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Automotive in 2011 Detroit to the Dealer Wards Dealer Magazine Steve Finlay ESA & Company Adam Armbruster

Automotive in 2011 Detroit to the Dealer Wards Dealer Magazine Steve Finlay ESA & Company Adam Armbruster The Good Old Days of Vehicle Sales? 1999 16,893,538 2000 17,349,755 2001 17,122,369 2002 16,816,368 2003 16,639,053 2004 16,866,920 2005 16,947,754

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Automotive in 2011 Detroit to the Dealer Wards Dealer Magazine Steve Finlay ESA & Company Adam Armbruster

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  1. Automotive in 2011Detroit to the DealerWards Dealer Magazine Steve FinlayESA & CompanyAdam Armbruster

  2. The Good Old Days of Vehicle Sales? 1999 16,893,538 2000 17,349,755 2001 17,122,369 2002 16,816,368 2003 16,639,053 2004 16,866,920 2005 16,947,754 Question back then was: “When will we reach 20-million unit sales year?” But how good was it, really?

  3. What primarily drove those sales (some of them unhealthy) • Push production (Bane of the industry.) • Easy credit (Often too easy; people getting into heavy debt.) • Hefty incentives (Expensive for the industry.) • Strong housing values (Lot of people re-financing homes, buying cars) • Low unemployment

  4. Then the storm hit in 2008 • Gas prices soar. • Financial markets collapses in September. • Housing prices drop. • Unemployment rises. • Credit starts to freeze in 2008; goes Arctic in 2009, • and auto makers and dealers get frostbite.

  5. The Devastation to Auto Sales: • 2000: 17.8 million – the high-water mark. • 2007: 16.4 million • 2008: 13.4 million • 2009: 10.6 million • How bad? A 6-million unit drop in annual sales based • on an average sale at $25,000 equals a revenue loss of • $150 billion!

  6. The Silver Lining of the Great Storm: • Auto makers and dealers right-size their operations. • The “Push” System is dead. • The “Pull” System replaces it. • An automotive industry revolution. • All knew push was flawed; it took a disaster to kill it.

  7. Where We’re at Now • Recovery is slow, so some forecasters are downward • revising original sales predictions. Impediments: • soft job market, low housing values and tight lending. • Ward’s projects 2010 sales at 11.3 million and • a similar SAAR (seasonally adjusted annual rate) going • into early 2011. • GM publicly says 11.2 million to 12 million, always a range. • Sales next year: 13.1 million. Depends on recovery. • Tough number to hit. Need for sales to pick up • at the second half. • Today’s question: What is the new “normal” in annual sales?

  8. QUICK WORD ON INVENTORY • Lowest in years. Auto makers holding back, awaiting a recovery. • Could be holding back sales, too, though. • Dealers want more fast-selling vehicles. • Big question: Can you grow the market without building inventory? • Need a better inventory mix, a smarter mix. Low on slow sellers, • high on fast. Right now it’s chaotic. • Solution: Flex manufacturing. Not there yet but headed • in that direction.

  9. Sales Outlook Beyond Next Year • 2012: 13,750,000 vehicles • 2013: 15,300,000 * • 2014: 14,700,000 • 2015: 15,500,000 • The spike above trend in 2013 (it could happen in a different year) • indicates a bump to catch up with pent-up demand. • Unprecedented: Scrappage rates exceed build rates. • We are moving towards market stability in 15.5 to 16 million range. • When sales hit 16 million it will be a profitable “sweet 16” • because both auto makers and dealers have right-sized.

  10. RECAP • Overall recovery really slow. • Banks hesitant to lend, auto makers hesitant to build until the • recovery. But is that impeding it? Risk management fine but… • Pull market replaces push – finally! • Industry needs flexible manufacturing – the nimble ability to • increase and decrease production of vehicles, depending on demand. • Flex manufacturing + pull market = healthy profits, even if volumes • are lower than “the good old days” of 17 million unit sales.

  11. A Car Dealer Day ESA & CompanyAdam Armbruster

  12. 19% spent in local television. Ward’s Dealer Business2010 TV

  13. To sell just 1 car … Ward’s Dealer Business 2010 OR OR 13.5customeremails 6.5customerwalk-ins 8.5customerphone calls

  14. Car buyers spend20% more timeto buy in 2010 Vs. 2008. Ward’s Dealer Business 2010 +20%

  15. 66%of car buyers do not buy from the first dealer they contact. Ward’s Dealer Business2010 66%

  16. Top 3 2011 Car Dealer Issues ESA & CompanyAdam Armbruster

  17. Auto Issue #1 “BUILD EM, PUSH EM” versus “SERVE THEM, SELL THEM”

  18. 89%

  19. 82%

  20. 50% Buy a Car

  21. 15%

  22. Auto Issue #2 Local Dealers thinking like… Local Dealers.

  23. 9,329

  24. Auto Issue #3 Bad Timing

  25. Typical Auto Buyer Foot Traffic

  26. Weekly Auto Buyer Online / Phone Traffic

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