2008 Auto Industry By The Numbers
You read the news and you’d think the sky was falling tomorrow. Well, it very could be, who knows. The auto industry is proving to ride the same wave as the economy does. I have devoured research upon research that shows both sides of the coin. It showcases that the automotive companies are being hit hard, and yes this is true. Remember Chrysler just killed its leasing programs and BMW, who runs 60% of their U.S. volume every year off of leases, have been trying to urge more customers to buy, rather than lease. The dollar is weak, labor is expensive and unions are costing more money by the day. What’s more, the materials to make cars are getting more expensive due to everyone being in a slump and riding the recession roller coaster. But, at the same time, this is an election year. And election years always prove to be a down turn for the economy for a little while. The sales slumps of each automaker keep pouring in month by month on all of the news reports. Even worse, gas prices are still high and now the automakers are continuing to raise prices on their cars for 2008 and 2009 to help even out their losses.
Every month Autoblog has their usual reports on how the car companies are doing by showing the monthly sales figures. Each month has shown the big 3 falling farther and farther, so much so that it’s now pointless to even assess how much money they have lost. Every carmaker is losing money in some form or another. Except each month you see Mini taking top honors in the best sales department, and it seems Hummer takes the cake for the worst. BMW Group is usually pretty high on the list each month, while more companies that you would expect to be rising are falling.
You can’t look at the monthly numbers and expect to see an accurate printout of information that could aid you in seeing who is doing better than whom, mainly because each month is different. You need to look and see the numbers that each company did either at this same time last year or you can look at the numbers they’ve done from January to July of 2008 compared to last year. This paints a much more realistic picture that shows what is really going on.
What is really going on you ask? Well, not much. GM, Ford and Chrysler are doing horribly. Ford has increased the leasing of their trucks and some SUV’s so high to the point that you might as well rent a jet plane to fly everywhere you go. Chrysler, contrary to what the news reported, is not giving up on leases, they just deleted their in-house financing from leasing vehicles. They have a small list of banks that will lease you a Chrysler, just at higher prices due to the fact that their vehicles have horrible residual values at the end of your leasing term. GM has yet to do anything drastic, key word being ‘yet’.
General Motors has taken somewhat of a different direction on things. They have started a campaign to boost their used car sales with a website (Used Car Ambush) that uses hidden camera techniques to showcase stingy used car lots. This is an effort to push more customers to purchase Certified Pre-Owned GM products. Whether this will be successful for them is only a time-frame away. I think it’s an interesting idea. BMW, Audi, Mercedes-Benz, Lexus and now Porsche have pumped a lot of money and advertising into their CPO programs. This has been fantastic for all of them, especially BMW and Mercedes-Benz. I think I see more adverts from them on their CPO cars then I do ads for brand new cars.
Believe it or not the Germans are the only ones beating their sales numbers from the first seven months of last year. This year they have a 1.7% increase in sales. All Asian automakers have dropped 3.1% and the Americans have one foot in the grave at -17.9%. This is where we see the real picture. BMW has slipped a little (186,890/192,702), as well has Porsche (18,214/21,089). Even though BMW’s July this year saw them selling 28,977 versus 28,364 over last year. Porsche was actually only 102 units shy of tying last year’s 3,230 units. Daimler (Mercedes-Benz) did fantastic this year, thus far, at an increase of 12.6% with Volkswagen Group reporting a 0.2%. Not bad with the economy and gas prices being so horrid.
Toyota is by far the biggest loser here. This time last year they were laughing their way to the top. Now their falling over one another trying to not slip to where Ford and GM are… Toyota sales have declined a total of 7.6 percent this year, so far. The month of July alone saw them falling 18.7% as a whole. That’s not much better than Ford’s 21.3%. I see Toyota falling to Ford by the end of the year. Ford has by far more things going on to pump their bottom line, whereas Toyota still have the same stingy, not so thumping lineup. Watch out for Subaru and Honda, though. Strong sales have propelled them to being 4.5 and 3.2, respectively, better by the end of the first seven months. Honda will no doubt pass Chrysler as the fourth largest auto-brand in the U.S. Subaru is far from that, unfortunately.
As a whole the auto industry is down 10.6% from this time last year. But, if you look at the recent history of the auto industry you’ll see that it’s been doing this for a while. For instance, there are 4,000 fewer new car dealerships in this country than 20 years ago. This is due in part to bigger conglomerates putting the smaller, more local guys to shame sales wise and shutting them down.
Here is another key thing, 60% of all cars driven today are 7 years or older, while 38% are 10 years or older. How much of this accounts for classic car collectors, I have no idea, but what is pretty obvious is the fact that people are going to need new cars, and soon. Technological advancements in safety alone will basically force people to purchase newer cars. There is no doubt that in the near future the American government will start telling people they need to get newer cars in order to help the economy and also to boost road safety. I believe that the government will start taxing older cars higher and higher percentages per year to force people into new car purchases.
New car sales have been tumbling for years to come. In 1988 new car sales accounted for 63% of the market, in 1991 it dropped to 61% and by 2001 it was down to 59%. Used car sales literally picked up all of that slack. 1988 saw 23% of all cars purchased being used, that number rose to 25% in 1991 and 29% by 2001. Used cars tend to outsell new cars these days by about 3-1. This isn’t surprising with the growing trend in CPO cars, as I mentioned earlier.
One thing that is incredibly apparent here is the fact that the Germans and the Asians are making the best ground here. I’ve been saying it for years, and now it’s happening, but it was only a matter of time before people started realizing that the expensive German cars were worth the money and the cheaper Japanese and Korean alternatives were actually pretty damned good. While for decades the Germans were spending so much money to make sure their cars had the best safety and technology, the Japanese and Koreans were trying to do a similar job, just cheaper. They both succeeded, in their own ways. All the while the Big 3 thought they could continue to make crappy cars for us all and have us hooked. Look at them now. Now they’re screaming for good attention. It just goes to show, you spend money to make money. Now BMW, Porsche, Audi, VW, Toyota, Honda and Nissan, mainly, are doing more and more in America, and they’re buying up all of the land at cheaper prices and building bigger and better American HQ’s to take care of everything. Oh, and some of them are buying up the old Ford, GM and Chrysler plants they closed to open up for their own development.
Take all of this information and do with it what you will. Basically what I’m trying to say is that you can paint a different picture if you look at all of the numbers. The American auto industry has been declining for years, it just happens to be free falling faster now because of a weak dollar, struggling economy and very high gas prices. Expect, with a little help from BMW’s X6, to see August SUV sales take a little rise. At least that’s how I see it. You will see a long and slow movement towards new cars in the next 10 years because of new and vital technologies that we need to have in our cars for safety and economic purposes. Just don’t expect the average fuel mileage to really gain that much strength. The average for each automaker will take a nice rise due to the crappy CAFE standards that are being unjustly proposed.