Archive for the ‘News’ Category

NADA, consumer group fuel CAFE debate citing customer impact

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Someone is wrong.

And we may not know who until 2025.

The National Automobile Dealers Association (NADA) thinks that failing to adjust corporate average fuel economy (CAFE) standards will mean fewer Americans will be able to afford new cars.

The Consumer Federation of America (CFA) says leaving targets in place will help Americans more.

And both organizations contend they speak for consumers as the federal government re-examines a mandated 54.5 mpg CAFE target for 2025 for all automakers.

Of course, they aren’t the only ones debating fuel-economy standards, just two of the most recent.

What consumers want

“We know something about what consumers want,” Peter Welch, NADA president, said recently during at Center for Automotive Research Management Briefing Seminars session in Traverse City, MI. “Affordability is everything; it’s the whole game from the consumers’ perspective.”

Meanwhile, the CFA cited a survey it said shows that 79 percent of Americans support current targets the group says will put $626 back into consumer pocketbooks each year.

“One reason for the widespread support of higher standards is that a large majority of those intending to purchase a motor vehicle in the future think that the vehicle’s fuel economy is important,” said the CFA in a press release announcing results of a July survey of 1,008 American adults.

But that doesn’t make NADA less skeptical about the impact of CAFE standards on new-vehicle costs.

Who’s right, who’s wrong?

“Every day at dealerships, people wonder if they can afford the monthly payments of a car they are considering buying,” said Welch, citing a $34,000 average transaction price of a new vehicle – up 57 percent from 20 years ago. “We need to make it possible for people to afford cars.”

The EPA says the 2025 regulations would cost $875 per vehicle, and that increased costs would be offset by fuel savings of $1,650 over the life of a vehicle, reports WardsAuto, referring to one of the federal agencies that is gathering input for a review of existing CAFE standards.

“But NADA and others predict the figure would run into the thousands of dollars,” WardsAuto reported.

“Customers are smart, do the math and know how to stretch a penny,” said Welch. “Getting it back in four or five years is not how customers think at dealerships.”

‘A guy trying to buy a car’

Meanwhile, a survey by the Alliance of Automobile Manufacturers (AAM) indicates that about two-thirds of consumers are willing to pay under $2,500 to meet government fuel-economy standards, “which would likely not cover the cost of updates.”

Based on the survey, “even if adults were given additional money when purchasing a vehicle, more would choose extra safety features over increased fuel efficiency,” the trade group said. The alliance, which represents a dozen large auto manufacturers, has called for a compromise that would “modernize” and ease CAFE targets, suggesting that it would be “the right thing to do.”

“You look at the world of one of [NADA’s] dealerships,” Mitch Bainwol, the alliance’s president and CEO, told WardsAuto, “and there’s just a guy there trying to buy a car.”

The EPA has said it will make a final decision on any changes in the standards by April 1, 2018.

Mainstream vehicles closing the appeal gap with premium models

Mainstream vehicles are getting more appealing.

At least that’s what J.D. Power’s 2017 Automotive Performance, Execution and Layout Study (APEAL)

purports to show.

The rise is due to rapid improvements in vehicle technology and safety features, making them more comparable to premium products, according to the study.

The Chrysler Pacifica ranked as most-appealing minivan.

The Chrysler Pacifica ranked as most-appealing minivan.

This year’s index showed that 32 brands averaged 810 points on a 1,000-point scale with 19 of 32 making positive gains in their performance, compared with 2016, said the report from J.D. Power (JDP). Mainstream brands averaged 804 points and premium brands averaged 845.

However, that 41-point difference is nine points less than it was in last year’s study, JDP said.

‘Better and better’

“Many automakers are getting better and better at giving consumers what they want in a vehicle,” said Dave Sargent, vice president of the well-known data research company.

“The industry is doing a very good job of creating vehicles customers like across every segment, and the APEAL study identifies why this is. One clear reason is that non-premium vehicles are increasingly offering technology and safety features found in premium vehicles.”

Top mainstream brands

Seven mainstream brands – MINI (838), Honda (820), Ford (819), Chrysler (815), Ram (815), Nissan (811) and Chevrolet (810) – scored at or above the industry average. And five more brands – Volkswagen (809), GMC (808), Kia (808), Buick (805) and Subaru (805) all scored above the mainstream average. Seven non-premium brands scored below the segment average in the study.

Top premium brands

Among premium brands, Porsche (884), Genesis (869), BMW (855), Audi (854), Mercedes-Benz (851) and Lincoln (849) all scored above the premium average, the JDP study reported. Another seven premium brands – Cadillac (843), Lexus (842), Jaguar (838), Land Rover (837), Volvo (836), Infiniti (832) and Acura (812) – scored above the overall industry average. Despite the APEAL gains by non-premium brands, 12 of the top 13 still were premium brands, the study showed.

Model-level winners

At the model level, Volkswagen AG came up big on the strength of its premium Audi and Porsche brands, despite finishing just under industry average overall. The six VW winners were Audi A3, Audi A4, Audi A7, Porsche 911, Porsche Cayenne and Porsche Macan.

Brands that won multiple awards, along with their winning models, were:

  • BMW AG (4) – BMW 2 Series, BMW X1, MINI Clubman and MINI Cooper
  • Ford Motor Co. (3) – Ford F-150, Ford Super Duty and Lincoln Continental
  • General Motors Co. (3) – Cadillac Escalade, Chevrolet Bolt and Chevrolet Tahoe
  • Hyundai Motor Co. (3) – Kia Cadenza, Kia Niro and Kia Soul
  • Fiat Chrysler Automobiles (2) – Chrysler Pacifica and Dodge Challenger
  • Honda Motor Co. (2) – Honda CR-V and Honda Ridgeline
  • Nissan Motor Co. (2) – Nissan Altima and Nissan Murano

Based on responses from almost 70,000 purchasers and lessees of new 2017 model-year vehicles after 90 days of ownership, the APEAL study measures owners’ emotional attachment and level of excitement across 77 attributes, ranging from “the power they feel when they step on the gas to the sense of comfort and luxury they feel when climbing into the driver’s seat,” said JDP.

The latest results of the survey reflect the vehicle-manufacturing equivalent of walking a tightrope.

“Manufacturers are making ever-higher quality vehicles,” Sargent said, “but this is not coming at the expense of performance, styling, utility or features.”

Visit the J.D. Power website for more details of the 2017 APEAL study.

Another swing for the fences before closing the summer scorebook

Almost time to close the scorebook.

But not before your post-season push and a wrap-up of a Sizzlin’ Summer that hasn’t been, well, quite as sizzlin’ as some hoped it might be after record-setting sales last year.

“The comparison with 2016 … causes 2017 to appear worse than it really is,” wrote analyst Timothy Cain in The Truth about Cars, but that doesn’t mean it wasn’t a struggle. Through June, total light vehicle sales had slipped 2.1 percent for the first half of the year, and July continued that trend.

IL-BLOG_70404-12 (Sizzlin' Summer III Logo)_300x300And even that level of sales came with a cost for the industry in the form of incentives.

“Auto sales are presently being propped up by average incentives equal to roughly 10 percent of the average transaction price,” wrote Cain. That average transaction price is pegged at around $33,000 by Bankrate.com and more than $34,500 by Edmunds.com.

Of course, this means that dealerships must make the most of the opportunities they get, whether they’re selling new or used vehicles.

Our baseball-themed Sizzlin’ Summer III email series aimed to help:

The First Pitch proposed adding Santander Consumer USA to your team as a “smart roster move.”

Game On showed dealerships how to come out consistent winners with the Dealer Extranet.

Homerun Ball was about hitting deals out of the park more often with the Rehash Tool.

League Leader sent up Direct Mail as a designated hitter to achieve high-average results.

All-Star Team suggested your ASM should be a major player in your sales lineup.

In the Zone featured the new Lead Exchange Program from RoadLoans.

Clutch Hit told how the SC Dealer Advocacy group aims to drive home win-win solutions.

These tools, products, programs and people empower dealers to swing for the fences through the end of summer, the fall and beyond.

We’re (world) serious.

Automotive ‘icon’ Fiat 500 finds parking place in art museum’s collection

The Fiat 500 is a piece of work.

Art work, that is.

Just ask the Museum of Modern Art (MoMA) in New York which has added a 1968 Fiat 500 in original condition to its small collection of automobiles that cross over into the world of art.

“The Fiat 500 is an icon of automotive history that fundamentally altered car design and production,” said Martino Stierli, The Philip Johnson Chief Curator of Architecture and Design at MoMA, when the museum announced the Fiat 500’s addition earlier this month.

Iconic Fiat 500 “has never been just a car.”

Iconic Fiat 500 “has never been just a car.”

“Adding this unpretentious masterpiece to our collection will allow us to broaden the story of automotive design as told by the museum,” Stierli said of the vehicle, the eighth in the MoMA collection.

The “Berlina,” which was produced from 1965 through 1972 “exemplifies a clear expression of form following function,” said the museum in a press release about the acquisition.

In addition to the Fiat 500F Berlina, commonly referred to as the Cinquecento, the collection comprises the Cisitalia 202 GT Car (1946), a Jeep Truck: Utility 1/4 Ton 4 x 4 (M38A1) (1952), a Volkswagen Type 1 Sedan (1959), a Jaguar E-Type Roadster (1961), a Ferrari Formula 1 Racing Car (641/2) (1990), a Smart Car “Smart & Pulse” Coupé (1998), and a Porsche 911 Coupé (1965).

The MoMA appears to be one of the few art museums in the country to recognize cars in this way. An Internet search, which included Business Insider’s compilation of 25 of the best museums in America, turned up just two others – the Minneapolis Institute of Art (MIA), which possesses a Czechoslovakian-made Tatra T87 four-door sedan (1948), and the Detroit Institute of Arts (DIA).

The DIA’s collection, which has been “warehoused in plastic bubbles away from public viewing for years,” according to one writer, includes a Ford Mustang II show car, Chrysler Turbine car, Stout Scarab, Ford Cougar II concept car, two Packard Pan American show cars, John and Horace Dodge’s personal 1919 Dodge Brothers cars, and company founder Henry Leland’s personal Cadillac (1905).

(We didn’t count the Smithsonian Institution, which collects everything, including art and cars. SI’s collection of 73 cars includes about 20 postwar road cars and nine racers, most of them under wraps.)

“It is not common for art museums to have cars as part of their collections,” said Paul Galloway, collection specialist for the Museum of Modern Art’s Department of Architecture and Design. “It is one of the things that sets MoMA apart – our belief in the diversity of modern creativity in all its myriad forms and the importance of showing all of them together in one place.”

All of which makes the MoMA’s recognition of the Fiat pretty special.

“It has never been just a car,” said Olivier François, Head of Fiat Brand and Chief Marketing Officer, FCA Group, adding that the Fiat 500 has entered “the collective imagination.”

Just the place for an iconic art work.

New cars getting less affordable as average price climbs – Bankrate

Can the average American afford a new car?

There’s a good chance he/she can’t, based on a study by Bankrate.com.

With the average price of a new car now more than $33,000, according to Kelley Blue Book, the median income in all U.S. cities but one, Washington, D.C., falls short.

Residents of the district, on average, can afford a vehicle costing $37,223, based on Bankrate’s study.

The Ford Explorer SUV sells for about the average price of new vehicles.

The Ford Explorer SUV sells for about the average price of new vehicles.

Even the average used-car price of just over $19,000 would be hard for households to afford in eight of the 25 biggest U.S. markets based on the 20/4/10 rule, according to Bankrate.

“The 20/4/10 rule says you should aim to put down at least 20 percent of a vehicle’s purchase price, take out a car loan for no longer than four years, and devote no more than 10 percent of your annual income to car payments, interest and insurance,” Bankrate explains.

“If you can’t stay within those lines, you can’t afford the car,” says Bankrate.

That may go a long way toward explaining why about 40 percent of sales by franchised dealerships are used cars and why more than twice as many used cars as new are sold overall annually.

So, how much could residents of average means afford in other U.S. cities used in the study?

San Francisco finishes second to the nation’s capital, with the average resident able to afford a vehicle of $32,286, followed by Boston ($30,863), Seattle ($26,771), Minneapolis-St. Paul ($26,606), Baltimore ($26,355), Denver ($24,485), San Diego ($23,440), Chicago ($23,386) and Portland, OR ($23,209).

The other cities in which the average resident can afford to purchase a vehicle costing more than the average used car are Philadelphia; New York; Atlanta; Charlotte, NC; Los Angeles; St. Louis, and Phoenix.

And the cities in which the average resident can’t afford the average used-car price, let alone a new car, are Dallas and Houston, TX; Riverside-San Bernardino, CA; San Antonio, TX; Orlando, FL; Tampa-St. Petersburg, FL; Detroit, MI, and Miami, FL.

“In Miami, the metro area worst for affordability, a typical household can afford to pay only about $13,600 without breaking the 20/4/10 rule,” according to Bankrate.

“In the past 35 years, the cost of a new car has gone up 35 percent, a used car is up 25 percent, and, at the same time, the median household income is only up 3 percent,” said Michelle Krebs of Autotrader.

One result has been the increasing length of car loans to as long as eight years.

“The length of an auto loan may not seem important, especially with today’s more reliable autos routinely going well beyond 100,000 miles without major issues,” says Bankrate. But it “can make a big difference” in a customer’s long-term financial well-being.

Auto dealerships headed for a plunge? Depends on who you believe

Thelma and Louise.

It’s an iconic movie that ends with the duo driving off a cliff.

And that’s where car dealerships – and much of the existing automotive industry – are headed in the next four to seven years, according to an analysis by think tank RethinkX.

In its report, “Rethinking Transportation 2020-2030,” the think tank sees a near-term future with plunging sales to individual owners starting in 2020 and no new individual-owner [IO] car sales from 2024 onward, just fleet sales to transportation service companies such as Uber and Lyft.

080317 IL Auto dealerships headed for a plunge- Depends on who you believe

“Vehicle fleet size will drop by over 80 percent, from 247 million vehicles in 2020 to 44 million in 2030,” the think tank contends in its report, which, at 77 pages, is the length of a short novel. “This could result in total disruption of the car value chain, with car dealers, maintenance and insurance companies suffering almost complete destruction.”

“Just 26 million vehicles will deliver the 5.7 trillion passenger miles traveled via [transportation services] in 2030, with the remaining five percent of miles attributed to IO vehicles.”

And those that already are owned by individuals will “plunge to zero” in value.

Cars worth less than zero?

“The rising cost of maintenance, gasoline and insurance; the cost of storing or taxing worthless vehicles, and the lack of a used car market might mean that prices go to zero or even below,” according to RethinkX. “That is to say, owners may need to pay to dispose of their cars.”

In its report, the think tank said that “97 million [internal combustion engine] vehicles will be left stranded in 2030, representing the surplus that will be in the vehicle stock as consumers move to [transportation services],” and warned that “these vehicles may eventually become entirely unsellable as used IO vehicles supply soars and demand disappears.”

Will this grim scenario happen and the industry drive off the cliff in 2024 as RethinkX envisions?

A nod to mainstream thinking

Mainstream thinking is a bit less dire – which RethinkX concedes in its report – predicting that “vehicle ownership will continue as the principal consumer choice … This is due to a number of reasons, including the belief that ‘we love our cars’ (like we loved our horses).”

Those mainstream analyses overall suggest that the existing fleet of internal combustion engine cars “would take decades to replace, with sales continuing into the 2040s and beyond,” said the think tank. And those analyses “generally see no mass stranding of existing vehicles.”

Mainstream industry forecasts also show that vehicle-ownership disruption as a multi-decade process, RethinkX observed, not as a “shift that would happen quickly and change the business model of the entire industry altogether … that wipes out the existing industry.”

Questioning the grim scenario

But healthy skepticism may be required – and that’s what we found in one stock market analyst.

“It’s always easy for think tanks and other similar organization[s] to throw out estimates for popular ideas in order to attract attention,” he wrote. “But when it’s observably nonsensical, such as in the case of the latest prediction from think tank RethinkX, that within about 13 years ‘self-driving electric cars will dominate the roads,’ it has to be challenged, because some investors might actually take it seriously, and make decisions based upon the faulty premises of the conclusions of the study.”

So, unlike Thelma and Louise, who nosedived into the Grand Canyon, there may be more to this story than meets the eye – and it may have a happier ending.

Why you need to seal the deal on improving your website

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Not everybody is coming to your website to buy a vehicle – right away.

But if you provide a good online experience when they do visit your site, there’s a chance you will get them back and, perhaps, convert them to a customer later.

“If you can reach all stages of shoppers – not just later stage leads who are ready to buy – you will edge out your competition,” wrote Ilana Zur of AutoLeadStar. “Building relationships with customers early in their process encourages loyalty and builds future sales.”

That may be easier said than done, but previous installments of our series, “The Net Effect,” have provided a lot of guidance on accomplishing your online objectives.

IL-BLOG_70630-11 (The Net Effect Logo)_WordPressThose installments, which you can reach through the following links, covered Why a great website is so important to the success of your dealership, What your prospects are doing online before visiting your dealership, How to make your website stand out to shoppers exploring online landscape, and What your dealership’s website needs to deliver to online shoppers.

Not only should that advice help you reach all stages of shoppers/buyers, but, according to Zur, making those efforts should ensure that you:

Raise engagement for all shoppers. Even late-stage shoppers – or service customers or previous customers – need something from your site. If you provide quality content onsite for all stages of the buying cycle, customers will turn to you again and again.

Build loyalty and establish your dealership as a resource. Why should shoppers turn to someone else when your site offers them everything they need? This is the kind of convenience that creates loyal shoppers who will recommend you to their friends.

Demonstrate values customers care about, such as honesty (offering expertise that demands nothing in return), transparency (helping customers find what they need), accessibility (providing information conveniently) and flexibility (not trying to fit everyone into the same sales box).

“The bottom line? Not every shopper … [is] coming to your dealership website to convert,” writes Zur. Most aren’t. “They’re coming to learn, do research, and decide whether or not to walk into your dealership for their next vehicle. Implement high engagement for more leads and more sales and track this success to optimize your website for every kind of shopper.”

Now, it’s up to you to seal the deal.

What your dealership’s website needs to deliver to online shoppers

Allow shoppers to get vehicle information they need online.

Allow shoppers to get vehicle information they need online.

You probably think your dealership has a good (even great) website.

And maybe it does.

But results of the Cox Automotive survey of 2,175 consumers who recently bought a vehicle suggest there’s little room for error.

So, if your metrics leave any doubt, it might be time to take another look.

The Cox survey shows that more than half of shoppers visit dealership websites, and just under 50 percent visited the websites of the dealerships where they ultimately purchased or leased their vehicles.

More than half of consumers who visited the website of the dealership from which they ultimately purchased or leased was influenced by that website, according to Cox.

IL-BLOG_70630-11 (The Net Effect Logo)_WordPressSo what should you provide those online shoppers to make the biggest impact?

In addition to the six features described in the last installment of “The Net Effect,” here are recommendations from Ilana Zur of AutoLeadStar to help you look at your website and make sure you are on the right road:

  1. Fill vehicle detail pages with photos and videos, explain features and specs, and provide prices. Make sure everything is synced with your inventory so online shoppers feel like they are actually at your store – and that they find in your showroom “exactly what they saw online.”
  1. Create comparison guides that explain the differences between your similar models, or even between yours and the competition. This is a chance to highlight your cars’ best features.
  1. Provide lists and guides for shoppers just getting started, help them prioritize what they’re looking for and then offer them vehicles you have in stock right now that fit the bill.
  1. Make it easy for shoppers to find a trade-in value so they can figure out their budget. Allowing them to start the finance process online “will score you points.”
  1. Offer how-to videos on anything car shoppers and owners care about – getting the most from a test drive, winter-proofing a car, etc. “These videos don’t have to relate to making a sale at all, but if your dealership is the one that offers this expertise, customers will return.”

“Allow people to get the information they need while getting to know your brand, before committing to anything,” Zur suggests. “Make your dealership website a one-stop for car shoppers and your dealership will do what other dealerships are not.”

The final installment of our series, “The Net Effect,” will get to the bottom line on what improving your website will accomplish and how that could affect your business.

How to make your website stand out to shoppers exploring online landscape

Orlando Kia North in Longwood, FL, offers 360-degree tours of new and some used vehicles.

Is your dealership’s website fit to be tried by online shoppers?

If your website provides for the five basic shopper/buyer activities described in the last installment of “The Net Effect,” you may be ready to take it to the next level – if you haven’t already.

So don’t stop short and expect your website to stand out to shoppers exploring the online landscape.

“Nearly all consumers (98 percent) want the ability to do at least some piece of the car shopping/buying process online, suggesting that dealers should incorporate at least some aspect of digital retailing into their offerings,” said Cox Automotive in a report on a survey of 2,175 recent new- and used-car buyers.

IL-BLOG_70630-11 (The Net Effect Logo)_WordPressFollowing are the automotive shopping/buying activities specific to dealerships that at least half of consumers want to do online and the percentage that want that option, according to Cox:

  1. Take a 360-degree tour of vehicles they are considering, 86 percent.
  2. Reserve a vehicle for a test drive, 59 percent.
  3. Negotiate the purchase price, 57 percent
  4. Use a chat box to talk with a salesperson, 55 percent.
  5. Learn about finance and insurance products, 52 percent.
  6. Apply for financing, 52 percent.

Providing some or all of them could help you capture more shoppers early in their process.

One example of how a strong online presence can affect results is in the sale of F&I products, representing more than one-third of the average dealership’s gross profit, Edmunds has reported, and which more than half of consumers told Cox they would like to learn about online.

“Since one in three buyers are not already aware of F&I products prior to going to the dealership, dealers should offer F&I educational resources on the dealership website and provide opportunities for consumers to learn more about F&I on their own during the sales process.”

Bottom line, according to Cox: “Purchase of F&I products is much higher among consumers who are already aware of the products before going to the dealership.”

Think about what that sort of effect that could have on other aspects of your business.

The next installment of our series, “The Net Effect,” will offer some practical steps your dealership could take to improve your website and your chances of getting those results.

What your prospects are doing online before visiting your dealership

Most shoppers want to find actual vehicles listed for sale.

Most shoppers want to find actual vehicles listed for sale.

Americans want to car shop online.

And that creates opportunities for dealerships to deliver online benefits that influence consumers’ decisions about where to purchase their new or used car, truck or SUV.

But you can’t take advantage of the opportunity unless you know what your prospects are doing online. And then act on that knowledge to satisfy their needs.

IL-BLOG_70630-11 (The Net Effect Logo)_WordPress“Understanding what car buyers are looking for can help ensure you are delivering the right marketing message and content to the right shopper at the right time to help influence their decisions about what to buy and whom to buy from,” said Cox Automotive, based on results of their survey of 2,175 consumers who recently purchased vehicles (new and used).

Here’s what the Cox survey indicates car shoppers are doing when they go online before a possible vehicle purchase:

 

 

  1. Researching car prices, 86 percent.
  2. Finding out the value of their current vehicle, 74 percent.
  3. Comparing different models, 72 percent.
  4. Finding actual vehicles listed for sale, 67 percent.
  5. Locating a dealer or getting dealer information, 44 percent.

But knowing this is only the first part of the equation, based on the Cox results.

If a shopper gets to your website – assuming you provide something like what he/she is seeking – there’s a good chance to influence that prospect to visit the dealership to purchase or lease.

The Cox survey shows that more than half of shoppers visit dealership websites, and just under 50 percent visited the websites of the dealerships where they ultimately purchased or leased their vehicles.

More than half of consumers who visited the website of the dealership from which they ultimately purchased or leased was influenced by that website, according to Cox.

These numbers seem especially important considering that dealership websites are the first dealer contacts for nearly half of vehicle shoppers, Cox reported. And that almost 40 percent of all buyers went only to the dealership where they made their purchase.

“Automotive marketers need to have a broad yet integrated marketing strategy … to effectively reach and influence shoppers wherever they are shopping online,” said Cox.

That leads to the next two installments of our series, “The Net Effect,” which will cover what consumers want from dealership websites as part of their online shopping experiences and some practical steps your dealership could take to improve your website to boost your results.