Tuesday, March 30

MediaPost Publications IHS: They Who Capture The Young Will Win 03/31/2010

car/big rebates

Speaking at the IHS/Global Insight Automotive Forum in New York on Tuesday, George Magliano, director of automotive research at IHS Global Insight, predicted that the auto business will climb out of last year's quarter-century low-water mark, but slowly. 

And market-share differences between car and truck manufacturers playing in the U.S. will tighten dramatically. Because of incentives and problems that Toyota has been having, the market will be incredibly fluid, he said. "Incentives are going to stay high, leases are coming back in and everyone's jockeying for market share. The bottom line is that everything is up for grabs in this business," he said. "Companies are looking to buy and hold onto share."

Another steroid injection will be loosening credit, as loan credit scores come down. "We have frozen the sub-prime buyer out so that if you have the least blemish on your credit rating, you can't get a loan. And it will stay that way for a while longer. And we will never get back to the 60% to 70% approval rates we saw in 2005," he said.

Currently, per IHS, automakers are spending, on average, $6,500 in incentives of various kinds on every car sold. "It shot way up with Cash for Clunkers, and has since come down. But it's high historically and will move up this and next month with Toyota leading the way," said Magliano. The firm predicts that some 14 million new cars and trucks will be delivered this year.

The firm predicts that General Motors will have a 17% share of the U.S. market, while Ford and Toyota settle at around the 16% range.

"The essential issue with GM has been their bankruptcy, and the brands they have closed. That is keeping them from achieving the 20% share they want; Ford has done extremely well. Their One Ford program puts them in good stead with Focus and Fiesta. They still have issues with raising money and getting give-backs from unions, but their position is good to hold that share and move up a bit," said Magliano.

Toyota's recall has hurt them when it comes to bringing in new buyers. "They will get baby boomers back when they get the recall behind them. But the first-time conquest buyer is going to be a struggle, and that's why they are spending lots of money [on incentives] now."

IHS predicts that Honda will move toward 12% of the market, while Nissan, Hyundai, Kia and Chrysler bunch together around 7%. "The bottom line is that since nobody is catching the younger generation, all share is fluid and up for grabs. People who can get the younger generation win, because at the end of the day, the job market will be there for them in 2014 and they will drive market share."

The firm predicts that pickups, crossovers and compact and lower mid-sized cars will make the strongest comeback, while large cars and traditional body-on-frame SUVs all but die. "Crossovers killed bigger body-on-frames," Magliano predicted. "Full-sized pickups will come back as the housing market comes back. The bottom line is, we have turned the corner. But automakers have to go out and get the next generation."

Posted via web from sophie's posterous

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