Auto sales reports: May car sales improve, lessons from Chrysler bankruptcy

A report from Edmunds.com on expected May sales indicates that the auto market is trying to stabilize, and at least one Fort Smith-based dealership is reporting good May volume.

May new vehicle sales (including fleet sales) are expected to be 890,000 units, a 36.1% decrease from May 2008 but an 8.9% increase from April 2009, according to Edmunds.com, a closely watched company recognized as a leader in auto sector analysis.  www.edmunds.com

“Consumer demand is slowly starting to come back, but is still far below last year’s levels,” Jesse Toprak, executive director of industry analysis, noted in a statement. “The dramatic year-over-year declines can also partly be attributed to significant reductions in fleet sales, particularly for Chrysler, who closed down production on May 1.”

However, the combined U.S. market share for Chrysler, Ford and General Motors is estimated to be 43.9% in May 2009, down from 45.3% in May 2008.

“Consumer confidence, a key factor in car buying, rose in May by the most in six years and is now at a level not seen since last September,” noted Michelle Krebs, senior editor of Edmunds. AutoObserver.com. “This good news couldn’t come soon enough for the auto industry, and the benefits are already coming in for most automakers.”

Harry Robinson, with Harry Robinson Pontiac-Buick in Fort Smith, said the dealership is seeing “good volume” in May, but won’t be able to match the “big May we had in 2008.” He said the used car sales continue to be strong.

“We’re having a decent month,” Robinson said. “Business is still good here.”

Edmunds.com made the following prediction for May new vehicle sales:
• Chrysler: 68,000 units in May 2009, down 53.9% compared to May 2008. This would result in a new car market share of 7.7% in May 2009, down from 10.7% in May 2008.

• Ford: 153,000 units in May 2009, down 28.5% compared to May 2008. This would result in a new car market share of 17.2% in May 2009, up from 15.3% in May 2008.

• GM: 170,000 units in May 2009, down 36.9% compared to May 2008. GM’s market share is expected to be 19.1% in May 2009, down from 19.4% in May 2008.

• Honda: 102,000 units in May 2009, down 39.3% from May 2008. Honda’s market share is expected to be 11.5% in May 2009, down from 12.1% in May 2008.

• Hyundai: 63,000 units in May 2009, down 18.4% from May 2008. Hyundai’s market share is expected to be 7.1% in May 2009, up from 5.6% in May 2008.

• Nissan: 65,000 units in May 2009, down 35.1% from May 2008 but up 38.7%. Nissan’s market share is expected to be 7.4% in May 2009, up slightly from 7.2% in May 2008.

• Toyota: 153,000 units in May 2009, down 40.6% from May 2008. Toyota’s market share is expected to be 17.2% in May 2009, down from 18.5% in May 2008.

LESSONS LEARNED
Edmunds is also reporting that Chrysler’s experience in bankruptcy may contain lessons for GM officials.

“Chrysler’s experience has been extraordinary: it is going through a smoother, faster bankruptcy with the federal government playing the unprecedented role of both task-master and mediator,” Edmunds noted. “GM is not Chrysler: GM is far larger and more complex. Still, the Chrysler experience should be cause for some optimism that GM’s experience will be similarly efficient.”

Edmunds said GM should learn at least five lessons from Chrysler’s experience.

1. Consumers will do business with a bankrupt brand. Prevailing wisdom was that with a major purchase (like a vehicle) consumers would avoid the risk of buying from a company in bankruptcy.

2. Consumers aren’t as familiar with brands as one might think. The pattern where sales share drops pre-bankruptcy and climbs during is most pronounced for Chrysler Division vehicles, less so for Dodge division and almost not notable for Jeep division. Clearly consumers aren’t keeping tabs on which vehicle brands are owned by which automaker.

3. Consumers will have questions and want answers. Consumers do have real questions about their dealer, their vehicle and the deals available in bankruptcy. Consumers flocked in record numbers to research these issues on the Internet; GM has the opportunity to proactively reach out and address these concerns head on.

4. Consumers think that “bankruptcy” equals “deal.” One reason that sales have been strong for Chrysler is that bankruptcy has brought “deal-seekers” into their dealer’s showrooms.

5. A deal is what a consumer thinks it is. Despite the terminated dealers selling vehicles at a unusually high discounted rate, overall profit margins for Chryslers dealers actually increased in May. How could this be? There is an intuitive logic around the idea that vehicles purchased from a bankrupt automaker must be a great deal. Consumers accepting this logic actually negotiate less aggressively and pricing trends up. Instead of a brand campaign, GM would be well served to consider a bankruptcy sales event. This type of campaign would reinforce and build upon consumer beliefs – a highly efficient marketing strategy.