2011 was a fascinating year to follow auto sales. With the overall market up over 10%, and hot new products hitting showrooms, there was definitely room to grow… and yet everyone seems to have an excuse for why growth wasn’t stronger. Japanese automakers, the biggest losers of 2011, had a strong of natural disasters to blame the bad year on. Detroit showed strong volume gains in terms of percentage growth, and earned respect in growing segments where they were previously weak, but couldn’t match the expectations of its perennially over-optimistic boosters. The Korean manufacturers showed strong market share growth but lack of capacity prevented them from bounding into the top tier of the US sales game. In fact, only the European luxury manufacturers could point to 2011’s sales performance with unalloyed satisfaction, as they grew some 29.5% as a group, from an already-strong volume position. So, given these mixed results, what was the lesson of 2011?
Given the interruptions endured by their Japanese arch-rivals, Ford and Chevy were nearly guaranteed to win the brand volume sweepstakes. But look closer and all is not entirely well at the top of this heap. Ford, the volume leader, grew its overall sales by just 11% last year, in a market that grew 10.3%… in short, Ford didn’t lose any market share, but it didn’t win much either. More troubling for the brand’s long-term prospects, much of that growth came from trucks (up 15.1%), while car volume improved only 3.7%. In short, despite launching a brand-new Focus (which had a disappointing 2011), Ford lost ground in the car game (which grew more slowly than trucks, but nearly matched them for volume). The news was better at GM, where overall sales rose 13.2% on 17.8% car growth and 10.6% truck growth. Still, given the weakness at Honda and Toyota, one would have expected more from a GM that is still rebuilding from its bailout-era downturn.
Toyota and Honda posted similar results, having lost 6.7% and 6.8% volume drops respectively. But Nissan, which recovered far faster from the tsunami and was hit less hard by the Thai flooding, made up for some of their losses, putting a 14.7% volume increase in the Japanese side of the ledger. All three Japanese brands lost volume on their luxury brands, however, bowing before the German onslaught. And though Toyota’s losses were evenly-distributed by vehicle type, both Honda and Nissan relied on truck sales (including non-BOF CUVs) to boost volume. More importantly, the qualitative weaknesses of newly-launched products from Honda and Toyota helped fuel a sense of Japanese downturn that could prove to outlast any impacts of 2011’s natural disasters… but only time will tell.
With Detroit’s offerings enjoying the benefit of comparisons to their ignominious predecessors and new Japanese products enduring the exact opposite, Detroit’s market share growth continues to be mysteriously stalled. Chrysler’s turnaround continues apace, with 26.2% corporate volume growth, but with truck volume dropping in an otherwise strong market for the segment, profits will not grow commensurately. And a 66% increase in car sales growth looks a lot less impressive when you realize that its car sales were a mere 354,359 units… which is fewer than VW/Audi sold in the same period.
So, what happened? Think of the current Republican presidential nomination process as a parallel: Instead of the long-running pitched war between Detroit’s “Big Two” and Japan’s “Big Two”, the market is fragmenting, creating a thick pack of contenders rather than clear winners and losers. Hyundai/Kia enjoyed 26.5% combined growth on record volume. Nissan began to emerge as a rising power after decades of playing catch-up to Honda and Toyota. Volkswagen began its new value-oriented volume blitz, growing VW-branded car volume 29.4%. 44% growth at Jeep propelled Chrysler up and away from unsustainable volumes. Even Mitsu and Volvo posted some of the biggest volume percentage gains, up 41.9% and 24.6% respectively. The days of Toyota-Honda-GM-Ford dominance seem to be coming to an end, forcing brutal battles for every tiny sliver of growth.
Things have not changed dramatically in the truck world over the last year. Though truck volume outstripped car volume by nearly 400k units and though truck sales growth outstripped car sales growth, those gains largely came on the back of non-BOF CUVs. My analysis on the truck front has changed little since I wrote about The Great American Downsizing, and the new CAFE regulations that came out this year show that the days of BOF truck/SUV dependence for any manufacturer are coming to an end. On the car front, the action has been in the compact/midsized arena, the former of which is unsurprisingly exhibiting the wealth of solid options and killer competition that is beginning to define this industry. As 2012 unfolds, I’ll continue to look at the compact segment as a bellwether for the strength of brands. And with new versions of the Camry and Passat out, new Malibu and Fusion models coming, and an Altima replacement likely waiting in the wings, look for the midsized segment to continue to heat up as well. Meanwhile, with the luxury sedan segment essentially treading water, nearly all of the Japanese and American brands will need to dig deep to fend off the German takeover of the market.
The best news coming out of 2011 was that North American-sourced vehicles continued their strong turnaround. Fueled by Japan’s Yen crisis, the weak dollar and overseas natural disasters, insourcing of US sales picked up pace after a decade of precipitous declines. And given the larger trends in the industry, this dynamic should continue as production flees Japan… at least until Chinese imports gain acceptance in the marketplace. Given that this trend is being driven by foreign brand insourcing rather than a resurgence of sales from Detroit, it seems clear that the prospects for US auto industry employment have improved independently of the bailout. Though GM and Chrysler would not have survived this long without government intervention, and though they seem to have stabilized, there’s little to indicate that either GM or Chrysler is en route to juggernaut status in the US market (and GM could well take a PR and sales hit if the government exits its “investment” with a taxpayer loss).
Of course there is much more to analyzing 2011’s sales results than volume alone… from pricing to incentives, from fleet sales to inventory, there are a million qualifiers to the volume numbers that I simply don’t have the data to analyze effectively. Luckily TrueCar, which looks at as much data as anyone, has released a grade sheet for the industry by manufacturer and by brand. And the results there seem to reinforce my perception of 2011: an inevitable loss by the Japanese, and not much momentum gained by Detroit. In short, 2011 appears to have been the year of the insurgent brand (with the notable exception of Subaru, which saw its share peak in 2009-10 and is now falling off), and the opening of a new, more competitive chapter in the US market. This bodes well for consumers, who can anticipate better vehicles over the next product cycle or two, but it also foreshadows another shakeout further down the road. And this time it seems just as likely that Honda or Toyota could find themselves knocked out of the top tier as Ford or GM. In short, there’s never been a more exciting time to be watching the US auto market.