By on August 9, 2010

Automotive News [sub] takes a stab at calculating the numbers that Detroit doesn’t want you to see. Best of all, AN says the numbers are based on “internal documents.” During this morning’s financial results conference call, Chrysler CEO Sergio Marchionne railed against AN’s “crusade,” implying that the industry paper of record is nursing a vendetta against Chrysler… which is usually a good sign that a media outlet is doing its job well. It’s also a sign that Marchionne knows his firm’s fleet dependence is a problem.

Why is AN going after fleet numbers? Because everyone knows Detroit is using them to help create the perception of a completed turnaround ahead of GM and CHrysler’s IPOs (to say nothing of midterm elections). Or, as AN diplomatically puts it:

Automakers traditionally have not broken out retail and fleet totals in monthly U.S. sales reports. But with growing interest from dealers and analysts, Ford and GM have started detailing basic fleet and retail information.

Count TTAC as part of that “growing interest.” Especially since the drive for greater transparency is clearly making certain executives very defensive. But, as AN points out, the response has not been so uniformly reflexive. After decades of fleet-free sales numbers ruling in Detroit, Ford and GM are breaking ranks to help prove that their addictions aren’t of the terminal variety.

George Pipas, Ford’s chief sales analyst, said the automaker cut its July fleet percentage to 25 percent by slashing daily rental fleet volume.

He said Ford is emphasizing commercial and government fleet sales — generally considered more profitable than sales to daily rental fleets. Sales to daily rental fleets are less than half of Ford’s fleet total this year.

By comparison, more than two-thirds of Chrysler and GM fleet volume goes to daily rental fleets.

And though not every manufacturer is getting on board with fleet-sales breakouts, nearly all of them agree that the second half of 2010 will see fewer fleet sales.

Manufacturers expect the pace of fleet sales to slow in the second half. Ford, Chrysler and GM say fleet will be a smaller part of their sales mix by year end. Pipas expects fleet volume to be about 30 percent of Ford’s sales for the full year. Henderson said GM’s full year fleet mix will be 25 to 26 percent, similar to 2009′s 25 percent.

Chrysler spokesman Ralph Kisiel said, “For the full year, fleet sales will be roughly 25 percent of our total sales.”

With Chrysler running at 40 percent fleet, it will have to cut back significantly to make a 25 percent fleet mix by year-end. If Chrysler’s sales start dropping off, we’ll know why. Meanwhile, the fact that consumers don’t seem to even be considering Chrysler paints a troubling picture ahead of its new product flood in the second half of the year.

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34 Comments on “Detroit Dominates Year-To-Date Fleet Sales...”


  • avatar
    Da Coyote

    In a weird way, the fleet sales were perhaps the most damaging of all to Detriot. After being forced to rent Chryslers and the occational GM junk (prior to the Malibu), I concluded that there was no hope for those two manufacturers. Now, I’ve at least got a choice when I do business rentals, and it’s Toyota – when any are left.

  • avatar
    philadlj

    A clearer picture could be painted if the various customers who have purchased almost a quarter million Chryslers for their fleets would report how many units they bought and when. I mean for all we know, Chrysler is buying its own cars then crushing them or tossing them over a cliff somewhere!

  • avatar
    jameswenn

    Don’t large fleet sales lower resale values?

    • 0 avatar
      educatordan

      Yes and no. Traditionally rental companies have only kept cars for 30,000 to 50,000 miles and then dumped them at very low prices. If you wanted a base (fleet) Impala with a bench seat and 0 options, many buyers would pick the el cheapo used rental one or use the price of the used one to talk the dealer down on the price of the new/used one they were looking at. Most consumers were not smart enough to know why they should pay more for the used Impala LS that the CarFax shows was a one owner by a 67 year old in Sun City, AZ as opposed to picking up the one owner from Hertz that was likely beat to hell by frustrated business travelers. The lower prices of the of fleet models would also drive down the KBB value of the car.

      Now rental fleets are starting to keep cars longer so we’ll see how this affects resale. I mean does anyone really want an ex-rental car with 90,000 miles on it? I think not.

    • 0 avatar
      segfault

      The last Impala I rented was an LS with bucket seats and was actually in good shape at 30,000 miles. YMMV.

    • 0 avatar
      Norma

      Can rental fleet be the only culprit? I think it’d be unreasonable to assume other fleet operators all run their vehicles to the ground and scrap them. Com’on, not a chance. Sooner or later, I think at about 3-4 years, they’re going to be dumped into the used vehicles market dragging resale price down, along with consumers’ perception of model/brand equity.

  • avatar
    dcdriver

    This may be a dumb question but what actually constitutes a fleet sale anyway? Most people talk about rental cars, but if a construction company goes out and buys 10 f-250′s– are those counted as fleet sales? What about a plumber or flower delivery business who buys one Transit Connect and uses it solely for business?

    • 0 avatar
      th009

      Yes, the construction company would count as fleet business, but customers with 1-2 vehicles are not fleet customers (don’t remember any more where the cutoff is, sorry).

    • 0 avatar
      SV

      I think small business purchases of F-250s, Transit Connects and the like would be counted as fleet sales, but in the commercial fleet, not rental fleet category. That type of fleet sale isn’t harmful to brand perception/resale value/profits the way rental fleet sales are.

      I’m surprised at Ford’s high fleet numbers, but at least theirs comes more from commercial/government fleets (I’m guessing F-series, Transit Connect, and Econoline for commercial and Escape/Fusion Hybrids for government/taxi service make up most of it). Going by the Malibu’s sales jumps, I bet it’s relying heavily on fleet sales, while the Fusion probably isn’t as its sales have been flat compared to last year. The Cobalt, Aveo and Impala are undoubtedly hugely reliant on fleets; there’s no hope for the Impala in its current iteration but I hope the Cruze and next-gen Aveo don’t become the fleet queen the Cobalt was.

    • 0 avatar
      daga

      5 vehicles is the cut off.

      The plumber would be considered the commercial market but not the fleet market if he only buys one

    • 0 avatar
      th009

      I’m actually seeing a lot of Fusion rentals at Hertz and Budget. That’s only anecdotal info, though.

  • avatar
    gslippy

    I’d like to understand why fleet sales are “bad”. Those are still sales. Do they have lower profits than consumer sales?

    Besides, those cars end up in the consumers’ hands anyway after their time at the rental is done.

    At one time, rentals were considered a measure of a nameplate’s popularity. Has that changed?

    Please enlighten me.

  • avatar
    carguy

    While rental sales are universally bad for resale value, I think they hit companies that dump undesirable models even harder. I have had Honda Civics, Hyundai Sonatas and Mazda6s as rentals and it generally left me with a positive view of those car makers. Even the current Malibu is a pleasant surprise.

    However, having spent way too much time in surplus Sebrings and Calibers, I would never consider spending my own money on any Chrysler product. These cars have poisoned my view of that company for years to come.

  • avatar
    eggsalad

    Daily rental car fleets are moving away from domestic manufacturers, not the other way around. I once had the joy of renting a Subaru from Hertz, and I was told by the rental manager that they were moving away from Ford because of the poor resale values. Remember, rental fleets turn every 6-18 months, and if resale is lousy, they will lose money.

    Back in the day, US manufacturers actually *owned* chunks of the big rental companies (Ford-Hertz, GM-Avis) so they could ensure they had a place to dump fleet cars. I believe those relationships are long gone.

    • 0 avatar
      jaje

      Though the D3 resale value is poor – they pay less upfront. I think Ford has made a point to reduce reliance on rental fleet sales – but not corp/gov’t fleet sales. Who else would buy so many Crown Vics or Rangers and F series trucks?

    • 0 avatar
      NulloModo

      The resale value on D3 vehicles overall may be a little bit under the Japanese average, but it is hardly poor. Certain vehicles, like full size trucks and SUVs, tend to have much higher residuals than the Japanese offerings (trade in values for Tundras, Titans, Ridgelines, and Armadas in particular run very low compared to domestic equivalents).

      The residual value on certain domestic vehicles is also increasing at a much faster rate than those of some of the leading Japanese models.

  • avatar
    jaje

    Two kinds of fleet sales – government / commercial fleets and rental car fleets. The Former is the better b/c volumes are typically lower meaning less discount. The latter is the worst b/c they are the stripper models built to large demand.

    A trend that has been happening – is the D3 blame loss of marketshare on “reduced reliance” on fleet sales. Where fleets are now buying in droves helping drive up their sales where they claim “increased retail sales” is the main reason for the gain in sales. However, if you then take this comparison and look at the Edmunds True Cost of Incentives and see how the D3 are still the largest players in relying on rebates and incentives to move the retail cars – it does not spell well that they have to rely on lower profit fleet sales for 30% plus of volume – then have the highest incentives to sell in the retail field.

    If you also look at Hyundai (even Nissan) – they are doing well but they rely more heavily on fleets and incentives than Honda or Toyota. History has a very relevant subject in that Mitsubishi earlier in the decade sold a lot of cars into fleets and gave large incentives and sold to credit risk customers to gain marketshare. After that strategy failed – Mitsubishi is now much smaller than it was.

  • avatar
    ZCD2.7T

    Thanks for this info – very illuminating.

    BTW – is it a coincidence that this item appeared shortly after I posted this??:

    http://www.thetruthaboutcars.com/chart-of-the-day-july-midsize-sedan-sales/#comment-1648743

    Coincidence or not, I appreciate the info.

    What I’d really like to know is which car (not truck) is the leader in “consumer” sales?

  • avatar
    th009

    There is a key point why daily rental fleet sales have been very bad in the past, and why they are not quite as bad any more — this part of the Automotive News article did not get mentioned above:

    “In the first half of the year, 65 percent of the rental cars in service and an even higher percentage of vehicles purchased by rental companies were sold under agreements that shift depreciation risk and remarketing expenses to the rental companies, Webb adds. That’s up from 51 percent in the 2007 model year.

    Before the recession, most of the vehicles sold into rental fleets by Detroit automakers were program vehicles, meaning the automakers assumed the depreciation risk and remarketing expenses of those vehicles.”

    Essentially most of the rentals used to come right back to GM/Ford/Chrysler at a pre-agreed price, and then the manufacturer would have to take the financial hit of dumping these cars on the market.

    • 0 avatar
      Stingray

      So I guess the rental companies will sell the cars at a higher price and even resale values won’t suffer that much.

      Carmaggedon left a very different market.

      We can even link this with Mr. Lang’s previous entry

    • 0 avatar
      George B

      Regarding the shift away from program cars, Last year I rented a Toyota Camry from Hertz with close to 40,000 miles on the odometer. It appears that Hertz was keeping this vehicle in their fleet longer than they would have for a program car. Because of it’s mileage and numerous scratches, this car wasn’t directly competing with new car sales like the program cars do.

    • 0 avatar
      th009

      The last Camry I had from Hertz had 48K miles on it. Not only worn out, but the worst vibration (at highway speeds) I have *ever* had in a rental car.

    • 0 avatar
      caljn

      I am a nearly weekly business travler and renter at Hertz and their cars most definetly have higher mileage then years past.

      But more salient is I purchased a Nissan Maxima a years back after a rental. Then traded for another Maxima a few years later, and just traded that one for an Xterra.
      Nissan sold 3 cars from one positive rental experience.
      Prior to that, Nissan was not on my radar.
      Don’t scoff at fleet sales…

  • avatar
    SkiD666

    Wouldn’t “Domestics” make have a larger percentage of fleet sales as compared to “Imports” in all world markets?

    In Germany, wouldn’t the locally produced vehicles (Opel/BMW/Mercedes/etc.) have a higher percentage sold into fleets than say Toyota/Honda/Ford/Etc.?

    Wouldn’t Japanese companies buy Toyota/Honda/Nissan/etc. for commercial use instead of Hyundai/Ford/GM/etc.

    How is that any different than is happening in the US?
    What is the proper “healthy” percentage?

    • 0 avatar
      NulloModo

      It’s also worth noting that the D3 make entire lines that are designed predominantly for fleet sales and use. Ford E-series and Chevy Express vans are probably well over 90% fleet purchases – very few people actually have a need for something like that as a private owner, especially since hardly anyone buys conversion vans anymore. Ford also has the Transit Connect, which is almost always a fleet vehicle, the Super Duty F-550 and above, the Crown Vic, which is fleet only, the Town Car, which is really only aimed at the livery market, and the SSV trim on certain vehicles which is only designed for fleet use.

      Ford and GM also go through a lot of trouble to accommodate fleet purchases through easy upfits and working with aftermarket suppliers to get the special use, construction, and fleet business on their trucks and SUVs. Fleet business can still make a lot of money for a company, and even though a ton of F-150 and Silverado trucks go to fleets, resale value is still good.

      For the most part the import automakers just don’t offer anything that competes with the domestics in these categories. Yes, Mercedes has the Sprinter, but that is very low volume compared to the E-series and Express, and yes Isuzu makes a lot of trucks, but I think Isuzu is commercial only at this point anyway.

  • avatar
    golf4me

    I wonder what Toyonda’s fleet sales % is in Japan? I seem to think that fleet sales are largely “patriotic”. I see Golfs in Germany and Fiats in Italy…

  • avatar
    mjz

    Chrysler has had to rely on fleet sales to keep production up until new/revised products come to market by the end of this year. Once the new products hit, I think you will see the percentage of fleet sales drop.

  • avatar
    mtr2car1

    To ZCD2.7T…the Accord has traditionally been the best selling (retail) vehicle in the US – given Honda’s low fleet number, it’s easy to see.

    Fleets are not bad but they do a good job of hiding the organic (retail) growth underneith. Ford’s Retail growth (selling cars to regular people that actually want to buy them with their own money) is up 19% – pretty good.

    Chrysler is finding that 19% Less people want their cars vs. last year – which is troublesome considering that the press about them last year was terrible; although, their last year retail numbers are inflated due to the dealer close out sales so it may not be as bad for the balance of the year.

    As we’ve seen in the past, man cannot live on Fleet alone but I can’t completely fault GM and Chrysler for juicing the numbers to keep the lights on until better product arrives.

  • avatar
    segfault

    Holy smokes, Chrysler… They’re having to do nearly 40% in low-profit fleet sales just to meet their “worst case scenario” numbers. This won’t help their residual values. Might as well sell exclusively to fleets.

  • avatar
    Z71_Silvy

    And I got lambasted for saying that Ford still fleet dumped…

    But…just like always, I was right.

  • avatar
    Corky Boyd

    Ed,

    Are government sales included in the fleet numbers or are they separate? That would be an interesting number no matter what. Are government sales done through delers?

  • avatar
    gslippy

    Th 09 Sedona I just bought was originally a Hertz vehicle, but I only discovered this after I bought it. :( However, it’s been a great car and at 18k miles showed no visible signs of abuse.

    The following 10k miles have been rosy, so hopefully it had a gentle childhood which will yield good long-term performance.

  • avatar

    Excellent post (and great research by Automotive News). I did the math this morning, and it’s nearly mathematically impossible for Chrysler to get its fleet sales down to 25%, assuming that their overall 11% sales gain YTD holds true throughout 2010.

    Here’s the link (in the beginning I linked back to TTAC, of course):
    http://www.autosavant.com/2010/08/10/chrysler-gm-and-ford-dominate-ytd-fleet-sales/

  • avatar
    george70steven

    I’ve at least got a choice when I do business rentals, and it’s Toyota. Fleet business can still make a lot of money for a company.
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