17 Million in sales predicted for 2015, here we go…

December 10th, 2010

Things have been looking up in the US market for the automotive industry lately.

Sales have been improving.  November was strong with most companies showing significant gains and one, Hyundai, blowing past everyone else with a +46% increase over same period year ago.  Some marques like Audi are predicting that they will achieve new sales records in 2010 and break the 100,000 unit mark for the first time.  It looks like we’ll finish the year at about 11.5MM units, up about a million over 2009.  Next year sales are expected to improve to 12.8MM.

The LA Auto Show was up beat; there were a number of new and exciting products shown (my personal favorite was the Audi quattro concept).  The sense of the industry moving forward was palpable; it was good to be there.  Then of course there’s GM’s successful IPO, where investor interest was so strong that the share price exceeded everyone’s expectations.

Even more important, the industry has made important progress during the worst recession within memory.  Given the widely held view in 2008 that we were entering a “new normal” with significantly lower industry sales, manufacturers took steps (some with taxpayer help) to reduce production capacity, which has led to dramatically lower inventories at the dealer level.  In turn, lower inventories combined with better product quality have led to lower incentives and higher margins.  Some manufacturers (BMW, Fiat) are even attempting to encourage consumers to order cars and wait for delivery as Americans become accustom to lower inventory levels and the idea that the car they want won’t be on the lot.

Sales on the rise, higher margins, lower inventories, Americans ordering cars, what’s not to like?  Nothing, all good news, until… Read the rest of this entry »

Is Fiat taking VW’s US positioning?

November 29th, 2010

The week before last, I was in Los Angeles for the auto show.  There were a number things that were interesting, but for me, the most interesting was the introduction of the Fiat 500 to the US market. The Fiat 500 represents the re-introduction of the Fiat marque to the US and thus garnered quite a crowd at the press conference:

http://autoperspectives.com/blog/wp-content/uploads/2010/11/DSC02466-150x112.jpg 150w, http://autoperspectives.com/blog/wp-content/uploads/2010/11/DSC02466-300x225.jpg 300w" sizes="(max-width: 450px) 100vw, 450px" />

As we watched Laura Soave, Fiat’s head of marketing, introduce the Fiat 500, I couldn’t help but lean over to a colleague and say “Fiat is taking Volkswagen’s US positioning.”  The presentation was full of “Italian passion” which might have been code for a youthful, fun, engaged approach to driving.  Here’s a video/ad:

Read the rest of this entry »

Why buy a Volkswagen?

November 12th, 2010

VW is intent on becoming the world’s largest auto manufacturer.  To achieve this lofty goal, the company needs to sell a whole lot more in the United States.

“The company plans to triple annual U.S. sales of VW, Audi and Bentley models to 1 million units annually by 2018 as part CEO Martin Winterkorn’s drive to overtake Toyota Motor Corp. and General Motors Co. and become the world’s largest automaker.”  Automotive News 9/18/09

Based on the VW brand’s 2009 sales (213,454), volume in the US will almost quadruple: “By 2018, VW wants to sell 800,000.”  Automotive News 1/19/09

800, 000 is a heck of a lot of cars for VW.  Especially considering that VW’s biggest volume year in recent memory was 2001, when it sold 355,648 units (in the 1970’s VW did sell roughly 500,000 units).  Many industry experts have questioned the wisdom and even the possibility that VW might sell 800,000 units in the US.

Volkswagen believes that it can sell 800,000 cars in the US by specifically developing vehicles to meet Americans’ tastes: “VW has concluded that price-sensitive U.S. consumers simply aren’t willing to pay for the extras found in a mass-market European sedan.” Automotive News 7/5/10

Consequently, the “new mid-sized sedan, which will be built in Chattanooga, Tenn., is supposed to be bigger and cheaper than the Passat that it replaces… VW wants to make its Passat replacement competitive with the mid-sized segment stalwarts — the Toyota Camry, Honda Accord and Ford Fusion — and thereby boost sales sharply.” Automotive News 7/5/10

This strategy is also evident in the new 2011 Jetta, which has been de-contented to make it price competitive with the Japanese.  The 2011 US version of the Jetta will have drum brakes in the rear and a torsion bar rear suspension.  The interior has also been cheapened to enable it to reach a competitive price point.  The European Jetta has been dumbed down to meet the needs of the “price sensitive” US customer: “European buyers will get a more costly and more upscale version of Volkswagen’s new Jetta sedan than North American customers.” Automotive News 11/1/10

This approach is being mirrored in the Company’s US marketing. When recently searching for a new advertising agency, the VW CMO offered the following rationale: “The Volkswagen brand needs to inspire our base of enthusiasts as well as reach out and captivate those in mainstream America.”  Automotive News 8/18/09

So, Volkswagens will be more mainstream in the US, larger, less expensive and less European, more price competitive with the Japanese marques.  While I am tempted to go on a rant about the dilution of the VW brand and the dangers of chasing volume (see my earlier blog post), let’s skip all that, and ask a simple question:

Read the rest of this entry »

2010 LA Auto Show–Press Conference Schedule

November 10th, 2010

WEDNESDAY, NOVEMBER 17, 2010

7:00 am 8:00 am Breakfast Room 502
8:00 am 8:40 am Motor Press Guild Keynote Address
– Stefan Jacoby, President and CEO of Volvo
Room 515
8:50 am 9:10 am Chevrolet South
9:15 am 9:40 am Volkswagen South
9:45 am 10:15 am Land Rover/Jaguar South
10:20 am 10:45 am Mercedes-Benz South
10:55 am 11:20 am Porsche Petree
11:25 am 11:50 am Nissan West
11:55 am 12:15 pm Fiat West
12:20 pm 12:45 pm Subaru West
12:50 pm 1:15 pm Ford West
1:20 pm 1:45 pm Honda West
1:50 pm 2:10 pm Dodge West
2:15 pm 2:40 pm Lotus Concourse
2:50 pm 3:15 pm Toyota South
3:20 pm 3:45 pm SAAB South
3:50 pm 4:15 pm KIA South
4:20 pm 4:40 pm Buick South
4:45 pm 5:10 pm Mazda South

Read the rest of this entry »

Chevy Runs Deep

October 27th, 2010

Chevrolet’s new advertising was previewed today in Detroit at Goodby’s new offices and breaks officially on the World Series tonight.  We learned a few days ago that while not a “tag line” the new work would include the theme “Chevy Runs Deep.”

Here’s the first commercial:

Already the pundits are criticizing the campaign.  Advertising Age has an article headlined “Criticism of the new Chevy theme runs deep” which does a very nice job of  chronicling the pundits’ negative opinions and I’m sure by tomorrow morning there will be more.

Much of the criticism stems from the idea that Chevy is trying to capitalize on “patriotism” or “American heritage.”  Other folks are implying that there is nothing new here, that in fact Campbell Ewald did this sort of work for Chevy for years and reference “Like a Rock” and “Heartbeat of America” as proof points.

Got it.  It’s true, the advertising is referencing the fact that the Chevy brand has long been a part of the fabric of America.   Read the rest of this entry »

Volume is the holy grail of the auto industry…but should it be? The case for stronger brands.

October 27th, 2010

A casual observer could be excused for thinking that volume is the only thing that matters to the auto industry:

“The annual global industry sales leader for 76 years.”

Headline on GM’s website

“Toyota ends GM’s reign as leader in global sales”

New York Times, April 24, 2007

“VW Group has declared its intention to become the global leader, overtaking Toyota by 2018”

Fortune 10/11/10

GM may have been the leader for 76 years, but we all know how that worked out.  The quest to be the global leader in sales drove Toyota to the breaking point where it lost its legendary focus on quality and reliability.  The result?  The biggest series of product recalls in history, allegations of unintended acceleration, thousands of lawsuits, and a decline in brand perception that will take years to recover.  Now Volkswagen has set its sights on the global sales crown and some are questioning the wisdom of the company’s leadership.

You can’t spend much time working in or around the automobile industry without feeling the relentless pressure of needing to sell more.

The problem that auto manufacturers face is that their business has extremely high fixed costs.   Unlike “variable” costs that go up and down based on the amount of vehicles produced, fixed costs remain the same regardless of volume.  Fixed costs include all the developmental investments, labor expenses and the costs of the factories themselves.  With such high fixed costs, the more vehicles the manufacturer can produce, the lower the cost per unit and the better the margin.  In short, higher volumes equal higher profits.

So bigger is better?  Maybe.

The performance of the automotive brands in Interbrand’s “Best Global Brands 2010” study might lead to another conclusion.  Interbrand’s study uses 10 principles to assess “brand strength” and ultimately places a “value” on the brand.  Ten automotive brands made the list of the top 100:

What’s interesting is that the brands that made the list fall into two distinct camps; Read the rest of this entry »

Ford, with Mike Rowe, gets Tier 2 retail right.

October 1st, 2010

Anyone who has worked in automotive marketing knows how tough it is to do really good Tier 2 advertising.

Here’s the issue.  Tier 1 is funded by the manufacturer and is often referred to as the “brand” communications.  Tier 3 is the communications funded and executed at the local level by individual dealers.  Tier 2 is caught betwixt and between.

Funded in part by the manufacturer and in part by the local market dealer groups.  Tier 2 must serve two masters.  The manufacturer wants to be sure that the work reflects the brand and makes the doors swing whereas the dealers are understandably concerned with just making the doors swing.  Just to make it more difficult, the manufacturer’s marketing team and the dealers often have a different points-of-view about what will make the doors swing.

Tier 2 is where the brand versus retail discussion often gets very heated.   It is very tough to find a balance between the brand and retail messages.  More often than not, you end up erring toward the retail.  We all know what this formula looks like.  The TV commercials are visuals of the vehicle on the road, held together by a litany of product features in the copy and you tie it up with a bow…the deal.  The newsprint is a visual of the car, a couple of sentences covering key features, the deal and some legal disclaimers.

This leads to a sea of sameness when it comes to Tier 2 communications.

But it doesn’t have to be that way.   Read the rest of this entry »

Top global automotive brands–Interbrand’s 2010 global brand ranking

September 17th, 2010

Today, Interbrand released their “Best Global Brands 2010” ranking. Ten automotive brands made the top 100.  The following chart details the ten automotive brands, their ranking in 2009 and where they stand in 2010.

Nissan decides to build a brand.

September 9th, 2010

A couple of weeks ago, Nissan launched a new brand campaign. Today Nissan made available a new commercial for the Leaf, their soon to be launched plug-in EV:

This is a wonderful commercial, it’s big, emotional and engaging. Before seeing it, I was certain that I didn’t want an EV, now I’m less certain, and I know for sure that I want to help that polar bear.  I admit that this commercial makes me think about Nissan a little differently; I’m not yet convinced that the company stands for “Innovation for all” but it’s a start.

Nissan has struggled over the years to establish a brand identity for itself. Automotive marketing history buffs can probably trace the issue back to the decision to change Datsun to Nissan in 1981.  In 1986, after a transition period, the brand was officially Nissan.

Since that time Nissan has struggled in the shadow of Toyota.  While Toyota steadily built a reputation for quality and reliability and smashed sales records, Nissan labored as the number two Japanese brand.  Nissan’s brand identity has never been clear and I suspect for many people it’s an simply an alternative to the better established Toyota.

The manufacturers in the vast middle of the market struggle with brand identity partially because Read the rest of this entry »

Chevrolet breaks new Cruze television ads.

September 8th, 2010

This morning Chevrolet’s campaign for the new Cruze broke.  Two televsion commercials produced by Goodby with Tim Allen as the voice-over.

Nothing earth shaking here, nicely produced  and very product focussed, the commercials clearly make the point that the Cruze is a car that is surprising people. “Get used to more” is a nice line and a huge improvement over “Excellence for all.”   More than anything else the tone and manner sets these executions apart from recent Chevrolet work:

These commercials certainly make the point that the Chevrolet Cruze offers a lot versus the competition and is worthy of a look but they do not offer a big “ah ha” regarding the positioning of the Chevrolet brand.

It will be interesting to see where they go from here.