Nissan just opened a new plant in Brazil, with capacity to make 200,000 light vehicles per year. Nissan has built the Livina/Grand Livina MPVs and the Frontier pick-up in a plant owned by Renault in the southern part of the country. With the new facility, they will make the March and Versa in Brazil. Previously, they were imported from Mexico, but when Brazil set limits on vehicle imports from Mexico in 2012, they had to change their strategy.
The new factory, which was built in 36 months, is critical for Nissan to reach its objective of 5% market share in Brazil by 2016. During the opening ceremony for the new facility, Brazil born Carlos Ghosn, the Renault/Nissan alliance CEO, reinforced that Nissan wants to be the best selling Japanese make in Brazil. Last year, Nissan’s market share was 2.2%, behind Toyota (4.9%) and Honda (3.9%).
That is not an easy task considering consumers purchases are slowing and more OEMs are entering the market, increasing competition. Chery and BMW will also open factories in Brazil this year (BMW does not compete against Nissan). Next year, Fiat and Honda start making light vehicles in a second plant in the country.
There is no doubt that the situation in South America is very challenging. Ghosn said that the potential of the Brazilian market justifies the investment of US $1.5 billion, including an engine plant. IHS Automotive has just reduced the production forecast for Brazil in 2014 by 6.6%, to 3.2 million light vehicles, compared with a 9.6% reduction for Argentina and 73.6% for Venezuela.
The first Nissan to be made at the new plant in Resende is the March, followed by the Versa later this year. We anticipate that Nissan’s new B-CUV, based on the Extrem concept car, is also going to be built there. It is slated to be the official car of the 2016 Olympic Games, which will take place in Rio de Janeiro. Nissan cannot use the World Cup, which Brazil hosts this year, for its marketing efforts because Hyundai sponsors Fifa and Volkswagen sponsors the Brazilian national team.
Nissan is still a very small OEM in South America and there is potential to grow. In 2012, for example, the Versa and the March reached the dealer network from Mexico and boosted the make’s sales. Consumers are eager for novelties, what we can observe by the success of the Hyundai HB20 and, in a lesser extent, Toyota Etios and the March itself. There is also potential to export vehicles to Argentina, where the market should recover in the long term. Our light vehicle forecast shows a drop of 30% for Argentina’s sales this year, but a growth of 8.5% in 2018.
If we look at how aggressive Renault has been in the Brazilian market, there is no reason to doubt Ghosn’s words and his plans for Nissan.
Posted by Augusto Amorim, Lead Analyst – South America Forecasting, IHS Automotive (04.17.2014)
As the automotive world focuses on the GM recall crisis, other stories are getting less visibility than they otherwise would. One of these is Jeep and its amazing start to 2014. Consider the following:
- In the first three months of 2014, Jeep dealers delivered 145,839 new trucks, almost 45,000 (45%) more than a year ago, the largest increase of any brand in the industry (other than the 331% increase at low-volume Maserati).
- Jeep captured 3.9% of the U.S. market in the first quarter, up 1.2 percentage points from a year ago (Jeep’s 2013 share was 3.2%).
- In March, Jeep outsold Volkswagen, Kia and Subaru and was within 10,000 sales of Hyundai, even though Jeep does not sell any cars.
- Jeep enabled Chrysler LLC to record a year-over-year share increase in the first quarter, the only one of the “domestic” manufacturers to do so.
- Jeep’s success has also helped propel Chrysler LLC to 48 consecutive months of year-over-year sales increases, a string of gains no other manufacturer can match.
- Each Jeep model has recorded a year-over-year sales increase in every month so far in 2014, despite the launch of the all-new Cherokee late in 2013 which normally would lead to cannibalization of contiguous models.
Below are several ways in which Jeep has achieved these successes:
- Jeep has a clear and strong brand image – reflecting genuine off-roading, toughness and patriotism - that has been in place for over 50 years; its products and marketing efforts by and large have been consistent with this positioning.
- There is no direct competitor to Jeep (Hummer had the potential to be one). The only other brand focused exclusively on the off-road market is Land Rover, which targets a much wealthier buyer.
- Jeep now has two and a half well-established models that can stand on their own and act as foundational pillars for the brand. The Grand Cherokee is well-entrenched as the flagship, ultimate off-roader; the Wrangler carries a unique aura and appeal that stretch deep into the American psyche; and, the Cherokee (the half vehicle) has a history but is not yet as established as the other two. Impressively, each of these models has carved out its own niche and there is minimal overlap across the three positions.
- The timing of the Cherokee launch could not have been any better, so perhaps Chrysler is thankful for the delays to what should have been a summer 2013 launch. The Cherokee eventually was launched in the fall, right before one of the worst winters in memory, making 4-wheel drive that much more appealing. The Cherokee was also launched during the growth of the red-hot non-luxury compact crossover segment. This category is now the fourth largest in the industry and has grown by 50% in the past five years.
Despite such growth, Jeep could probably do more. The propensity of Jeep owners who returned to the market in 2013 to stay loyal to the brand was 37.5%, below the non-luxury average of 50.1%. Admittedly, Jeep is at a disadvantage here, since Jeep owners who want to migrate to another body style have no choice but to leave the brand. Some Jeep owners, though, stick with an SUV but leave the make.
Even though Jeep currently markets five products, more are on the way. A small crossover slotted under the Wrangler arrives later this year, and a three-row truck positioned above the Grand Cherokee comes in 2015. Since these products are entering segments not currently served by Jeep, much of this business should be incremental, assuming the brand can continue to minimize cannibalization.
Source: All sales data are from Automotive News; loyalty data are from IHS Automotive (Polk new vehicle registration data)
Posted by Tom Libby, Solutions Consultant, Loyalty Practice, IHS Automotive (04.07.2014)
A new study by the Pew Research Center on millennials (age 18-34, also known as Generation Y) provides financial data that support new vehicle registration data collected by IHS Automotive/Polk. According to the Pew study, millennials have more student loan debt, poverty and unemployment than both the preceding generations did at the same age, and, predictably, lower levels of wealth and personal income as well.
With less buying power, millennials have been less likely to purchase a new vehicle, and this is reflected in the new vehicle registration data. Only 11.2% of all new vehicle registrations in 2013 were to millennials, the lowest level in six years and down from 14.1% in 2008. Also, in each of the last ten months of 2013 this metric was down substantially from 2012, although the year-over-year difference narrowed in December. Whether millennials’ waning interest in cars is caused by their dire economic conditions or merely correlated with them will not become clear until the millennials’ finances improve. It is possible millennials may in fact be less excited by cars than their predecessors and instead be obsessed with the digital world (the Pew study says 61% of millennials sleep “next to” their cell phones).
The Pew study also indicates millennials are more independent than their predecessors and less attached to or associated with institutions. Half describe themselves as politically independent and 29% do not associate themselves with any religion; these results are higher than those for any similar-age generation in the last twenty five years, according to Pew. While these results would suggest today’s millennials are less attached to a particular brand of products including vehicles than their predecessors in prior generations, IHS/Polk loyalty data do not support this hypothesis. In fact, trended IHS/Polk loyalty data suggest younger buyers’ make-level loyalty has been increasing over the past six years. For each of the three youngest age categories (18-24, 25-34, and 35-44), loyalty to a make has increased since 2008. While fewer millennials are buying new vehicles when compared to their predecessors, those who do are in fact more loyal to their original make.
Posted by Tom Libby, Solutions Consultant, Loyalty Practice, IHS Automotive (03.21.2014)
February U.S. car sales were driven in part by the appeal of mainstream compact crossovers. These vehicles offer the ideal combination of value for the money, good fuel economy, car-like driving characteristics, and SUV-like functionality. Midsize as well as sub-compact crossovers offer some of these advantages but not all of them. Compact crossover sales in February drove industry results at the segment, model and make levels.
At the segment level, the February results were extraordinary. Non-luxury compact crossovers captured 14.8% of all February sales, up from 11.7% a year ago and 13.8% for all of 2013. Non-luxury compact CUV deliveries jumped 27% from last February, while the industry was flat. Small mainstream crossovers are now the third largest category in the industry among IHS’s 30+ segments, trailing only non-luxury midsize cars and non-luxury compact cars, and small crossovers are not that far behind compact cars.
Among the 18 small mainstream crossovers now on the market, 15 enjoyed year-over-year sales gains in February, and several of the winners played a major role in their respective brands’ February successes. Sales of the all-new Jeep Cherokee were close to 12,000, up more than seven-fold from that of its predecessor, the Liberty, a year ago, and the Cherokee propelled the Jeep make to a 47% year-over-year gain, the largest in the industry. Chrysler was the only “domestic” automaker to register a gain in February. Remarkably, every other Jeep model also improved in February. A lack of cannibalization by a strong new model such as the Cherokee is rare.
Like the Cherokee, the Nissan Rogue had a terrific month, and pulled its brand along with it. The redesigned Rogue, now available with a third row of seats and more distinctive styling, had a 72% sales gain in February, and the Nissan Division climbed 17%. In this case, though, there was some cannibalization, as both the Murano and Pathfinder slipped (though the Murano’s decline was negligible). Nissan’s corporate U.S. share jumped by almost a point and a half in February to 9.7%, and, in a rare occurrence, the company out-sold American Honda.
There were similar results for the Buick Encore (up 93%) and the Buick Division (up 19% while the other three GM makes were all down) as well as for the Subaru Forester (up 95%) and Subaru itself (up 24% with a half-point share gain). Amazingly, not only did the Subaru XV Crosstrek not suffer in the wake of the Forester’s gains, the XV climbed 69% itself in February. These two Subaru models are a potent combination in the small crossover category, and help to explain Subaru’s ongoing success in the U.S.
Some compact crossovers’ successes in February pulled their respective makes up from what would have been dismal monthly results. The Mitsubishi Outlander Sport was up 43%, while every other Mitsubishi model that was also on the market a year ago dropped. Similarly, the Mazda CX-5 was up 72%, in contrast to the decline of all other Mazda models except the redesigned 6. Because of the appeal of these models, Mitsubishi and Mazda February results were only marginally down from a year ago.
Ironically, the segment sales leader for the month and year-to-date, the Ford Escape, suffered a 4% sales decline in February, but it was being compared with a strong year-ago total of 24,000+ units. One of the other three models retreating in February was the Tiguan, which is nearing the end of its life cycle. Its February deliveries of only 2,019 were the fewest in the segment and help to explain Volkswagen’s recent struggles in the U.S. market.
It is unlikely the segment can continue to grow at the same pace in the next few years. All the mainstream makes are now in the segment, and before the end of 2013 we will see sub-compact crossovers hitting the market from mainstream makes such as Honda. Although these smaller vehicles will not offer the ideal combination of car and SUV features mentioned above, it is almost inevitable that their sales will eat into the compact category to some degree.Non-Luxury Compact Crossover New Sales Feb. 14 Feb. 13 Chg. % Jeep Cherokee 11,795 0 NA Subaru Forester 10,773 5,529 94.8% Buick Encore 3,078 1,597 92.7% Nissan Rogue 17,197 9,964 72.6% Mazda CX-5 9,353 5,451 71.6% Subaru XV Crosstrek 5,489 3,258 68.5% Mitsubishi Outlander Sport 2,348 1,644 42.8% Toyota RAV4 16,451 13,329 23.4% Jeep Compass 4,354 3,776 15.3% Chevrolet Captiva Sport 4,452 3,867 15.1% Hyundai Tucson 3,956 3,444 14.9% Kia Sportage 2,669 2,334 14.4% Dodge Journey 7,963 7,530 5.8% Chevrolet Equinox 21,587 20,649 4.5% Honda CR-V 20,759 20,668 0.4% Ford Escape 23,145 24,110 -4.0% GMC Terrain 9,297 9,802 -5.2% Volkswagen Tiguan 2,019 2,533 -20.3% All models 176,685 139,485 26.7% Compact CUV share 14.8% 11.7%
Posted by Tom Libby, Solutions Consultant, Loyalty Practice, IHS Automotive (03.07.2014)
In “Twilight of the Brands” in the February 17/24 issue of “The New Yorker,” James Surowiecki discusses the challenges facing brands in today’s information-rich U.S. economy. Surowiecki focuses on Lululemon Athletica, a yoga apparel company that quickly became the darling of the industry and then tumbled almost overnight because of negative customer feedback. Such instantaneous customer reaction can propel a company to new heights or spell its doom in the blink of an eye, according to Surowiecki. He also claims “information overload” is a myth, that consumers in fact are adept at efficiently obtaining the information they want. This plethora of information available via the web is increasing the possibility that consumers will switch brands, reducing brand loyalty and rendering brands more fragile. Proof of brands’ reduced clout is the lower premiums consumers are willing to pay for them.
Several challenges mentioned by Surowiecki exist in the U.S. light vehicle industry. New car customers today have a huge amount of information at their fingertips, including (among other things) what the dealer pays the manufacturer for a particular model, what the model is actually selling for today in any given zip code, actual incentives, and actual customer feedback about the vehicle and its attributes. With such information seemingly everywhere and available in two seconds via the web, car shoppers increasingly will gravitate to that car or truck that provides the most value, with the brand playing a less important role.
But the new vehicle industry does not readily fit with some of the descriptions provided by Surowiecki. Unlike the yoga apparel industry, the automobile industry is exceptionally capital intensive, with billions of dollars needed to design, engineer, manufacture, assemble and sell new vehicles. The barriers to entry are huge, so few makes actually do enter and survive. The table below shows the makes currently on the U.S. market, along with their U.S. launch years and the number of years they have survived. The average amount of time a new vehicle make has been on the U.S. market is 48 years; only four makes have been on the market less than ten years, and only five less than 20 years. In other words, few makes have recently entered the market and survived. One of these is Ram, which is not completely new but rather a semi-new name (derived from an existing model name) for an existing set of light trucks. Tesla has done well in the past year in terms of sales, but its financial position is not clear. Smart is still here but struggling, with 2013 sales down 7% (in a market up 8%) to just 9,300 cars. Two of the four makes launched in the past ten years are not yet “out of the woods.”Longevity of New Vehicle Makes Make U.S. Launch Year Number of Years on the U.S. Market Ford 1903 111 Cadillac 1903 111 Buick 1904 110 GMC 1910 104 Chevrolet 1912 102 Dodge 1914 100 Lincoln 1920 94 Chrysler 1924 90 Jeep 1946 68 Jaguar 1955 59 Volkswagen 1955 59 Volvo 1959 55 Toyota 1959 55 Nissan (Datsun) 1959 55 Mercedes-Benz 1960 54 Mazda 1972 42 Audi 1973 41 Honda 1974 40 BMW 1975 39 Porsche 1975 39 Subaru 1975 39 Ferrari 1978 36 Rolls-Royce 1978 36 Bentley* 1978 36 Mitsubishi 1982 32 Maserati 1984 30 Lamborghini 1985 29 Aston Martin 1986 28 Hyundai 1986 28 Acura 1986 28 Land Rover 1987 27 Infiniti 1989 25 Lexus 1989 25 Kia 1993 21 MINI** 2002 12 smart 2008 6 Tesla 2008 6 Fiat** 2011 3 RAM 2012 2 Average 48.1
*Bentley is estimate
**MINI and Fiat years on market prior to most recent launches are not included
Source: 1996 Automotive News Market Data Book, miscellaneous industry sales reports
Surowiecki uses Hyundai as an example of a make that quickly climbed the sales charts, going from “being a joke to selling four million cars a year." Quickly may not be the correct word – Hyundai launched in Seoul in 1967 and in the U.S. in 1986 (though I admit its rise to one of the largest global automakers in 47 years has been remarkable).
Buyers are still paying premiums for some brands and models in the luxury and non-luxury markets. The Hyundai Genesis competes in the same segment as the Mercedes-Benz E-Class, but the E-Class has a current transaction price in Southeastern Michigan of almost $49,000, approximately 23% above the (comparably equipped) Genesis’s transaction price. At the model level, a 2014 Honda Civic sedan is now selling for an average transaction price of $18,469, 11% above a comparably-equipped Dodge Dart. (All transaction price data were obtained from Edmunds.com on February 20, 2014.)
Surowiecki says, “the percentage of brand-loyal car buyers has plummeted in the past twenty years.” IHS Automotive make-level loyalty for the calendar years 2008 through 2013 is shown below; it appears to be increasing rather than declining (data prior to the 2008 calendar year are not readily available). These results are derived from actual registration data (not sample data) collected by Polk, recently acquired by IHS.
For the auto manufacturer, loyalty remains critically important. Retaining an existing customer within the same make is much less expensive than conquesting a buyer from a competitive make. OEMs utilize several tools to improve make-level loyalty, including leasing (21% of all new vehicle transactions in 2013 were leases) and enhanced relationships with existing customers via the web.
The days of buying one brand because “we’ve always bought xx” are over, for sure. The internet is changing much of the new vehicle industry in profound ways, including the retail sales process. But brand still plays an important role, in both the luxury and non-luxury arenas, and those makes with substantial clout in the marketplace will benefit.
Posted by Tom Libby, Solutions Consultant, Loyalty Practice, IHS Automotive (02.20.2014)
Given all the attention recently focused on Tesla, I thought it would be interesting to see who is buying the Model S. Specifically, what are customers trading in for the Model S, or what other vehicles do Model S buyers have in their garage if they are adding to their fleet? The Model S conquest data, derived from Polk new vehicle registration data, are fascinating.
There are two ways of looking at the data. First, the pure conquest data show that the Model S is conquesting owners of Toyota (brand) vehicles more frequently than owners of any other brand on the road, followed by Mercedes-Benz and BMW owners (see table below). The Toyota conquests by the Model S are being driven by the Prius, which is the number one model conquested by the Model S. The Highlander and Sienna are fifth and sixth on the list. Interestingly, the Leaf ranks number seven on the model list, and the fact that the Prius and Leaf both rank so high on the Model S conquest list suggests that the S now gives hybrid/EV-inclined purchasers an opportunity to move up to a vehicle that is:
- clearly a hybrid or electric, like their current model
- more luxurious and upscale than their current car
- more stylish as well
The second approach to the conquest data looks more deeply at the data and by so doing provides a more useful picture of the actual marketplace dynamics. This second approach compares a model’s conquest share of all conquests with the same model’s return to market share of all customers who returned to the market. In other words, is the model in question being conquested by the Model S at a faster or slower rate than the overall rate at which owners of that model return to the market? This calculation results in an entirely different list of top ten makes. The ten brands which are most likely to be conquested by the Model S, when compared to the rate at which their customers return to the market in general, are all either exotic or premium makes. Also, the conquest/return to market ratios for these makes are exceptionally high, suggesting they are much more likely to move to the Model S than the typical customer coming back into the marketplace. These data point unequivocally to the conclusion that Model S buyers are very well-off financially.
In summary, while the simple conquest data suggest the high-volume mainstream and premium makes are losing the most customers to the Model S, a comparison of conquest data with return to market data reveals that, in fact, the exotics are moving to the Tesla model at rates far above those of other brands.
Posted by Tom Libby, Solutions Consultant, Loyalty Practice, IHS Automotive (02.06.2014)
Do you think a Jeep Grand Cherokee is a direct competitor of a Porsche Cayenne? Would you add the Volkswagen Touareg to the competitive set? Well, many Brazilian consumers do. And the results may be surprising.
Let me start with the winner in the SUV/crossover segment. Land Rover is the preferred brand. The Range Rover Evoque sells over three times more than vehicle number two, the Volvo XC60. And the Freelander (LR2 in the U.S.) comes right in third place. Looking one length class above, the competition is fiercer, but the Discovery (LR4) has the highest volume. Finally, in the large segment, Land Rover sells five Range Rovers for each Mercedes GL-Class that leaves the dealer network.
There is no doubt Land Rover is doing well all over the world, so it is natural that it is the market leader in Brazil among off-road vehicles. However, what is striking to me is how well the Porsche Cayenne does. Last year, according to preliminary numbers, 622 Cayennes were registered ahead of Mercedes ML-Class, BMW X5 and X6, Audi Q7 and Volkswagen Touareg. Our light vehicle forecast for next year accounts for 571 Cayennes, but Porsche will sell even more SUVs thanks to the Macan.
Porsche has only five dealers in Brazil, a country larger than the continental U.S. Land Rover has 35 dealers, while BMW has 38 and Mercedes has 37. The most "affordable" Cayenne costs 329,000 Brazilian reais (US$ 138,125). An Audi Q7 starts at R$ 277.300 (US$ 116,420) and a Lexus RX is priced at R$ 256.000 (US$ 107,477).
As in many other countries, SUVs and crossovers are the must have vehicle of the elite in Brazil. It is also the fastest growing segment, especially considering smaller models such as the Ford EcoSport and the Chevrolet Tracker. Without any consumer research, I can tell image counts a lot in this segment. SUVs make drivers look more powerful and richer.
There is still a lot of inequity in Brazil, where 10% of the population hold 43% of the country's income. Although Brazil does not have as many billionaires as China, Russia or India – according to Forbes, there are 46 billionaires in Brazil compared to 122 in China –, those who have money like to spend in very expensive goods. That explains why an entry level luxury vehicle is not the best seller in a brand's portfolio. The Audi A4 outsells the A1. The BMW 3-Series is the most popular BMW in Brazil, ahead of the X1 and the 1-Series. And Mercedes C-Class registrations are double those of the A- and B-Class combined.
Another of the Brazilian market characteristics that just cannot be explained through logic.
Posted by Augusto Amorim, Lead Analyst – South America Forecasting, IHS Automotive (01.20.2014)
When Google released its Zeitgeist 2013, a compilation of the most googled terms of the year, the Hyundai HB20 reached the top spot for the Brazilian automotive industry. It was followed by the Chevrolet Onix and Chevrolet Prisma. The new Volkswagen Golf and the Volkswagen Beetle (locally called Fusca) rounded out the Top 5. The HB20 hatchback, the Onix and the Fusca were launched late in 2012.
There is no doubt the HB20 has written its success story in Brazil’s automotive history. With 3,312 units registered in its first month in the market (October 2012), it had over 122,000 units registered last year. Polk, now IHS Automotive, forecasts that more than 125,000 units will be registered in 2014, in line with many of the vehicles made by more established brands in Brazil. Hyundai built a factory with a 150,000-unit capacity just to make the HB20, and it cannot keep up with demand. Earlier in 2013, a sedan version was added to the assembly lines, and Hyundai has already added a third shift.
Hyundai did loads of consumer research and developed the HB20 just for the Brazilian market. With potential to be successful in other countries as well, it is not exported at all. The Korean make ended up creating a very good looking car that competes in the so-called “popular” segment for offering a 1.0-liter engine, but that also competes with more premium small cars with a 1.6-liter engine.
By the way, the small hatchback segment in Brazil is the largest and most competitive one. Almost 37% of all registrations fall under this category, where 25 vehicles try to steal sales from each other, including Brazil’s best seller for the last 28 years, the VW Gol. The new model is challenging make loyalty: we estimate that for each 100 HB20 that Hyundai sells, VW loses 22 sales.
The state of São Paulo led Google’s search, which is very understandable. This is the largest state in the country by population, where more light vehicles are registered than in the entire country of Argentina. The city of São Paulo also led the search, which is also very understandable. It is the country’s largest and richest city. The surprises popped in the second places: the state of Mato Grosso and the city of Bauru, in the São Paulo state.
Out of 27 states in Brazil, Mato Grosso is the third largest in area, but only the 19th in population. Most of the land is used for agriculture, and it is the country’s biggest soy and seed cotton producer. Mato Grosso has the eighth highest GDP per capita. In Bauru, 362,062 people live there, which ranks it as the 65th largest city in Brazil, well behind other capitals such as Rio de Janeiro and Salvador. In both Mato Grosso and Bauru, pick-up trucks are successful for their agricultural vocation.
But what really pushed the HB20 to the top of Google’s list? Hyundai’s confusing marketing strategy. First, there is no simplified URL for Hyundai such as: www.hyundai.com.br (while Fiat and Volkswagen have: www.fiat.com.br and www.volkswagen.com.br). So when a consumer tries the most basic web URL and gets and error message, Google becomes the natural alternative. The second reason is that there is a dealer network only for the HB20, and a different network for the imported vehicles. A store selling a Sonata, for example, cannot sell an HB20 and vice-versa. Naturally, the locally built vehicles do not share the same website as the imported ones. If someone is visiting www.hyundai-motor.com.br, he or she is redirected to linhahb20.com.br to get HB20’s information and schedule a test drive. The website does not inform price, and "preço HB20" was the most popular query. Preço means price in Portuguese.
Hyundai just made it faster to Google HB20.
Posted by Augusto Amorim, Lead Analyst – South America Forecasting, IHS Automotive (01.17.2014)