DETROIT
-- Paul C. Taylor, Chief Economist for the National Dealers
Association,
spoke to the media inside the Detroit Free Press during the
FACS
conference. He mentioned how car dealerships will go through
a series of
changes and compared the U.S. market to Asia and Europe.
He said that motorists
that are concerned with the price of gasoline are
mostly driving used cars. Taylor noted that Americans have
not given up
their trucks and SUVs and moved entirely to smaller cars.
Americans have
decided to go for the smaller drivetrains instead. They made
choices based
on their needs. For example, crossover sales are up and SUV
sales are
down. Crossover vehicles look like sport utility vehicles
but they are
based on a car platform. Sales of large cars, vans and pickup
trucks are
down.
"People are
tending to hold onto old cars as backups and are not driving
SUVs to work," Taylor said.
Taylor added that
many businesses that use pickup trucks adorned with
their logos will have to switch to crossovers. Crossover will
become the
new automobile for small businesses and company cars. Sales
of crossovers
hit the 3 million mark between 2005 and 2006.
What will the future
of the big three automakers look like? GM's market
share is expected to fall from 26% to 24% by 2008. Ford will
drop from 18%
to 17% in that time period. The Big three on average will
drop from 58.2%
to 54.9% market share by 2008. Asia's market share is on the
rise from
38.6% to 40.1%. Europe will also experience a slight increase
from 5.1% to
5.6%.
Taylor reported
that the Europe automotive market will be affected like
the U.S. market. More companies will be moving in. There will
no longer be
a top three market. There will be a top six or seven manufacturers
in a
list of twenty or so.
Japanese automakers
account for 60% of the world's new vehicle sales. The
Detroit three automakers provide 55% of new vehicles. European
manufacturers account for 57% of new car sales globally.
When it comes to
used cars, the story is switched. The Big three companies
take the lead with 32% of the used car sales globally. Japan
and European
manufacturers account for 25% of used car sales, according
to Taylor.
How has dealership
advertising changed? Car dealers are spending less on
advertising over the last few years. In 2003, dealers purchased
$8.5
billion of ads. In 2005, that number dropped to $7 billion.
Dealers are
spending more on TV and cable, internet and direct mail ads.
However, they
are spending less on newspapers and the radio. They are also
willing to
pay more to sponsor events, ads on billboards, ads on flyers,
magazines
and even some sponsor race cars. Dealers are more willing
to spend their
ads on newspaper display advertising that is located outside
of the
classified section.
"Expect to
see more as where people are doing the reading," Taylor
said.
"Newspapers are linking classifieds to their websites."
He believes that
the U.S. will lose 150 car dealership per year. That is
the total number that will go out of business. Most of the
dealers that
will close are in rural areas. People will have to driver
farther to
showrooms to choose a vehicle. However, they will be able
to drive less to
get to a service station. For example, a dealer could operate
several
service stations within a certain radius from the showroom.
Taylor insists
that dealers are optimistic about the future. Consumer
confidence has improved after the start of the Iraq war. The
nation's GDP
(gross domestic product) is expected to be at around 2.5%
this year.
Unemployment is lower in the U.S. Michigan's unemployment
is higher than
most states right now.
In terms of the
used car market, Americans are purchasing more cars with 6
cylinder engines. Prices of import used autos are down while
domestics are
going up. People are not as concerned with the price of gasoline
because
it has gone down in recent months. Taylor mentioned that consumers
are
purchasing used SUVs in recent months.
Sales of used cars
are up in 2006 by 2.2%. The average price for a used
car was $15,708. About one fourth of Ford dealers are not
making money on
new cars. The average price of a new car nationwide was $28,223.
While all this moving is going on, the competition drives
prices down for
consumers. However, it increases the costs for manufacturers.
There is no
middle ground.
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PHOTO
BY JASON RZUCIDLO / AMERICAJR.com
Paul
C. Taylor speaks to the media inside the Detroit Free Press.
