McNaughton Automotive Perspectives

The automobile industry is entering new territory as the recession wanes and consumers, who have been emotionally scarred by the last 18 months, remain cautious.  Many believe that consumers have been forever changed by this recession and that they will be more conservative with their money for years to come.

No one expects that the automotive industry will achieve the heady sales levels of the early part of this decade.

“By 2013, car and truck sales in North America will rebound to the new normal rate of 15 million to 16 million units”  Automotive News 8/5/09

At best, we will attain a “new normal” of 15-16MM units in 2013.

That means that competition for customers is going to be tougher than ever and no one’s business is going to grow just hanging on to the industry coattails.  Historically the manufacturers have reacted to these types of circumstances by using incentives.  These tactics artificially inflated sales earlier in the decade, pulling sales forward and contributed to the most recent “correction” that has pummeled the industry.  Using short-term incentives to steal share is not the answer to long-term prosperity, it’s merely a tactic that gives a franchise a quick shot in the arm.  Establishing a brand’s immutable points of difference and creating consumer affinity for it, is what creates value over the long term.

Last week, BusinessWeek published a piece by Ed Wallace about GM making the same mistakes; in it he made the case for branding:

“True, people want a “deal” when they buy a new car. But more important, they want to buy something exceptional….The automotive selling process, done right, has little to do with negotiation: It has everything to do with building value in the vehicle.”

It’s about time the industry took “branding” seriously.

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