Experts See Familiar Auto Sales Trend

DETROIT December 21, 2004; John Porretto writing for the AP reported that Most veteran forecasters say they expect a familiar sales trend in the U.S. automotive market next year: continued gains by Asian brands at the expense of Detroit's Big Three.

A host of new cars and trucks from General Motors Corp., Ford Motor Co. and DaimlerChrysler AG's Chrysler Group has failed to stem combined market share losses this year -- a disappointment given Ford's "Year of the Car" hype and GM's industry-leading 29 vehicle introductions.

Meanwhile, Asian automakers such as Toyota Motor Corp., Nissan Motor Co. and Kia Motors Corp. have used enhanced lineups to post impressive sales gains. The growth, analysts say, can be attributed in part to their reputations for quality as well as new products -- such as Toyota's Scion brand that targets younger buyers and the Nissan Titan, that company's first entry in the full-size pickup category.

The lone bright spot among domestic carmakers has been Chrysler, the only Detroit automaker whose sales are up from a year ago.

Forecasting firm CSM Worldwide predicts GM, Ford and Chrysler will end 2004 with a total U.S. market share of 63.4 percent, including foreign brands such as GM's Saab and Ford's Volvo. By the end of 2005, CSM sees that figure declining to 61.9 percent.

For the first 11 months of 2004, the Big Three's U.S. share -- excluding foreign brands -- stood at 58.7 percent, down from 60 percent a year earlier. For the same period Asian makes grew their stake from 32.8 percent a year ago to 34.5 percent.

The comparisons are even more discouraging for U.S. brands given the thousands more per vehicle they spend on consumer incentives versus their foreign counterparts.

"GM, Ford and Chrysler continue to come out with new product, but so do their competitors," said CSM analyst Joe Barker. "The U.S. market is mature and saturated, and gaining or even sustaining share -- for the Big Three and others -- is becoming very, very difficult."

Many observers predict a slight uptick in U.S. sales in 2005 -- maybe as little as 1 percent from what's shaping up to be a relatively healthy tally this year. But they say several unknowns linger -- factors that could provide a boost to business or cause a significant drag.

The uncertainties include incentive spending, fuel prices and the reception of even more new cars and trucks by consumers.

Led by Ford, GM and Chrysler, automakers will spend a record $60 billion on rebates and other financial enticements in 2004, up from $50 billion in 2003, according to CNW Marketing Research in Bandon, Ore. In 1994, the total was $1.1 billion.

Some type of incentive is now available on 90 percent of all new vehicles, up from less than 10 percent a decade ago, CNW said.

GM, Ford and Chrysler have said they'd like to pull back on the amount per vehicle they spend to spur sales each month, but attempts to date have been largely unsuccessful.

GM, for example, scaled back its average outlay per vehicle by $304 in November to $3,747. Sales fell 13 percent.

What's more, despite record levels of spending this year, GM and Ford both have said they'll produce fewer vehicles in the first quarter of 2005 versus a year ago because of inflated inventories -- news that prompted Wall Street analysts to trim their earnings outlooks for the nation's two-largest carmakers.

The double-whammy for automakers, analysts say, is that even as they pile on the rebates and financing offers, the deals appear to be losing their effectiveness.

"The domestic automakers are beginning to accept that consumers -- who've been bombarded with messages of cash back and special financing -- are becoming relatively insensitive to those offers," said Jane Liu, vice president of data analysis for Santa Monica, Calif.-based Edmunds.com, an independent company that provides online automotive information.

So what's a carmaker to do to increase sales?

Because the quality gap has narrowed among all automakers, styling has become an increasingly important aspect of the business, said CNW President Art Spinella.

He cited as an example Chrysler's hot-selling 300C, the uniquely styled sedan that's helped the company revive its U.S. business and was named Motor Trend magazine's 2005 Car of the Year.

"You have to stand out," Spinella said. "You have to generate something that people want."

Automakers will have ample opportunity to do that with a barrage of all-new and redesigned entries scheduled for the next few years. J.D. Power and Associates expects major automakers to introduce 22 new and 30 significantly redesigned vehicles in the U.S. market in 2005, up from 22 new and 25 redesigns this year and 17 new and 13 redesigns in 2001.

The mix will be varied -- gas-electric hybrids, car-based crossover vehicles, compact cars and full-size pickups, among others.

Toyota is expected to further its sales momentum in 2005 with the introduction of two hybrid SUVs: the luxury Lexus RX 400h and the Toyota Highlander. Toyota says it's already received 11,000 orders for the RX 400h, which goes on sale in April.

To date, said J.D. Power chief economist Bob Schnorbus, rising gas prices haven't had a marked effect on the sale of larger vehicles, though some people shopping for SUVs may be opting for smaller versions that get better gas mileage.

In fact, light truck sales in the United States -- pickups, vans and SUVs -- were up nearly 4 percent for the first 11 months of the year, while car sales were off 2.7 percent, according to the research firm Autodata Corp.

"Gasoline prices easily could have to hit $4 or more a gallon before we start seeing a real energy-shock effect," Schnorbus said. "I think consumers are still expecting volatility in energy prices, but not at a sustained level that's going to make them dramatically rethink the type of vehicle they can afford."