News about Auto Futures Group and Selected Automotive Articles

Worried Buyers Hit the Brakes on Ultra-Luxury Car Purchases

Thu, 2 Oct 2008 22:56:18 -0400

Sales Drop Attributed More to Psychology Than Finances

By Jean Halliday

Published: October 02, 2008

DETROIT (AdAge.com) -- The rich may be different, but maybe not all that different in the current economic climate.

Sales of new vehicles in the $100,000 range are skidding, for reasons "more psychological than practical," said Susan Jacobs, president of auto consultant Jacobs & Associates. She said wealthy Americans are losing "that splurge mentality" in today's souring economic climate and predicted the top of the market will remain weak for some time.

Not a time to be conspicuous

And then, of course, there's been backlash in mainstream America over Wall Street "fat cats" who have contributed to the financial meltdown that's prompting a $700 billion bailout by the U.S. government.

Bentley Motors' U.S. sales slipped by "25-odd percent" this year, due to a combination of market conditions and new-product cadence, a spokesman for the automaker said. Bentley's research and dealer comments revealed people are now questioning whether it's socially acceptable to buy big-ticket items such as a high-end car or yacht, he added.

Consumers with a net worth of between $3 million and $5 million "are second-guessing their high-end purchases because of the economy," he said. So the Volkswagen AG-owned brand, which does a limited amount of national U.S. newspaper advertising via Fuse Communications, Birmingham, Mich., has been tweaking its event marketing to focus on more affluent prospects -- Americans with a net worth of some $25 million or more.

Bentley sold 2,001 new cars in the U.S. in the first eight months of 2008, or 808 fewer units than in the same 2007 period, according to Automotive News. Aston Martin and Porsche each saw their U.S. sales drop by more than 15% through August vs. a year ago, while Mercedes-Benz USA's Maybach arm slid by almost 8% in the same period, Automotive News figures show. Sales of Ferrari-branded cars dipped to 1,080 from 1,173 in the eight months.

The anomaly was Rolls-Royce: BMW's Rolls-Royce brand sold 296 cars through August, up 5% from the 281 it sold domestically a year ago.

Perception is a problem

Bob Austin, partner of consultant Auto Futures Group and an industry veteran, warned that even though the target market's own income may not be threatened, potential buyers of ultra-luxury automobiles are concerned about how they might be perceived: "Will they be seen as evil Wall Street tycoons or successful business people?" The former communications general manager for Rolls-Royce Motor Cars in North America advised marketers to profile their owners as good guys who are creating jobs and making other noteworthy social contributions.

Maserati North America President-CEO Marti Eulberg said she hasn't started to feel or see any evidence of potential negative images of her buyers from Main Street America. The Fiat Group-owned brand has seen its U.S. sales climb to 1,748 cars in the first eight months of the year vs. 1,736 in the same year-ago period, according to Automotive News. But sales of Maserati's flagship sedan, the Quattroporte, are off by more than 40%, Ms. Jacobs said.

Ms. Eulberg said sales have shifted from the aging sedan, which got a significant facelift for the 2009 model, to the GranTurismo sports car (which starts at $113,750 and went on sale 11 months ago).

Maserati in 2002 returned to the U.S. market, which was the automaker's biggest last year, accounting for 2,650 of the 7,353 cars delivered globally in 2007. Another possible reason for Maserati's growth is the carmaker started to do more vehicle leasing last year after launching its captive finance arm, Maserati Finance Co.

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Maserati does all its advertising in-house, including direct mail and 650,000 monthly e-mails to owners, prospects and hand raisers. The average buyer has an annual household income of $500,000.

"It used to be believed that the super-affluent buy what they want, when they want," Ms. Jacobs said. But the major declines in real estate values, the stock market and other economic indicators "does have an impact at the upper end."

As fuel prices rise, drivers consider market options

Fri, 15 Aug 2008 22:32:53 -0400

Herb Shuldiner MOTOR MATTERS
Friday, August 15, 2008

Skyrocketing fuel prices will change the landscape of auto retailing, according to a new study on how consumers approach future vehicle purchases.

The study, which was conducted by Auto Futures Group LLC and TechnoMetrica Market Intelligence Inc., shows new vehicle purchasing choices could be vastly altered by high fuel prices. The study also reveals motorists do not plan to relinquish ownership of personal vehicles.

The study surveyed 908 car and truck owners nationwide to learn how high they think fuel prices will climb and how escalating prices might impact their future vehicle-purchase decisions.

Sales for the subcompact Honda Fit rose 78 percent over one year ago, reflecting the
current fuel-driven consumer shift to small cars.

Bob Austin, a senior partner of AFG, says 92 percent of drivers expect gasoline to remain above $4 per gallon. One-third believes fuel prices will top $5 per gallon and half the motorists surveyed say prices will rise above $6 per gallon.

Two out of three car owners surveyed say they are driving less and using their family's most fuel-efficient vehicle as their primary mode of transportation. Some 87 percent say their next vehicle will be more fuel-efficient and 38 percent say they are considering selling or trading their present car or truck for something that gets better gas mileage.

Surprisingly, a large percentage of those who took part in the survey say they would buy vehicles from non-traditional companies if fuel exceeded $6 per gallon in price. For example, 68 percent indicate they would consider purchasing a car from General Electric Co. and 43 percent say Dell Inc. possibly could sell them a vehicle. Some 34 percent would be willing to buy a car from Google Inc.

About 30 percent of the respondents said they would consider purchasing a vehicle made in India or China. At the pace automakers from those countries are entering the U.S. market that may be more than a decade away.

"In the past, drivers held back temporarily when gas became scarce or there were price spikes," says Bert Holland, a senior partner in AFG. "But this time there is a marked shift in both expectations and behavior.

"People are driving less and fuel economy is becoming a major purchase influence," he says. "The readiness to accept vehicles from non-automotive brands is growing more rapidly than we expected."

AFG says the study reveals motorists still want private vehicles, but plan to purchase or lease smaller, more fuel-efficient models.

Hybrids are the preferred alternative to conventional gasoline-powered cars, but diesels are of limited interest to the survey group.

"It is obvious from this study that $4 is a tipping point," says Raghavan Mayur, president of Mahwah, N.J.-based TechnoMetrica. "People are not merely making minor adjustments to their driving habits; they are considering radical changes we have not seen previously."

Those surveyed also were asked about the type of vehicle they likely would buy in the event fuel prices soared $6 to $8 per gallon. At $4, 37 percent say they plan to purchase a subcompact or compact vehicle. This leaps to 58 percent at $6 per gallon and to 65 percent at $8 per gallon.

Those intending to purchase full-size or midsize cars drop from 38 percent today to less than 19 percent at $8 per gallon. At that price, the survey group indicates Sport Utility Vehicle purchases would shrink to less than 33 percent of today's level.

AFG is a small market research company headquartered in Ridgewood, N.J. It recently was created to offer market guidance to companies seeking to enter the North American auto market. It consists of three senior partners who are veteran auto industry marketing and engineering experts.

Austin spent more than three decades as a marketing communications executive at Volvo Cars of North America Inc. and recently retired as head of U.S. marketing communications for Rolls-Royce Motor Cars Ltd.

Holland is a former engineering executive at BMW of North America LLC and Porsche Cars North America Inc. The third principal is Bill Pettit, a former research manager for BMW of North America.

A GE Or Google In Your Garage? Consumer Is Game If Gas Stays Up

Thu, 31 Jul 2008 03:14:29 -0400

IBD Op-Ed - By Constantine Kambanis, Raghavan Mayur (Technometrica) and Bert Holland (AutoFuturesGroup)

The media have been sounding the death knell for Detroit's Big Three, and who can blame them? General Motors, Ford and Chrysler are struggling to cope with the lowest sales in decades amid rising gas prices and collapse of the SUV market.

But all is not doom and gloom. There's an upside here, though the nature of that upside may be surprising. Let's put it this way: Have you ever considered purchasing a Googleor Dell-branded automobile?

According to a new study by TechnoMetrica and Auto Futures Group, more than a third (34%) of Americans would consider buying a Google- or Dell-branded vehicle, assuming gas were to hit $6 per gallon and the vehicles were especially fuel-efficient.

Tata Group Chairman Ratan Tata poses with the world's cheapest car, the $2,500 Tata Nano, at its launch in January. A survey by IBD's polling partner, TechnoMetrica, found that 29% of Americans would consider buying a Tata or a car made by Chinese
manufacturer Chery if gasoline prices get to $6 a gallon. Even more would be likely to consider cars by General Electric (68%), Dell (48%) or Google (34%).

We can't speak directly to fuel efficiency, but we can speak to the $6-a-gallon figure. According to the survey, Americans expect to see gasoline reach an average price of $6.14 within the next three years.
If that comes to pass, the stage is set for new, non-automotive brands to enter the market.

Disruption is said to present big opportunities for those savvy enough to seize them, and the current marketplace is full of disruptive forces. Let's take a look at some of them.

On the consumer side, Americans no longer depend on what U.S. automakers offer from year to year. They're sophisticated consumers who do research before buying, are aware of the true cost of ownership and are cognizant of the fact that "American" no longer means better.

Americans are open to new possibilities. In addition to Dell- and Google-branded cars, they are also willing to consider vehicles made by General Electric, Chinese automaker Chery and Indian manufacturer Tata — if gasoline hits $6 a gallon. Americans' desire for change would not be limited to branding, however. They are ready for technological change as well. Thirty-eight percent say they would consider buying a plug-in hybrid and nearly half (46%) would be open to a battery electric vehicle if gasoline hits $6. At $8 a gallon, the percentages jump to 54% and 55%.

This is telling, especially considering that these technologies are not yet available on the open market. Talk about latent demand! Overcapacity and potential bankruptcies have lowered barriers for new players eager to enter the U.S. and global auto markets. Foreign brands seeking assembly capacity or even an American "face" (brand and dealer network) can potentially scoop up either. Just take a look at Tata for the playbook.

Suppliers have grown in both size and depth and are now the de facto technological gatekeepers, thanks to car manufacturers who for years pushed developmental responsibility off to suppliers. Now, desperate for new business, suppliers have every reason to assist new players wanting to enter the auto scene with know-how and attractive financials.

What's more, foreign sourcing has been suppressed in the car industry to protect local plants, suppliers and unions.

This represents an opportunity for non-automotive high-tech brands that have become experts at optimizing global sourcing and facilities to slash costs, and who are already on the forefront of rapid product development and short product cycles.

Who stands to make the most of Americans' new openness to non-automotive brands? Popular consumer brands that could capitalize on their high profiles. An Apple car might be chic, easy to use and unique; a Nike car high-performance and trendy; a Sony car compact, modern and well-made; a Gucci car a pure fashion statement; a GE car reliable and technically advanced; a Google car intuitive and connected; or a Dell car individualized to consumer specs.

Of course, the Japanese, as well as up-and-coming Asian and Indian car companies, are natural beneficiaries of Washington's new Corporate Average Fuel Economy increases and proposed metropolitan congestion pricing.

Clearly, the edge right now lies beyond Detroit's traditional forte. Unfortunately, Detroit now lacks both the image and the products to be convincing in a high fuel-price world. GM, Ford and Chrysler still have significant market share as well as market inertia — a
sound basis from which to launch re-makes.

But first, the triple burdens of health plans, pension plans and current infrastructures must be overcome. Then these companies must rapidly redefine themselves via technical and marketing alliances, global sourcing and more forward-thinking model policy.

Looking at the big picture, we believe the role of government should not be to "bail out" the American auto giants, but rather to provide a framework for renewal and growth via an intelligent and consistent energy policy and incentives for new technology.

No doubt, gasoline prices are profoundly reshaping the industry. The question is: How can we best rise to the challenge, and who is best positioned to take it on?

Kambanis is a senior analyst at and Mayur is president of TechnoMetrica Market Intelligence, IBD's polling partner. Holland is a senior partner with the Auto Futures Group.

http://www.investors.com/editorial/editorialcontent.asp?secid=1502&status=article&id=302222692473936

Handwriting is On Wall in Detroit, with Foreign Cars Vastly Preferred

Wed, 30 Jul 2008 20:46:41 -0400

IBD Op-Ed - By Constantine Kambanis, Raghavan Mayur (tecnometrica) and Bert Holland (autofuturesgroup)

Auto-industry insiders over the years have often blamed Detroit's mounting problems on mediocre management, poor technological leadership and a lack of vision for the future.

While the successful foreign firms relied on technological innovation, a thorough study of the market, clever marketing and high quality, Detroit's Big Three automakers relied on massive economies of scale, price discounting, zero-percent financing, rebates and volume fleet sales, all of which led to erosion of vehicle resale values.

What were customers to do? Buy highly rated "foreign" cars with high resale values or steeply discounted American vehicles with lower resale values?

The answer is in the numbers. From 1992 to 2007, the number of imported passenger vehicles more than doubled, and Toyota Motor Co. is now the world's largest automaker. According to a new joint study by TechnoMetrica Market Intelligence and Auto Futures Group, the No. 1 brand Americans will consider buying is Toyota.

Our study also shows that when it comes to brand power among customers, Toyota and Honda owners are — on average — four times more likely to promote their brands to friends than Ford owners are, and three times more likely to promote their brands than GM or Chrysler owners.

This does not bode well for Detroit, where the Big Three are at crossroads. Already bleeding from declining sales, increasing incentives and heavy lease losses, they must at the same time find the resources to retool their lineups, remake their images and shore up their market values.

Today, hybrid technology is the single most popular alternative fuel choice, with two-thirds of consumers saying they will consider a hybrid the next time they're in the market for a new vehicle. This is bad news for Detroit and good news for its hybrid-savvy competitors.

When consumers think of hybrid vehicles, the first manufacturer that comes to mind is Toyota. In our survey, Toyota consistently outpaces all other brands by a wide margin. In the latest survey the standings are Toyota (44%), Honda (15%) and Ford (5%).

Moreover, American consumers are more than twice as likely to promote an Asian or European brand to others as they are to promote an American brand.

We base this on responses we got when we asked owners how likely they were to recommend their brand of vehicle to friends or colleagues. We then came up with a "net promoter score" by subtracting the percentage of detractors from each brand from the percentage of promoters.

The top brands that owners were most likely to promote were all foreign — Lexus had a score of 81%, Toyota 75%, BMW 73%, Honda 72%, Subaru 68% and Infiniti 59%.

Whereas Asian manufacturers hold the keys to hybrid sales, American companies continue to plug flex fuel vehicles.

But longer term, the Big Three are working on such groundbreaking vehicles as the Chevy Volt. Although such vehicles do not yet appear to be sufficiently capable of generating the sales volumes needed to turn things around, it does show that the Big Three have read the writing on the wall and are beginning to emphasize innovation.

While the No. 1 considered brand is Toyota, the No. 1 brand being driven today continues to be Ford.

For Detroit, in other words, it's not too late to change. Seeds of revival already have been planted.

Next: A GE or Google in your garage?

Kambanis is a senior analyst and Mayur is president of TechnoMetrica Market Intelligence, IBD's polling partner. Holland is a senior partner with the Auto Futures Group.

http://www.investors.com/editorial/editorialcontent.asp?secid=1502&status=article&id=302222692473936

Gas Prices Precipitate Change According to Survey

Sat, 14 Jun 2008 03:04:52 -0400

(PRWEB) June 14, 2008 -- Over the weekend the price of regular gasoline topped $4.00 per gallon for the very first time and consumers believe this is only the beginning. In a nation-wide survey just completed, drivers indicate that the recent increases in gasoline prices are already having a significant effect on their driving behavior, and will dramatically impact their car purchasing behavior. Of most interest is the fact that drivers will increasingly consider cars from non-traditional brands and manufacturers as the price of gas continues to climb.

A joint study by Auto Futures Group and TechnoMetrica reveals that car ownership behavior and car purchase preferences are already changing. Key findings include:

• 92 % of drivers expect the price of gas will stay above $4.00 per gallon over the next three months. One third expect gas prices to top $5.00 per gallon this summer and nearly 40% expect prices to exceed $6.00 per gallon within three years.

• Over 80% are already bundling their errands when driving.

• 66% are driving less and, a similar percentage, are now using the family's more fuel efficient vehicle as their primary car.

• 87% are likely to make their next purchase a more fuel efficient car and 38% are considering trading in or selling their present vehicle for something smaller or more fuel efficient.

• When asked if, at $6.00 per gallon, they would consider buying cars from non-traditional car companies, the answers are quite interesting. If they delivered better fuel economy than cars from traditional manufacturers; 68% percent would consider a car from General Electric, 43% would consider a car from Dell, and 34% would consider a car from Google. Cars from India or China are considered by approximately 30% of drivers.

This is a break with past behavior according to Bert Holland a senior partner of Auto Futures Group. "In the past drivers have held back temporarily when gas became scarce or there were price spikes", explained Holland, "but this time there is a marked shift in both expectations and behaviors. People are driving less and fuel economy is becoming a major purchase influence".

The study confirms that people do not intend to give up their private cars. Instead, they plan to purchase or lease smaller or more fuel efficient cars. Hybrids are the preferred alternative to traditional gasoline powered cars. Diesels continue to be of relatively little interest to drivers in America.

Raghavan Mayur, president of TechnoMetrica, stated this particular study had been developed in recognition of the dramatically changing environment in the automotive market. "We have been doing our quarterly Alternate Fuels Tracker for some time, but now the price of gas has reached a level where it precipitates real changes in driving and purchasing behavior", Mayur explained. "It is obvious from this study that $4.00 is a tipping point. People are not merely making minor adjustments to their driving habits; they are considering radical changes we have not seen previously". And this has serious implications for sales volumes according to Mayur, "compared to our earlier waves of research, we now register a marked decrease in overall car purchase intent".

The survey explores people's present vehicle purchase intent, and how it might change if fuel rose to $6.00 and $8.00 per gallon. At today's gas prices, 37% of people intend to purchase a sub-compact or compact car, at $6.00 per gallon this rises to 58%, and at $8.00 per gallon it climbs to 65%. The intention to purchase a full-size or midsize car drops from 38% today to under 19% at $8.00 per gallon. The effect on the SUV market is even more profound. At $8.00 per gallon, the intent to purchase an SUV drops to just one third of today's level.

To determine people's willingness to make real change, the study asked would you consider purchasing cars from a non-traditional car manufacturer provided it offered better fuel economy. The questions presented the names of several well known brands including General Electric, Dell and Google. The results clearly show that the acceptance of these names as vehicle brands is quite good and increases as the price of gas increases. Similar questions were asked about cars produced in China and India. The results showed a parallel trend, consideration rising as gas prices increase.

"Auto Futures Group has been expecting changes like these in vehicle preferences with increases in fuel prices", Holland explained. "We also anticipated there would be a number of new manufacturers by 2015. But the readiness to accept vehicles from non-automotive brands like GE, Google, and Dell; and from different countries like China and India is growing more rapidly than we expected."

TechnoMetrica conducted the survey as a part of the sixth wave of their Quarterly Alternate Fuels Tracking Study. More than 900 interviews were completed yielding a statistical accuracy of 3 percentage points.

TechnoMetrica Market Intelligence Inc. is a progressive full-service research firm established in 1992. The firm is headquartered in Ramsey, New Jersey and provides both quantitative and qualitative research solutions to the business and government markets. TechnoMetrica has been providing innovative research solutions to many of the world's most respected automotive brands for over a decade.

Auto Futures Group LLC was founded to support the development of new business in the rapidly changing automotive market. The Group provides comprehensive and sophisticated analysis and business deliverables in the areas of strategy, marketing, product, consumer preferences, emerging technology, regulatory compliance, and distribution channels in the US automotive environment and worldwide. Headquartered in Ridgewood, New Jersey the Auto Futures Group is comprised of experienced senior managers all of whom have worked for some of the world's most respected automobile companies.

Note to Editors:
Users of these statistics should attribute credit and source to AFG/TechnoMetrica as this research is proprietary.

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