Domestic Car Sales and The Riddle of the Sphinx

Whatever the qualifications and diplomas accumulated by auto executives, it’s a pretty safe bet that they failed mythology. Automobile names are a silly subject already, bring in some of the poorer choices, and you have the makings of high comedy.The assorted Zodiac names are harmless, if a bit silly. I’ll accept that no one at Chevy realized that Cobalt is a poisonous metal named for a demonic imp. But really, who green-lighted “Gremlin” back in the day? Odyssey is a cool-sounding name, but really, shouldn’t it be some sort of mid-life-crisis car? Well, maybe it’s a car for a “homer”. What would Oedipus drive? That’s easy: a black 300 with tinted windows cause he’s one baaad.. OK, I’ll stop. But mentioning the poster boy for tragic screw-ups reminds us of something that does have relevance for today’s auto market, the riddle of the Sphinx.

Just as man has three ages, you can easily divide a car’s age into three: New (just out of the factory), middle-aged (when it is “sold on” for the first time), and old age (when it enters beater-hood). Interestingly, the age of the customer tends to work in reverse. This is both helpful and worrisome for the domestics.

There’s no doubt that Detroit sees new car sales as the purpose of their business. While overall quality is still a bit… worrisome, “off the lot” quality has improved dramatically from the nadir (Nader?) of the 70s and 80s. The only remaining lagging part of the off-the-shelf equation: interior appointments, which are still bad enough to make poking your eyes out sound like a plan. Memo to Detroit, the owner sees a LOT more of the inside than the outside.

While interior quality and option packages are still a negative factor, on price “actually paid,” the domestics are in the ballpark. The real issue is too much “empty” volume, cars that won’t see a “real” owner until their next stage. Like many of their owners, cars can also have mid-life crisis. The dynamics of domestic “new” cars, quite often see their customers passing like ships in the night.

Even at their most arrogant, no domestic honcho will claim quality “parity” after three to five years. Truth be told, it’s usually not that bad. Aside from Toyota, Honda and perhaps Subaru, GM and Ford can claim at least parity with the competition (and parts are usually much cheaper). Given those facts, the re-sale value of the domestics (especially cars) comes as a shock.

The culprit is all those “extra” sales, especially the rentals. This lack of “trade-in” power could well be the single largest factor in the domestics’ failure to retain their customers. Horror stories make better copy, but they are comparatively rare. The bright flip side of this “problem:” the domestics can attract quite a few “value” shoppers, who are much more forgiving of “issues;” they didn’t (wouldn’t and can’t) pay full price.

Unfortunately, for these sorts of customers, upgrading them to a “new” version of their favorite grocery-getter is a BIG step. Buying “off the lot” can mean paying twice or even three times what their old vehicle cost.

By comparison, the Dai-sans’ high retained value keeps buyers in. To combat sticker shock on the old whips, they have emphasized “certified used” programs (Honda’s trailed only Jaguar’s in one satisfaction survey). While it may be harder to sell a 50k mile car with only 25 percent savings, it’s a much shorter step to get such a buyer into a brand-new one later.

If the early stage is full of promise that leads to the conflicts at mid-life, the end-life of the domestics raises a good deal of hope. When you enter the realms of “beaterdom,” one of the most important factors is the cost to keep it running. As our Steven Lang has said many times, the domestics’ relatively simple mechanicals, long model runs (can you say “pick and pull?”) and cheap parts make them compelling proposition.

The Dai-san depend on robustness to offset their more expensive parts. Most of the remaining competition may come cheap, but often becomes a “money pit.” Buying an old Merc/Volvo isn’t too hard, it’s the parts’ cost that kills. This is important because “beater” drivers often move on to something better, especially the teens.

Whether they get them hand-me down, direct from their folks, or purchased with the receipts of some job they’d rather forget, teens are the customers of tomorrow. The single biggest issue for “converting” teen drivers is the disconnect between your father’s old wheels and what is likely to be available when you have a real job.

The real answer to the riddle of ages is: The Big 2.8 will always be creating new customers. It’s keeping them past their first trade-in that’s the problem.