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Automotive Retail - US - May 2009

This report provides an in-depth examination of the automotive retail market for industry manufacturers, distributors and marketers interested in pursuing opportunities to innovate trends within segments and to evaluate the competition. Sales and analysis covers three segments of the automotive retail market: new vehicles, used vehicles and parts/service.

Specific questions that are answered in this report include the following:

  • What effects do rising gasoline costs, automotive vehicle prices and the economic downturn have on the overall market?
  • What segments of the automotive retail market are stagnating, and what can be done to increase activity?
  • What is the dynamic between new vehicle sales with used vehicle sales and parts/service?
  • How has excess vehicle inventory affected sales revenue and what incentives are dealerships offering to help move cars?
  • How will the federal intervention of President Obama’s automotive task force contribute to or hinder future growth?
  • How can automotive dealerships take advantage of the economic downturn to appeal to consumers seeking a new or used vehicle?
  • How are third party online brokers contributing to or hindering revenue growth for brick and mortar vehicle dealerships?
  • What media are industry leaders using most to deliver effective marketing campaigns, and what actions need to be taken to improve visibility?

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer survey data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                    • New car dealership revenues forecast to decline 21% in 2009
                      • Domestic automakers losing share over ten years
                        • New vehicle sales dominate revenue, but losing market share
                          • Used vehicle sales increase market share
                            • Older cars on the road leading to increased share of service/parts
                              • Banks creating tighter credit market, resulting in slower sales
                                • President Obama’s automotive task force forcing cuts in dealerships
                                  • Consumer findings
                                  • Insights and Opportunities

                                    • Transition dealership to sell, promote niche electric-only vehicles market
                                      • Education seminars
                                        • Quick service battery charging
                                          • Why wait? Start selling electric cars today
                                            • Move new cars by promoting them as more affordable, reliable than used
                                              • Battling financial fears by directly connecting to consumers
                                              • Inspire Insights

                                                  • Trend 1: Simplicity and Convenience
                                                    • Convenience means more ease and portability
                                                      • Dealerships benefit by allowing convenience to start from home
                                                        • Trend 2: Ego Is All
                                                          • Let’s be honest with ourselves: ego is (still) all
                                                            • Dealerships massaging consumer ingenuity at their own expense
                                                            • Market Size and Forecast

                                                              • Key points
                                                                • After gradual declines, revenues plummet starting in 2008
                                                                  • Figure 1: Total sales at new car dealerships, at current prices, 2003-09
                                                                  • Figure 2: Total sales at new car dealership, at inflation-adjusted prices, 2003-09
                                                              • Competitive Context

                                                                • Third-party online sites selling or auctioning new vehicles
                                                                  • eBay experimenting with selling new cars at discounted prices
                                                                    • Costco brokering both new and used vehicles in auto program
                                                                      • Growth in scooter sales suggesting potential threat to automotive market
                                                                      • Segment Performance

                                                                        • Key points
                                                                          • U.S. dealership units in continual freefall over the past 21 years
                                                                            • Figure 3: Number of U.S. new car dealerships, 1987-2008
                                                                          • New vehicle sales dominate, but losing share to used
                                                                            • Figure 4: New car, used car, and service and parts revenues, 2005 and 2007
                                                                        • Segment Performance—New Vehicles

                                                                          • Key points
                                                                            • New vehicle revenue declining, corresponding to rising sticker price
                                                                              • Figure 5: Number of new vehicles sold and average selling price, 1997-2007
                                                                              • Figure 6: U.S. sales of new vehicles at new car dealerships, 2001-07
                                                                          • Segment Performance—Used Vehicles

                                                                            • Key points
                                                                              • Dynamic between new, used vehicles dependent on supply, demand
                                                                                • Figure 7: U.S. sales of used vehicles at new car dealerships, 2001-07
                                                                            • Segment Performance—Service and Parts Sales

                                                                              • Key points
                                                                                • Service and parts revenue increasing as consumers hold on to cars longer
                                                                                    • Figure 8: U.S. sales of service & parts at new car dealerships, 2001-07
                                                                                • Market Drivers

                                                                                  • Lenders raising down payment rates
                                                                                    • Excess inventory of older models, shuttered brands, hurting dealerships
                                                                                      • Automakers offering rebate programs, dealer cash to help move old stock
                                                                                        • President Obama’s automotive task force pressuring automaker cuts
                                                                                          • Obama stimulus package includes incentives to drive up car buying
                                                                                            • “Cash for Clunkers” bill expected to award consumers with cash for going green
                                                                                              • Used vehicles boost dealers although increased prices threaten longevity
                                                                                              • Leading Companies—Domestic

                                                                                                • Key points
                                                                                                  • Domestic automakers losing share to imports over ten years
                                                                                                      • Figure 9: U.S. new vehicle unit sales and market share, by domestic manufacturer, 1997-2008
                                                                                                    • General Motors
                                                                                                      • Chrysler
                                                                                                        • Ford
                                                                                                        • Leading Companies—Imports

                                                                                                          • Key points
                                                                                                            • Import U.S. unit sales increased 56% between 1997-2007
                                                                                                              • Figure 10: U.S. new vehicle unit sales and market share, by import manufacturer, 1997-2008
                                                                                                            • Toyota
                                                                                                              • Honda
                                                                                                                • Nissan
                                                                                                                • Brand Qualities

                                                                                                                  • Luxury dealers target clientele through full-purpose Manhattan showroom
                                                                                                                    • GM provides incentives to dealerships to move old inventory
                                                                                                                      • Mitsubishi dealers given green light to cut costs through shared space
                                                                                                                        • BMW invests in U.S. showrooms through renovation, expansion
                                                                                                                        • Innovation and Innovators

                                                                                                                          • AutoNation bolsters consumer confidence with payment loan program
                                                                                                                            • Smart USA launches program to streamline inventory to expectant buyers
                                                                                                                              • Start-up steps in to help automotive dealers restructure financing
                                                                                                                                • Online research site targets women through tailored features
                                                                                                                                  • Dealership website launched to help stem consumer financing fears
                                                                                                                                  • Advertising and Promotion

                                                                                                                                    • Ad spends declining since 2003; newspapers struggle to retain media lead
                                                                                                                                        • Figure 11: Dealership media spend, by segment and annual total, 2002-07
                                                                                                                                      • Interactive media allow dealerships personal relationships with buyers
                                                                                                                                        • Redesigning websites for the portable screen
                                                                                                                                          • Creating special sites that cater to niche consumer groups
                                                                                                                                            • Dealerships forced to combat public negativity/media misinformation
                                                                                                                                              • Ford dealerships launch campaigns to rectify consumer perception regarding bailout
                                                                                                                                                • Analysis of television commercials
                                                                                                                                                  • Heritage, patriotism emphasized over brand to help massage consumer perception
                                                                                                                                                      • Figure 12: Northern California Auto Dealers ad, 2008
                                                                                                                                                    • Turning recessionary fear into a positive by promoting recession-based deals
                                                                                                                                                        • Figure 13: Greater New York Automobile Dealers Association ad, 2008
                                                                                                                                                      • Dealership associations emphasize Obama stimulus plan incentives for consumers
                                                                                                                                                        • Figure 14: National Automobile Dealers Association ad, 2009
                                                                                                                                                        • Figure 15: Colorado Automobile Dealers Association ad, 2008
                                                                                                                                                      • Fuel efficiency tops incentives to get consumers motivated to purchase new
                                                                                                                                                        • Figure 16: Bob Rohrman’s Arlington Nissan ad, 2008
                                                                                                                                                        • Figure 17: Acura of Pembroke Pines ad, 2008
                                                                                                                                                    • Automotive Retail—Consumer Preferences

                                                                                                                                                      • Key points
                                                                                                                                                        • Brand loyalty drives buys at dealerships, but economic crisis threatens
                                                                                                                                                            • Figure 18: Source of last new vehicle purchased, by gender, February 2009
                                                                                                                                                          • Youngest consumers most open to non-traditional channels
                                                                                                                                                              • Figure 19: Source of last new vehicle purchased, by age, February 2009
                                                                                                                                                            • Highest household incomes prefer branded dealerships
                                                                                                                                                                • Figure 20: Source of last new vehicle purchased, by household income, February 2009
                                                                                                                                                            • Automotive Retail—Trade-In Experience

                                                                                                                                                              • Key points
                                                                                                                                                                • The largest group of new-vehicle buyers don’t trade in at all
                                                                                                                                                                  • Figure 21: Trade-in experience, by gender, February 2009
                                                                                                                                                                • Buyers aged 18-24 least likely to trade-in
                                                                                                                                                                  • Figure 22: Trade-in experience, by age, February 2009
                                                                                                                                                                • Households earning the least are also the least confident making trade-ins
                                                                                                                                                                  • Figure 23: Trade-in experience, by household income, February 2009
                                                                                                                                                              • Automotive Retail—How Consumers Prepare

                                                                                                                                                                • Key points
                                                                                                                                                                  • Most respondents prefer independent resources over retailers’ information
                                                                                                                                                                      • Figure 24: Research sources used before buying last new vehicle, by gender, February 2009
                                                                                                                                                                    • Respondents aged 25-34 more tech-savvy and open to retailer marketing
                                                                                                                                                                        • Figure 25: Research sources used before buying last new vehicle, by age, February 2009
                                                                                                                                                                      • Lowest-earning households least likely to research
                                                                                                                                                                          • Figure 26: Research sources used before buying last new vehicle, by household income, February 2009
                                                                                                                                                                      • Automotive Retail—Reasons To Visit Other Than Vehicle Purchasing

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Men more likely to return to dealerships following purchase
                                                                                                                                                                              • Figure 27: Reasons for visiting dealership other than vehicle purchase, by gender, February 2009
                                                                                                                                                                            • Respondents aged 18-34 more likely to return for dealer service
                                                                                                                                                                              • Figure 28: Reasons for visiting dealership other than vehicle purchase, by age, February 2009
                                                                                                                                                                            • The likelihood of service repair increases steadily with household income
                                                                                                                                                                              • Figure 29: Reasons for visiting dealership other than vehicle purchase, by household income, February 2009
                                                                                                                                                                          • Automotive Retail—Consumer Attitudes

                                                                                                                                                                            • Key points
                                                                                                                                                                              • Nearly half of all respondents expect more incentives
                                                                                                                                                                                  • Figure 30: Attitudes towards new car incentives, by gender, February 2009
                                                                                                                                                                                • Most think retailer facilities should be more comfortable
                                                                                                                                                                                    • Figure 31: Attitudes towards dealership facilities, by gender, February 2009
                                                                                                                                                                                  • Respondents less into fun, more into facts
                                                                                                                                                                                      • Figure 32: Attitudes towards entertainment factor at dealerships, by gender, February 2009
                                                                                                                                                                                    • Respondents tend not to see sales people as obnoxious
                                                                                                                                                                                        • Figure 33: Perception of new car sales personnel as obnoxious, by gender, February 2009
                                                                                                                                                                                      • Personnel judged on an individual basis
                                                                                                                                                                                          • Figure 34: Attitudes towards trustworthiness of new car personnel, by gender, February 2009
                                                                                                                                                                                        • Price and service most relevant issues for majority of respondents
                                                                                                                                                                                            • Figure 35: Attitudes towards disclosure of price and service information, by gender, February 2009
                                                                                                                                                                                        • Automotive Retail—Factors Influencing Purchasing

                                                                                                                                                                                          • Key points
                                                                                                                                                                                            • A good ear – and a customized pitch – help make the sale
                                                                                                                                                                                              • Figure 36: Factors influencing new car purchasing, by gender, February 2009
                                                                                                                                                                                            • Test drive and financial incentives most important to younger respondents
                                                                                                                                                                                              • Figure 37: Factors influencing new car purchasing, by age, February 2009
                                                                                                                                                                                            • Lower-earning households value warranties more than time, efficiency
                                                                                                                                                                                                • Figure 38: Factors influencing new car purchasing, by household income, February 2009
                                                                                                                                                                                            • Race and Hispanic Origin

                                                                                                                                                                                              • Key points
                                                                                                                                                                                                • Whites most likely to buy at branded dealership
                                                                                                                                                                                                  • Figure 39: New vehicle distribution channel preference by race/Hispanic origin, February 2009
                                                                                                                                                                                                • Blacks and Hispanics least likely to trade in used vehicles
                                                                                                                                                                                                  • Figure 40: Trade-in experience, by race/Hispanic origin, February 2009
                                                                                                                                                                                                • Hispanics more active in internet research
                                                                                                                                                                                                  • Figure 41: Use of research, by race/Hispanic origin, February 2009
                                                                                                                                                                                                • Blacks more likely to use repair and quick services
                                                                                                                                                                                                    • Figure 42: Reasons for visiting dealership other than vehicle purchase, by race/Hispanic origin, February 2009
                                                                                                                                                                                                  • Blacks most likely to view sales personnel favorably
                                                                                                                                                                                                    • Figure 43: Attitudes towards new car sales personnel, by race/Hispanic origin, February 2009
                                                                                                                                                                                                  • Hispanic mistrust sales personnel significantly more than other groups
                                                                                                                                                                                                    • Figure 44: Attitudes towards trustworthiness of new car personnel, by race/Hispanic origin, February 2009
                                                                                                                                                                                                  • Convenience of location a bigger factor for Hispanics
                                                                                                                                                                                                    • Figure 45: Factors influencing new car purchasing, February 2009
                                                                                                                                                                                                • Cluster Analysis

                                                                                                                                                                                                    • Confirmers
                                                                                                                                                                                                      • Who they are
                                                                                                                                                                                                        • Opportunity
                                                                                                                                                                                                          • Frequenters
                                                                                                                                                                                                            • Who they are
                                                                                                                                                                                                              • Opportunity
                                                                                                                                                                                                                • Reasoners
                                                                                                                                                                                                                  • Who they are
                                                                                                                                                                                                                    • Opportunity
                                                                                                                                                                                                                      • Cluster characteristics
                                                                                                                                                                                                                        • Figure 46: Auto retail clusters, February 2009
                                                                                                                                                                                                                        • Figure 47: Source of last new vehicle purchased, by auto retail clusters, February 2009
                                                                                                                                                                                                                        • Figure 48: Research sources used before buying last new vehicle, by auto retail clusters, February 2009
                                                                                                                                                                                                                        • Figure 49: Reasons for visiting retailer other than vehicle purchasing, by auto retail clusters, February 2009
                                                                                                                                                                                                                        • Figure 50: Factors influencing new car purchasing, by auto retail clusters, February 2009
                                                                                                                                                                                                                        • Figure 51: Attitudes towards incentives, facilities and personnel, by auto retail clusters, February 2009
                                                                                                                                                                                                                      • Cluster demographics
                                                                                                                                                                                                                        • Figure 52: Auto retail clusters, by gender, February 2009
                                                                                                                                                                                                                        • Figure 53: Auto retail clusters, by age, February 2009
                                                                                                                                                                                                                        • Figure 54: Auto retail clusters, by household income, February 2009
                                                                                                                                                                                                                        • Figure 55: Auto retail clusters, by race, February 2009
                                                                                                                                                                                                                        • Figure 56: Auto retail clusters, by Hispanic origin, February 2009
                                                                                                                                                                                                                      • Cluster methodology
                                                                                                                                                                                                                      • Appendix: Trade Associations

                                                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                                                        • American Honda Motor Co., Inc.
                                                                                                                                                                                                                        • Anheuser-Busch Companies Inc
                                                                                                                                                                                                                        • Audi of America Inc
                                                                                                                                                                                                                        • Automotive Industry Action Group (AIAG)
                                                                                                                                                                                                                        • BMW of North America, LLC
                                                                                                                                                                                                                        • Chrysler LLC
                                                                                                                                                                                                                        • Ferrari S.p.A.
                                                                                                                                                                                                                        • Fiat Auto
                                                                                                                                                                                                                        • Ford Motor Company (USA)
                                                                                                                                                                                                                        • Greenfield Online
                                                                                                                                                                                                                        • Jaguar Cars North America
                                                                                                                                                                                                                        • Mazda North American Operations
                                                                                                                                                                                                                        • Mercedes-Benz USA
                                                                                                                                                                                                                        • Mitsubishi Motors North America, Inc.
                                                                                                                                                                                                                        • National Automobile Dealers Association (NADA)
                                                                                                                                                                                                                        • Nissan North America, Inc.
                                                                                                                                                                                                                        • Porsche Cars North America, Inc.
                                                                                                                                                                                                                        • Rolls-Royce Motor Cars Ltd
                                                                                                                                                                                                                        • Saab Cars North America
                                                                                                                                                                                                                        • T-Mobile USA
                                                                                                                                                                                                                        • Toyota Motor Corporation USA
                                                                                                                                                                                                                        • U.S. Bureau of Labor Statistics
                                                                                                                                                                                                                        • Volkswagen of America, Inc.
                                                                                                                                                                                                                        • Yahoo! Inc

                                                                                                                                                                                                                        Automotive Retail - US - May 2009

                                                                                                                                                                                                                        £2,684.63 (Excl.Tax)