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The Light Vehicle Market, Advertising & the Economy

1. The Light Vehicle Market, Advertising & the Economy. Television Bureau of Advertising Annual Forecast Conference New York City September 5, 2002. Phil Brady, NADA President National Automobile Dealers Association, McLean, VA www.nada.org. 2.

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The Light Vehicle Market, Advertising & the Economy

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  2. The Light VehicleMarket, Advertising & the Economy Television Bureau of AdvertisingAnnual Forecast ConferenceNew York CitySeptember 5, 2002 Phil Brady, NADA President National Automobile Dealers Association, McLean, VA www.nada.org 2

  3. Franchised Auto Dealers are a Vital Cog in the U.S. Economy • At around a trillion dollars per year, the auto retailing business is the largest retail industry in America. Franchised New Car Dealers account for over $700 billion, or 70 percent • Twenty-two percent of retail sales in the U.S. today are generated at franchised new car dealerships • New light vehicle sales have enjoyed the 3 best years in history, 1999 - 2001. • NADA expects 2002 to be 4th best sales year 3

  4. New Car & Light Duty Truck Sales were Well Above the Trend Line in Recent Years(millions of units) 2001 = 17.1 million units (New) 2002E = 16.8 million units (New) 2001 = 13.3 million units (Used) 2002E = 13.2 million units (Used) 4 Source: NADA Industry Analysis

  5. New Car & Light Duty Truck Sales this year will compare favorably with the three best years. 2001 was a Very Mild Recession, unlike the recession like 1990-1992 (graph in millions of units) 16.8 est 16.0 1990 - 1992 Recession 5 Source: NADA Industry Analysis

  6. New Car & Light Duty Truck Sales this year will compare favorably to the all-time record of 17.4 millions units in 2000. Trucks: 51% of sales in 2001; 53% this year 16.8 est 17.4 17.1 16.9 15.5 6 Source: NADA Industry Analysis

  7. “Crossover” sales, a subset of SUVs, Show Most of the Growth in Sales and a Strong Change in U.S. Segment Share of New Light-Vehicle Sales (YTD July 2002 Vs YTD July 2001).Truck-based SUVs and Luxury Cars gained slightly in share. 7 Source: Ward’s Automotive *Crossover Utility Vehicles are built on unitized car platforms

  8. Korea and other lower volume countries show the largest Change in Sales by Country of Origin Share Change in U.S. New Light-Vehicle Sales, YTD July 2002 Vs. YTD July 2001 8 Source: Ward’s Automotive

  9. Currently, Domestically produced “Crossovers” are the fastest growing segment, year-to-date July.Off-shore produced CUVs show strong growth also. U.S. made Truck-based SUVs Show Modest Growth 9 Source: Ward’s Automotive

  10. U.S. Household Net Financial Assets Doubled from 1994 through 1999 (5 years)Then the impact of Equity Market Corrections ensued Net Household Wealth = Total Financial Assets - Total Liabilities (excludes home equity but includes all mortgage debt) 10 Source: Federal Reserve Flow of Funds Data, Z.1., Table L.10.

  11. Looking at the Correction by Quarters:U.S. Net Household Assets fell during Stock Market Corrections, which subdued Luxury Light Vehicle Sales(Blue Line) Net Household Wealth = Total Financial Assets - Total Liabilities Incentives for Luxury Makes Have Helped Increase Sales Recently estimated 11 Source: Federal Reserve Flow of Funds Data, Z.1., Table L.10., Ward’s Automotive

  12. How Have Light Vehicle Sales Remained So Strong?Total Dealership Advertising Spending Jumped with Record Vehicle Sales 12 Source: NADA Industry Analysis

  13. Franchised Dealers’ Overall Ad Spending increased 3.7% in 2001 compared with 2000, shown below by media *Other includes items such as Community/Event Sponsorship, Billboard/Transit Ads, Yellow Pages/Shopper Flyers, and Magazines 13 Source: NADA Industry Analysis

  14. Automakers’ Overall Ad Spending fell 8.1% in 2001compared with 2000, shown below by Media.Spot TV Advertising has picked up in 2002, year-to-date -19.0% -6.8% +2.1% -1.4% +24.6% *National Newspaper consists of NY Times, USA Today, and Wall Street Journal -19.6% 14 Source: Competitive Media Reporting * Syndicated TV fell by 19.9% ** Network Radio fell by 9.5%

  15. NADA Dealer Optimism Index in July Reflects Market Concerns, but Overall Consumer Confidence is still Reasonably Strong Optimism Sales 15 Source: NADA Industry Analysis

  16. 89 % of Dealerships now have a Website, Up from 47 % in 1997Internet will help Future New Light Vehicle Sales 16 Source: NADA Industry Analysis

  17. More Services are Offered on Dealership Websites in 2001 compared with 1997 17 Source: NADA Industry Analysis

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