Post Strongest Gain Since February 2011

John Humphrey

U.S. retail new-vehicle sales in May are projected to climb 20%* from May 2011 and reach 1.087 million units, which would be the largest year-over-year volume gain since February 2011, when sales climbed 27% from February 2010, based on data collected during the first 17 selling days of the month by the Power Information Network® (PIN) and LMC Automotive.**

In a monthly sales forecast update developed by J.D. Power and LMC Automotive, combined light-vehicle sales (retail and fleet) in May are expected to rise even higher—to some 1.384 million unit deliveries, which would be up 21% from 1.059 million unit sales in May 2011. Fleet volume is set to remain strong and account for 22% of total sales in May. May’s total sales pace is predicted to average 14.3 million units, up from 11.7 million units in May 2011, but not quite as strong as April’s pace of 14.4 million units. Continue reading ›

Some Unexpected Brands May Gain Sales with Engine Downsizing

Tyson Jominy

As we see new-vehicle buyers and lessees continue to shift from large to midsize vehicle segments and from midsize to small or compact segments, there has been a decrease in the size of engines. In addition, we are seeing that consumers who do not downsize are finding more fuel-efficient powertrain options at the segment and model level, according to our Power Information Network® (PIN) retail transaction data.

Detroit Automakers will Not be Left in the Lurch

An interesting change related to the shift to smaller engines this time around is who is leading the charge, and therefore who will stand to reap the gains. Two Detroit automaker brands, Ford and Chevrolet, are exclusively offering 4-cylinder engines in their freshened midsize cars—Fusion and Malibu, respectively. In addition, Ford offers 4-cylinder powertrains in their midsize crossovers and now offers a V-6 in the F-150 that is selling very briskly. In fact, the Ford EcoBoost powertrain sub-brand is turning out to be one of the early automotive successes of the decade. Continue reading ›

Integrating Smartphone Apps Can Attract Canadian Auto Shoppers

J.D. Ney

Nearly two-thirds of new-vehicle shoppers in Canada (65%) indicate they own smartphones, which is up from 58% in 2011, according to our 2012 Canadian Manufacturer Website Evaluation Study.

In addition, the study finds that although slightly more male shoppers said they own smartphones than did female shoppers, both groups say they . . . Continue Reading Integrating Smartphone Apps Can Attract Canadian Auto Shoppers

Satisfying Website Visits Lead to More Showroom Traffic in Canada

J.D. Ney

A majority (76%) of new-vehicle shoppers in Canada who indicate having a highly satisfying experience while visiting an auto manufacturer’s website (score of at least 976 on a 1,000-point scale) say they are much more likely to visit that brand’s showroom for a test drive, according to our 2012 Canadian Manufacturer Website Evaluation Study.

 
As might be anticipated, among shoppers who have a less satisfying online experience (score of 500 points or below), only 14% say they will visit a dealership for a test drive. These study results indicate that there is a strong correlation between a satisfying online shopping experience leading to a visit to a dealer showroom and the likelihood of a vehicle purchase.

It’s encouraging this year that auto brands and their websites made significant advances in satisfying new-vehicle shoppers in Canada. The industry average rises 37 points to 821 from 784 in 2011, with increases across all four factors examined. Scores for Site speed and Appearance factors increased the most, based on analysis from some 3,078 new-vehicle shoppers who indicate they will be in the market for a new vehicle within the next 12 months. Continue reading ›

Dealers in India Offset Slowdown with More Diverse Revenue Sales Sources

Mohit Arora

Dealers in India expect to generate more than one-third (34%) of their revenue this year from sales of parts and accessories, auto insurance, and commissions on loans, which is an increase from 22% in 2011, based on analysis from our 2012 India Dealer Satisfaction with Automotive Manufacturers Index Study.

Finding new revenue opportunities is a way to manage risks of a slowdown in the auto market since the growth rate of passenger-car sales in India this year has been the weakest since the 2008-09 fiscal year, when sales were hurt by the global financial crisis.

On a more positive note, this year’s study finds that overall dealer satisfaction with automakers has increased 71 points to 820 (on a 1,000-point scale) from 749 points in 2011. According to the study, satisfaction improves across all nine measures,* with the largest improvement in support from the manufacturer—the factor with the most weight in our index. Continue reading ›

China’s Auto Exports: Small but Posting Strong Growth

Marvin Zhu

In 2011, China’s automakers shipped nearly 850,000 vehicles from different harbors in China to other world regions. Exports were up 50% from the previous year and contributed US $11 billion (69.55 billion RMB) to the country’s trade balance, which was an increase of 57% from 2010.

While most of the Chinese home-grown brands are suffering to some extent from declining market share in the domestic market, surging exports might help local automakers to counter this decline, according to Marvin Zhu, senior automotive analyst with LMC Automotive.* Recently, he wrote about how China’s local automakers are making inroads in other countries’ auto markets in China Automotive Monthly, published for J.D. Power Asia Pacific. The article is excerpted:

Some Local Companies are Already Overseas Players

Chery, China’s largest local carmaker, recorded sales of 642,000 units in 2011, down 6% year over year. Its export volume reached 160,000 units, which amounted to one-fourth of the company’s total sales. Last July, Chery set up a US $400 million (2.54 billion RMB), fully-owned factory with a complete production line in Brazil. It became the Wuhu-based carmaker’s 17th overseas plant. While this growth and investment is happening internationally, the company announced it would drastically reduce its investments for ongoing R&D projects for the local market. Continue reading ›

China’s Government Purchase Rules: A Sweet Deal for Domestics?

Jenny Gu

Earlier this year, China’s Ministry of Industry and Information Technology (MIIT) released its list of approved vehicles for government purchase. The list caused quite a stir because all 412 models included are from China’s domestic brands. International media have been critical of the list, and some have even said it violated WTO principles. Jenny Gu, senior analyst with LMC Automotive,* which has a strategic alliance with J.D. Power, points out that the policy is in line with public opinion in China, and does not violate WTO principles.

A few excerpts from Ms. Gu’s perspective in a recent issue of China Automotive Monthly—Market Trends about the reality and ramifications of the new policy are highlighted:

“This policy is in line with public opinion, whereby government purchases require greater scrutiny and more cost controls. After all, it seems unreasonable to use taxpayers’ money to buy luxury cars for a small group of public officials. However, to become a supplier of official vehicles in China, a company does not need to be a Chinese brand, but the three conditions are difficult for foreign brands to meet:

• Vehicles sold for official purposes, such as tax collection or criminal investigation, must have an engine size of 1.8 liters or below.

• These vehicles must cost no more than 180,000 yuan (US $28,571).

• The manufacturer must have spent no less than 3% of their core revenue on research and development in China in the past two years.

“The first two conditions block luxury brands such as Audi and BMW, which typically have large engine-displacement, expensive vehicles. However, it is the third condition that all foreign brands struggle to meet. Continue reading ›