The Automotive Sales Story

by Rick Davis

We often find that the sub-indexes within our Automotive sector write stories about the counter-currents in the economy that nearly everyone can read — including the divergences in the experiences of Americans during this recession. To start off, consider the patterns traces by the brands typically identified as “economy brands” and those associated with luxury (note the different vertical scales):

The strength shown in the “economy” brands just before year-end was similar to the data seen in many retail categories at that time — where significant incentives only pulled sales forward from the earliest parts of this year. The numbers returned to slight growth as the pain at the gas pump began to reassert itself. The luxury brands have followed a different course:

The luxury brands do not show the same “pulling forward” effect seen in the economy brands, perhaps as a consequence of such sales resulting from less price driven decisions in the first place. But the recent softness could be a minor ramification of the gas price rise, which may have shifted some market share to the more gas frugal brands.

Slicing the data another way, the domestic brands chart still has an artifact on the left that is the 2010 year-over-year inverse down-blip (which is also clearly visible in all of the other charts) that is a reflection of the 2009 “Cash for Clunkers” promotional up-blip. But it also shows a general weakening as 2011 progresses:

Meanwhile, the European brands have demonstrated a substantial recent upward turn that is far stronger than that seen in the domestic chart. The European brands are proportionately over-weighted in the luxury chart and under-weighted in the economy chart, and the similarities to the luxury pattern are plainly visible:

The Japanese brands clearly shared the same “pulled-forward” sales drop-off experienced by the economy brands (where they are heavily represented) in the early part of the year. The more interesting part of the chart is the year-over-year consistency of the brands over the past 6 months, which might be expected for mature brands with well established market shares and repeat buyers:

Finally, demand for the Korean brands has moderated somewhat this year, but they are still showing 15% year-over-year gains, most likely taking growth share from the more mature Japanese labels:

The Korean brands are over-weighted in the “economy” chart, and their share gains are coming at the expense of all of the other producers in that product class. We are also fairly confident that the market share shifts to the Korean brands is at least partly a demographic shift caused by a new Baby-Boomer frugality hurting the brands that they grew up buying, coupled with serious financial stress among less brand loyal “Generation Y & Z” consumers pushing them towards the lower priced end of the market.

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