Are Luxury Car Sales In Deep Trouble?

Just as the auto industry struggles to remain afloat, so do the segments it's made up of. And luxury car sales are no exception. Since, luxury automobiles are faced with a double whammy of being high priced and being gas-guzzling, are we to see their sales go from bad to worse?

Automobile and auto part sales have generally been affected negatively, owing to high gas prices and economic downturn, with auto stocks showing spikes only sporadically, as crude prices lower a bit. Now, when it comes to the sales of Luxury cars and trucks they've taken a hit of 11% year-to-date (YTD), while the auto sales throughout the US have been down by 18%.

Based on the figures above, it appears that luxury sales are much better than the rest of the industry and since they only account for for just about 10% of the industry's sales, they won't have much of an impact. The margins however, on all products within the segment are large, and which is what makes it valuable.

At the same time, given the shift in demand from gas-guzzling automobiles towards smaller ones, it appears that no one would go for them, but the recent announcement by the General Motors Corp of an SUV, Cadillac Escalade Hybrid indicates that auto makers have different expectations. And it seems that they might be right because the high-end products are directed towards a different target audience altogether. The target segment for luxury vehicles shouldn't have problems with affordability per se, including paying for high gas prices, while the need to acquire high-end products persists.

The factor, aside from the gas-guzzling ability that could affect the purchase of bigger automobiles is the perception that these vehicles are less environment friendly. Now while demand might exist, whether the big autos sell well or not seems to depend on a lot more than their uniqueness. But auto makers seem to have an answer to even this conundrum by producing hybrids, which have a better standing when it comes to eco-friendliness. The Cadillac Escalade hybrid seems to be proof enough, and perhaps other car makers like Toyota or Ford would follow suit if the experiment goes off well.

On the whole some rough weather does loom large over the luxury car segment, but given the efforts auto industry is ready to put in, luxury sales could sail through the storm, quite well.

Study: Vehicle Quality Dictates Customer Satisfaction!

Automobile manufacturers can benefit from repeat purchases and word of mouth recommendations for their products, if the long-term dependability rates for their products are high.

So will we see auto makers highlighting dependability as a selling point during the upcoming automotive trade events?

Deterioration in vehicle quality during the first three years of ownership strongly affects overall customer satisfaction as well as customer willingness to recommend their vehicle model, found a recent study by JD Power.

How Quality Affects Satisfaction?

This study measured problems experienced by original owners of 3-year-old (2005 model year) vehicles and found that on average, customers report experiencing 75 percent more problems in the third year of ownership than during the first 90 days.

The models with the largest increase in problem levels resulted in the highest declines in customer satisfaction as well as the probability of the owners recommending their vehicle models.

On the contrary, those models that averaged less than 35 percent problem growth fared a lot better in overall satisfaction during the three-year period. However, none of the models studied, reported lesser problems by the third year.

Where The Auto Makers Have Failed?

Although, car manufacturers aren't completely indifferent to the problems of car owners, and have indeed addressed quite a few issues, the following problems have remained unattended during the three year period, since the study began in 2005, up to now.

These problems include:

1. Excessive wind noise
2. Noisy brakes
3. Vehicle pulling to the left or right
4. Issues with the instrument panel/dashboard
5. Excessive window fogging

In fact all of these problems are the five of the top 10 problems reported industry-wide in the 2008 Vehicle Dependability Study, and that they were among the top 10 most frequently reported problems in the 2005 Initial Quality Study too.

I know how irritating noisy braking systems can be, automakers need to act fast and do something about these. Perhaps an extra attention to these issues before a vehicle launch would result in happy consumers, and consequently, increased customer satisfaction.

Why Car makers Still Deserve Kudos?

• The results also show that long-term vehicle quality has gone up by 5 percent industry-wide in 2008.


• Compared with 2007, there's been an overall decrease of 10 problems per 100 vehicles.


• Between 2007 and 2008, over 60 percent of the 38 nameplates studied showed improvements.

And out of the 19 segments studied, the midsize premium MAV segment improved the most with 36 percent. Next in line were the compact car and midsize car segments, both of which combined, accounted for over 50 percent overall industry improvement.

With the highest improvements reported in the small car segment, it's good news for consumers because these are also the segments which have become the 'hot cakes,' in the wake of skyrocketing gas prices and a wobbly economic scenario.

Vehicle Dependability Scorecard

For the 14th time in a row, Lexus ranked highest in vehicle dependability, improving by 25 problems per 100 vehicles since 2007 to achieve a score of 120 PP100.

The following graph shows the first 23 brands by rank.

The figure below shows the top three models for each of the car segments.
The chart below shows the top three models for each of the Truck/Multi-Activity Segments (MAV).


So while car makers fix their products, you might want to take a peek into the hunting ground for car buyers these days.

Autobook Review: “Time for a Model Change:.."

All riled up and overstressed, the auto industry as it sails through the intimidating high tide of economic battery, alarmed and defensive automakers attempt to salvage the best out of the bad times. This also seems to be an opportune moment for a review of the industrial events as they unfold, and to gain insights in to the hows and whys. And then, to march ahead with a perked up grit, coupled with an approach that signifies a paradigm shift, perhaps.

Authored by Graeme P. Maxton and John Wormald, both seasoned industry veterans, the book “Time for a Model Change: Re-engineering the Global Automotive Industry" delves deep into the unsystematic thinking, and unsynchronized approach that ails the industry as a whole, both the auto manufacturers and the auto parts sector.

The development of the automotive industry has turned out to be the one of the most significant industrial phenomenon of the previous century, that's impacted the society like no other. And it continues to be one, as it makes up for more than 11% of the GDP of Europe, North America, and Japan. This means that a one in nine people are employed by the industry.

The reader, throughout the journey of its reading would encounter broad, new, practical, critical, and far reaching recommendations meant to ensure the industry's sustainability, by satisfying its myriad stakeholders.

The book takes the reader on and intriguing voyage bit by bit, here's the rundown of the contents.

1. From automania to maturity: in the main markets at least


2. The problems that can be fixed: dealing with noxious emissions, traffic accidents and congestion


3. The global resource challenges: energy and space


4. A global industry: the changing international order


5. The supplier industry: the catalyst for the profound changes to come


6. The downstream sales and service sector: the coming revolution


7. When the numbers don’t add up: an industry that doesn’t earn its keep


8. Choosing a future for the automotive industry


9. Time for a model change

The content is comprehensive and thoroughly researched, just as you would expect from the ace analysts. The critical analysis exposes the fallibility of the present system, but not without several eyeopening ideas as solutions. Further, since the coverage presents the automobile industry's overview as a whole, and not its fragments, the text has universal appeal. For instance, the aftermarkets are an ever expanding segment but are still fuel by obsolete standards of retailing. The authors explain this and point out the opportunities that lie within the sector.

All in all, the book appears to be a must read for one and all associated in any way with the industry, not to mention all those who're simply interested.

The book's details follow:

Title: Time for a Model Change: Re-engineering the Global Automotive Industry

Publisher: Cambridge University Press (December 6, 2004)

ISBN-10: 0521837154

ISBN-13: 978-0521837156

You can purchase it either from Cambridge.org or Amazon.com.

Happy Reading! :-)

You might want to read the previous review as well, the following link will take you there: Autobook Review: “Six Men Who Built the Modern Auto Industry”

AutoEvent: Sydney Truck Show 2008

Formally known as the National Expo – Trucks & Commercial Vehicle, the Sydney Truck show or NTCVE, is all set to be Australia's information and business platform for leading companies manufacturing heavy, medium and light vehicles.

Come August 7, 2008 (the show's opening) and it would feature a broad range of state-of-the-art commercial vehicles (light and heavy) and automotive parts, from some of the biggest names in the industry like Hyundai, Volkswagen, and Renault. The show provides an ideal B2B ambiance for business and it claims to have been the largest truck show in Australia's history, with about 23,000 sqm of indoor exhibition space.

Exhibits to Feature

With more than 250 participating companies you will see 1000’s of products, vehicles, services and equipment.

Expect to see heavy, medium and light commercial vehicles, right from panel vans through heavy haulage operations up to B-double and road train specifications.

As for automotive parts and components, there would be side trailers, tires, bodies, IT, fuels, lubrication system supplies, numerous aftermarket supplies & accessories and a host of services.

Some new releases to be showcased there would be new model trucks & a hybrid form the manufacturer "Hino." The new 714 Hybrid is a second hybrid truck release from the company, which is also a reflection of a changing face of commercial automobiles. The company emphasizes that it's committed to sustainable transport solutions.

Another, hybrid project to feature is the "Argosy Hybrid." While its trials would only commence in September 2008, the truck meant to be a shorthaul, linehaul and interstate road freighter is expected to reduce fuel consumption and emissions output by 25 percent when it goes live.

How You Can Benefit From It?

The show is primarily aimed at business buyers and is a B2B event. Since there's a large variety of exhibitors and products, you can pick and choose. More importantly, the show features upcoming and state of the art technologies, which too should help you to make profitable investments for the future.

Typical audience profiles to the show entails, Government Departments, Corporate & Institutions, Fleet Owners, Travel & Tour Operators, Owner Drivers, Dealers & Resellers, Cargo / Parcel Movers, Service & Workshop Owners etc.

The statistics for the last year's event also reveal that it was quite a hit, here are some facts.

Of those who visited the show, 52.7% were decision makers, authorized to purchase. Another 47.3% comprised those who were authorized to recommend purchases.

While, 43.6% visitors placed direct orders, 98.7% of exhibitors reported that new customers had placed orders with them.

Key Details

Show Name: National Expo – Trucks & Commercial Vehicle a.k.a. The Sydney Truck Show

Dates:

Thursday August 7, 2008; 9:00am – 5:00pm
Friday August 8, 2008; 9:00am – 5:00pm
Saturday August 9, 2008; 9:00am – 4:00pm

Venue:

The ‘Dome’ and Halls 2 & 3,
Homebush Exhibition Centre,
Sydney Olympic Park

Contact Details:

Exhibition Management Pty Ltd
179 Park Street (PO Box 1192)
South Melbourne Vic 3205
Telephone +613 9699 4699
Email: info@exhibitionmanagement.com