Edmunds: Used Prices to Stay Strong in 2010, More
SANTA MONICA, Calif. — Reflecting on the tumultuous auto market in the past year and looking ahead to the next 12 months, Edmunds.com analysts project that the used-vehicle price strength of 2009 — caused largely by low inventory levels and healthy demand — will likely continue into 2010 thanks to "tight" supply and sustained demand.
"Used-car prices rose in 2009 because inventory was limited and demand was strong," explained Joe Spina, Edmunds.com analyst.
More specifically, Edmunds.com noted that three-year-old vehicles' average retail True Market Value during 2009 climbed 4.1 percent year-over-year to $16,454.
Meanwhile, five-year-old units had an average retail True Market Value of $11,226, a 3.8-percent year-over-year gain.
Edmunds.com noted that the average retail value for 10-year-old units was $4,459, a 5-percent increase from the prior year.
New-Car Sales Slide
Moving over to the new-vehicle side of the market, Edmunds.com projects that year-end 2009 new-vehicle sales will be just under 10.4 million, which would be the lowest mark in 40 years.
This is quite significant considering that there were 70 million fewer people in the U.S. in 1970, officials noted.
And while there were 16 million new-vehicle sales a year for much of the middle of this past decade, there was a 36.4-percent drop between 2007 and 2009.
What Impacted Auto Sales in 2009?
Continuing on, Edmunds.com analysts looked at how a few stimuli impacted the auto market in 2009.
Beginning with fuel costs, officials suggested that low fuel prices curbed some of the consumer emphasis on fuel-efficient models.
"The price of gasoline was relatively low — an average of 32 percent lower than last year — so most consumers hardly felt compelled to shop for more fuel efficient vehicles," shared Edmunds' GreenCarAdvisor.com senior editor John O'Dell.
"The Cash for Clunkers program created a small window of time in late summer during which some preference shifted, but afterward the market share of most segments returned to their previous levels," he added.
Looking at a few individual segments, hybrids started off 2009 with a market share of 2.4 percent, and eventually hit an apex of 3.6 percent in July. The segment averaged 2.9 percent for the first 11 months of the year and commanded 2.7 percent of the market in November.
After beginning 2009 with a market share of 16.1 percent, compact cars jumped to a 22.9 percent share in August. However, they fell to 14.4 percent by November.
The market share for subcompacts reached an all-time high of 6.2 percent in August, compared to its 3.6 percent share in November and at the start of the year.
Large pickups showed ups and downs in market share as well. The segment commanded 12.2 percent of the market to the kick off the year, but large pickups share fell to 9.3 percent by August. Then, it climbed to 10.7 percent three months later.
Meanwhile, market share for sports cars hit 3.8 percent in June due to new-product launches after a 2.4-percent share to begin the year. In November, it was 3.1 percent.
"Despite slow sales of green cars, automakers continue to improve fuel economy, offer new hybrid models and promise that electric vehicles are on their way to the market," O'Dell stated. "No one wants to be caught flat-footed when gas prices inevitably climb again."
OEMs Show Market Share Fluctuations
Next, Edmunds.com took a look at market share among various automakers, which tended to fluctuate "unexpectedly" in 2009.
"The market's instability allowed for some unique opportunities that benefitted well-positioned automakers," noted Edmunds.com senior analyst Michelle Krebs.
Edmunds.com gave the example of Subaru, Hyundai and Volkswagen, all of which showed double-digit gains in market share.
Subaru showed the strongest surge of the three, as its share climbed from 1.4 percent to 2.1 percent, a 49.2-percent year-over-year gain. Officials attributed this largely to strong sale from the "impressively redesigned" Forester.
Hyundai saw its market share grow from 5.2 percent to 7.3 percent, a 40.4-percent leap. Edmunds.com pointed to the Hyundai Assurance program, which spotlighted the "value-oriented products that resonated in the recession."
VW's market share in 2009 was 2.1 percent, a 23.3 percent improvement over the 1.7 percent share it had in 2008. The redesigned Jetta TDI helped to spur this surge.
Conversely, there were four automakers whose market share fell by more than 10 percent during 2009, including General Motors (market share was down 10.6 percent year-over-year) and Chrysler (down 18.7 percent), both of which went through the Chapter 11 bankruptcy process.
The market share dips in Mitsubishi (off 29.7 percent) and Suzuki (down 40.5 percent) were rather significant, as well.
Moving on, Edmunds.com reviewed the impact of incentives and found that increased spending didn't necessarily translate into stronger sales.
"Bargains were the name of the game during the economic downturn, so essentially every automaker had to increase its incentives to keep customers interested," shared Jessica Caldwell, Edmunds.com senior analyst.
Breaking it down, the Big 3 had average incentive spending of $3,801 per vehicle sold during 2009, a 6.3-percent increase. However, domestics' market share dipped by 7.3 percent.
Meanwhile, Japanese brands increased incentive spending by 15.8 percent to $1,664 per vehicle sold and their market share increased by 1.8 percent.
Korean automakers' incentive spending jumped 31.8 percent to $2,810 per vehicle sold and their market share climbed by 41.8 percent.
The average incentive spending for European brands was $3,342 per vehicle sold, a 19.5-percent increase. Their market climbed by 7.7 percent in the same time frame.
Of the Big Seven automakers, Chrysler spent the most on incentives at $4,264 per vehicle sold, compared to $3,868 the prior year.
GM was No. 2 with incentive spending of $3,889 per unit sold in 2009, up from $3,554 a year before.
Ford was next at $3,365 (roughly even from $3,360 in 2008).
Hyundai spent $2,810 per unit sold (compared to $2,132 in 2008), followed by Nissan at $2,533, which climbed from $2,100.
Toyota increased spending from $1,318 per vehicle sold to $1,602, while Honda's incentive spending jumped from $1,204 to $1,281.
Looking forward, Edmunds.com anticipates new light-vehicle sales to come in at 11.5 million units in 2010, up nearly 11 percent year-over-year.
Other expectations from Edmunds.com are the following:
—2010 is likely to be "the year of the electric car," as the all-electric Nissan Leaf and extended-range plug-in hybrids Chevrolet Volt and Fisker Karma are launched.
—Incentives probably won't be as up-and-down as they were in 2009 due to OEMs watching production more closely.
—With new-product launches as well as production rates more in sync with demand levels, Edmunds.com is projecting that transaction prices should climb.
—The sales performance of subcompact and compact cars will maintain its strength, even though fuel costs have stabilized.
—Analysts are expecting that India's first automaker in the U.S., Mahindra, will introduce three new models and will add to the competition in "an already crowded market."
—Internal combustion technology will be refined by automakers so that they can build cleaner, more fuel-efficient engines.
"The best thing that might be said about the year the auto industry — and an economically battered nation — is preparing to close: it probably can't get any worse," stated Bill Visnic, AutoObserver.com senior editor.
Edmunds.com Names Best and Worst Ideas of Year
Continuing on, Edmunds' AutoObeserver.com also unveiled what it considered to be some of the auto industry's best and worst ideas of 2009.
"Companies sometimes do the most interesting things when they're desperate," Visnic wrote in the AutoObserver.com report.
"Desperation in 2009 — as defined by coming up some 6 million sales short of the industry's glory days of just three years ago — generated products and strategies that ran the gamut from ridiculous to sublime," he added.
Edmunds.com listed the following as some of the best ideas, with commentary included:
"A clever response to the nation's epidemic employment anxiety," officials noted.
"Overcapacity was a decades-old problem, and the recession forced everybody to deal with it."
"Auto companies are taking intelligent chances with this practical, useful and more fuel-efficient alternative to SUVs."
—Talking up the Volt.
"The Volt is impressive, progressive and potentially game-changing. Yeah, GM's gone a little overboard, but the company is right to hype the Volt."
—Paperless Owners Manuals.
"Beginning with '10 Chryslers, searchable DVDs will replace 900-plus tons of the ignored paper Chrysler plops in glove compartments every year."
—The Ford Fusion.
"Case study in how to take some pretty old bones and keep them going on the cheap – and win accolades and top-10 best-seller status in the process."
Conversely, some of the worst include:
—The Dealer Dump.
"Were GM and Chrysler over-dealered? Yes. Was this heavy-handed gambit the fix? Nope."
—Giving up on Diesels.
"‘Diesels cost too much,' companies from Ford to Honda to Nissan bleated, but don't ask us how anybody plans to get their fleets to the federally-mandated 35 miles per gallon by 2016 when the Honda CR-V struggles to get 25."
—Foot-Dragging on Floor Mats.
"Toyota displayed a magnificent amount of corporate irregularity in dealing with the situation, creating another vivid gash in the company's formerly impregnable reputation."
"Why is the division that epitomizes the rampant, marketing-driven re-badging that led GM to the brink still hanging around? "
—The 230-MPG Volt Claim.
"Overpromising on the Volt's fuel-efficiency capabilities seemed a strategy destined for ridicule and smacked of the bad old days of GM marketing-by-hocus-pocus mentality."
—Whining About Executive Pay Limits.
"A million bucks, give or take, should be enough to lure a CEO with a brain even if decades' worth of ‘ya-won-the-lottery ‘exec pay packages couldn't get it done for GM up to now."
—Internet and TV on Board.
"More on-board distractions? Sounds like great news for airbag suppliers and insurance companies, though."
"Honda is building a case for those who say the company is losing its famed engineering edge."
—Porsche is Assimilated.
"Look, we like Volkswagens. But the company that uses its legion of econobox brands to knock out the majority of Europe's mainstream cars — good as they are — shouldn't have its fingers in Porsche's sauerkraut."
"How do Cash for Clunkers and the bailouts and bankruptcies of Chrysler and General Motors rank among the year's best and worst decisions? In the mixed bag category, for obvious reasons," Krebs who contributed to the AutoObserver.com report, suggested.