Canadian Sales - 2013 Strada iQ January 2014

What a Year 1.74 M The first quarter of 2013 (down 2%) gave no indication of such a strong year. Finally in the 2nd quarter everyone throttled up to move iron in a convincing fashion. Fascinating results when the auto industry gets aggressive. Nuke the Market With all manufacturers firing on all cylinders. They nuke the market with tempting offers. The Canadian consumerloves to get nuked with tempting offers. Cheap Credit Its no secret that subsidized loans and leases make vehicles affordable. While the customer presumably assumes the value risk with ever longer loan terms. Trade Deficiencies Who cares. Cheap loans, imaginative financing, facilitates dealing with trade in deficiencies. Enabled by the financial service providers.Subsidized by the manufacturers. Longer Terms Terms are inexorably getting longer to arrive at an appealing monthly payment. Roll over the trade deficiency, the taxes, no down payment, extend the term.Lower the RateClose the sale with theLengthen the TermTo stay in the budgetsubsidized monthly payment. The Risk Customers use the subsidized low interest loans to continually roll over the trade in risk to a new vehicle. Manufacturers and financial service providers assist customers to roll over the risk.Manufacturers actively assist customers to roll over the used vehicle risk.Manufacturers assume the residual risk in a lease, and assist customers to roll over the risk in a loan. Moves Iron New ProductSubsidized RatesTo record sales never seen for many years. How can you move so much iron?Popularity of Pick UpsAbbreviated Ownership CycleHigher InventoriesNuke and churn the market. Tempt the opportunistic buyer. Keep dealer inventories high. It all works.It moves a ton of iron. Why did it take so long to execute? CPO When you move so much iron with such tempting offers.The balancing act tilts against Certified Pre Owned, and recent model year used vehicles. Especially for manufacturers with established CPO programs.CPO is the Canary in the coal mine The Months in 2013 Our Thoughts January: (-2%) No sales management from 2012, Audi huge blink at -26%February: (-3%) Testing the market, is this realityscary stuff.March: (-0.5%) The Japanese and Koreans are napping, - 2% for the quarter.April: (+8%) After an alarming 1st quarter, everyone throttles up.May: (+5%) Lets keep it up, to get a strong quarterJune: (+1%) A breather, lets asses the positions, up 2% YTD some relief.July: (+10%) Flat out in the summer, Ford blinked at -10%August: (+6%) More flat out who else will blink, BMW a huge blink at -15%September: (+4%) Keep it up for a strong quarter, BMW blinks again at -12%, Mazda blinks at -16%, Kia has been winking all summer.October: (+7%) Momentum, and intense competition, Acura blinks at -18%, Kia now blinks at -12%November: (+6%) Flat out to generate more blinks, Acura blinks again -5%December: (+4%) Strong finish with some selected sales management by a few. Blink For the second year, every manufacturer going into the 3rd quarter seeks opportunistic sales. For one to acquire opportunistic sales, another must blink.Get aggressive to gain an advantageLevers to create blinks: Product ProgramsUncover weak spots in the competition, to create blinks.Inventory Tactics Some Numbers 2013CompactMid Size SedansHonda Civic..64,063Jetta.30,413Hyundai Elantra57,760Ford Fusion ..20,145Toyota Corolla44,449Toyota Camry..18,245Mazda 3....40,466Honda Accord.........17,165Hyundai Sonata..14,519Chrysler 200....11,666Nissan Altima...10,488Chevy Malibu..6,834As expected the Civic remains on top, followed by a strong performance for the Elantra and CorollaThe Jetta remains ahead, the Camry and Accord continue to trade paint. All Figures from Automotive NewsAgreedJetta is a success story. Some Numbers 1 2013CUV/SUVPick UpFord Escape.45,141Ford F Series..122,325Honda CR-V.34,481Ram.80,248Toyota RAV4.33,156GMC Sierra.. 46,908Hyundai Santa Fe29,220Chevy Silverado.37,490Chrysler Journey..27,745Chevy Equinox.....19,819The Escape ahead, while the Japanese trade paint, and Hyundai keeps the leaders focused no to blink.Up by 13% in 2013, dramatically better than the overall market. Its an enduring love affair with big vehicles. Some Numbers 2 2013Entry LuxuryLuxury SUV/CUVBMW 3 Series12,507Lexus RX7,789M-B C Class..9,356Audi Q57,547Audi A4......5,956Acura MDX......6,114Cadillac ATS3,256Acura RDX...6,112Infiniti G/Q50......3,048M-B GLK...5,979Lexus IS...2,579BMW X3......5,658Acura TL..2,374M-B M Class...4,804 BMW X5..4,704Lincoln MKZ.1,625 Cadillac CTS..997Cadillac SRX ........3,765Buick Enclave....3,286Lincoln MKX......3,238What else is new 3 Series ahead, ATS beat the G/Q50 combo, with IS nosing out the TL. CTS will be interesting next year.Infiniti J/QX60......3,191BMW X1..2,910Shuffling of positions, very competitive segment. Some Numbers 3 2013Pony CarsDid You KnowMustang.5,054SLS AMG.......67Camaro..2,167Lamborghini....46Challenger.1,514Maserati....214Ferrari....214Panamera.....328GT-R..125R8....111Bentley...147Volt.....931Leaf....470George Follmer (Mustang) probably got bored by the lack of competition. Shorter Ownership As terms get longer to arrive at a monthly payment that fits the budget. The ownership cycle is abbreviating. With 40% considering, and almost 10% actively shopping for a new vehicle within 24 months.Longer terms and shorter ownership cycle Manufacturers in 2013 Our Thoughts Audi: (+2%) Good performance especially the Q5Acura: (+10%) On the strength of the ILX MDX RDXBMW: (+1%) After a few blinks still in front of the MerBimAu raceChrysler: (+6%) Still # 2Dart Grand Cherokee andRam huge numbersFord: (+2%) # 1 in 2013, although felt the competitionGM: (+3%) Its still not right at GM, gave in to the Japanese, and Ram.Honda: (+10%) The Civic at # 1 and strong gains by Accord. Manufacturers in 2013 - 1 Our Thoughts Hyundai: (+1%) Modest increase, strong numbers by Elantra and Santa FeInfiniti: (+11%) Improved with Q50 and QX60Jaguar: (+96%) Finally a gain after a challenging 2012Kia: (-7%) Begs the question What is going on?Land Rover: (+20%) Again the Evoque and SportstrongLexus: (+5%) Steady increase with ES IS and the RX as usualMazda: (+0%) Again this year the CX5 saves the day Manufacturers in 2013 - 2 Our Thoughts Mercedes-Benz: (+5%) Lost # 1 to BMW, B Class GLK saved the dayMini: (-4%) Niche / Specialty cars are fickle.Mitsubishi: (+7%) Hovering around with only 2 modelsNissan: (+11%) Gaining with the Pathfinder.Porsche: (+22%) Boxster, Cayman, Cayenne, with a glimmer from the 911.smart: (-6%) Sliding again in 2013Subaru: (+19%) What can you say Wow XV Crosstrek, Forrester Manufacturers in 2013 - 3 Our Thoughts Suzuki: (-43%) Closing the shop.Toyota: (+1%) In the game with strategic gains.Volkswagen: (+6%) Maintained strong momentum with Jetta and TiguanVolvo: (-16%) What can you say? Sales in Canada were up 4% for the year.The Japanese solidified their positions, especially Honda and Toyota. Hyundai held its position, while Kia gave some ground. GM persists in leaving pockets of vacuum filled by other. A record breaking 2013. Epic competition. Success The Canadian market is hyper competitive, been like that for years.Success hinges on having your competition blink.Discretion is essential especially with a myriad of social platforms, and pundits.In a hyper competitive marketWhy would your competition tell you everything they know? Sustainable? Can the value of auto loans continue to rise in 2014?What do you think? Do you think anyone has the answer?There remain pockets of ebullient household credit growth most notably, the value of car loans is rising at an eye-watering 18% per year (Exhibit 15). From Canada Economic Compass. Our Thoughts On 2014 Lower value of the Canadian dollar will impact some manufacturers and strategies?Will the level of financing, programs, subsidies persist?As usual new models/product will provide an advantage.Will the Canadian consumer continue to remain bullish and optimistic to acquire additional debt especially during the second half of 2014?Astute manufacturers contrary to 2013 will be hyper aggressive during the first quarter of 2014.Thank You