Polk forecasting team\'s review of the US light vehicle competitive landscape.

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MARCH 2012
1
By the end of the first quarter of 2012, every manu-
facturer will have either overcome the impediments
described above or lost the dominant position it once
enjoyed. Here is a description of the current U.S. posi-
tion of each of these companies.
American Honda Motor Co. – Its U.S. inventories
curtailed by the Japanese earthquake and tsunami last
March, Honda and Acura in 2011 suffered their worst
years in recent memory, losing a combined 1.6 points
of U.S. market share with sales down 6.6 percent and
7.7 percent, respectively (in a market up 10.3 percent).
Estimates are that the inventory situations will be
resolved by the end of March 2012. New products
from both makes, including the Honda Accord, CR-V
and refreshed Civic as well as the new Acura ILX and a
re-designed RDX, will help the company recoup at least
some of its former U.S. market share.
Chrysler Group LLC – By going through a U.S. govern-
ment-managed bankruptcy in 2009, Chrysler has been
virtually re-invented: it is now majority-owned by Fiat
and led by a new management team. Chrysler’s labor
costs and debt levels are now more competitive than
at any time in recent memory. The company is also
more agile than prior to bankruptcy, as evidenced by
its ability to launch two new makes (Ram and Fiat) and
bring sixteen re-designed models to market in just two
years.
Ford Motor Company – Even though Ford did not go
through the bankruptcy process, the company has
been transformed dramatically from its pre-recession
form. Its debt is down, its labor costs are close to those
of the transplants, it has eliminated a largely redun-
dant make (Mercury), and it has launched a series of
competitive products. The company has been profit-
able in ten consecutive quarters since 2008, and it was
recently described as a “leader in producing techno-
logically advanced fuel-efficient cars.”1
General Motors – Similar to its domestic rivals, GM
has been almost re-invented. With little debt, about
$37 billion of cash on hand (or the equivalent), more
competitive labor costs, “just” four makes, and several
well-received new models, GM is in the best situation
in many years. Like Ford, GM has enjoyed a string of
consecutive profitable quarters (eight), and it recently
announced that it made more money in 2011 ($7.5
billion) than in any other year in its history. Things are
not perfect, as its European operations continue to
operate with serious deficits, the U.S. government still
owns a substantial portion of the company, and its
U.S. product lineup has some holes and weaknesses.
Nevertheless, GM has overcome many of the obstacles
it faced for much of the past decade.
continued
The U.S. Light Vehicle Industry Transitions to a New ChapterTOM LIBBY
Senior Analyst,
North American Forecasting
thomas_libby@polk.com
”
“We are entering
a new chapter in
which the playing
field is more level
than it has been in
recent years and
each of the OEMs is
operating close to
‘full strength’.
1
New York Times, February 19, 2012
We’re at an inflection point in the evolution of the U.S.
new vehicle business. The industry is leaving behind
a time in which one or more of the eight major auto
manufacturers operating in the U.S. either had a clear
differential advantage or was restrained from operat-
ing at full strength. Put another way, we are entering
a new chapter in which the playing field is more level
than it has been in recent years and each of the OEMs
is operating close to “full strength.” One analyst has
described this new stage as “game on for everybody.”
For the past eleven years, one or more of the major
OEMs has either occupied a dominant, virtually
unstoppable, position in the U.S. market or been
restricted by a variety of circumstances. This landscape
is described below:
• 2001-2007 – The three major Japanese manufactur-
ers (Toyota, Honda and Nissan) gain almost eleven
points of market share while the domestic OEMs are
hampered by non-competitive labor costs, high debt
levels, too many dealerships, ineffective brands and
perceptions of inferior quality. Toyota/Nissan/Honda
combined corporate U.S. share climbs from 20.8
percent in 2001 to 31.7 percent in 2007.
• 2008 – Gas prices jump to $5+ per gallon in spring;
Lehman Brothers’ collapse in September triggers
financial collapse
• 2009 – Financial collapse worsens; GM and Chrysler
go through government-managed bankruptcies
• 2010 – Toyota recalls over 8 million units globally
and suffers major negative publicity
• 2011 – Japanese earthquake and tsunami in March
disrupt supply chain for Japanese manufacturers;
flooding in Thailand that fall inhibits recovery
Figure 1: 2011 U.S. Market Share for Nine Leading Non-Luxury Mainstream Makes

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© 2012 R. L. Polk & Co. All rights reserved. R. L. Polk & Co. makes no representations or warranties with respect to the contents hereof and specifi-
cally disclaims all implied warranties of merchantability or fitness for a particular purpose. R. L. Polk & Co. reserves the right to make changes to this
report without notice or obligation. Polk is a registered trademark of R. L. Polk & Co.
MARCH 2012
2
(continued from first page)
Hyundai/Kia – These two makes are riding a wave of
positive momentum. Utilizing a combination of in-
novative marketing, leading-edge styling, and a steady
cadence of product re-designs, among other things,
these two brands had two of the largest year-over-year
sales gains in the industry in 2011. They outsold the
Nissan/Infiniti combination by almost 90,000 units,
and there appears little on the horizon to curtail their
upward movement.
Nissan – Nissan was less impacted by the Japanese
earthquake and tsunami than its Japanese rivals, and
it was able to take advantage of this situation and pick
up almost a half point of market share in 2011 (which
translates to 65,000 light vehicle sales in the U.S.).
Nissan’s focus on innovation, as manifested in the
LEAF, has given it a more distinct position in the
marketplace, gotten it out from under the shadow of
Toyota, and contributed to its growth.
Toyota – Toyota’s two U.S. makes were both severely
impacted by a string of recalls in 2010, the earthquake
and tsunami in early 2011 and flooding in Thailand in
late 2011. Toyota and Lexus inventories are expected
to approach normal levels by the end of March 2012,
and between them, the two makes will launch 19
new or re-designed models in 2012, representing 40
percent of their volume. The Toyota management
team has vowed to regain the share it relinquished in
the past two years.
Volkswagen of America – Determined to become
the largest automaker on the planet based on sales
volume, Volkswagen AG has re-positioned its high-
volume Volkswagen products in the U.S. to boost sales
volumes. Last year, the Volkswagen make was up 26
percent in the U.S., with the Passat and Jetta up 83
percent and 55 percent, respectively. This trend should
continue as the company re-positions its other prod-
ucts in the U.S. (such as the Beetle) when re-designed
versions are launched.
New Landscape for Non-Premium and Premium
Categories
These competitive positions of the major OEMs are
significant on two levels. In the non-luxury space, there
are now nine mainstream makes (not counting the
lower-volume brands) all vying for the same customer,
with some clamoring to regain share lost in the past
two years, but none willing to cede share. Further-
more, none of these makes boast a market share suffi-
cient to command a dominant position. Instead, many
have market shares within striking distance of one
another. This makes the overall landscape that much
more fluid, competitive and open to change.
On the premium level, a similar picture exists for the
most prominent makes. Consider the following:
• Audi has already overtaken Mercedes-Benz globally
and is eager to approach it in the U.S.;
• BMW will want to retain its recently-won crown as
the most popular premium make in the U.S.;
• Cadillac, for the first time in decades, will market
three competitive cars;
• Lexus will soon have the inventory with which to
at least challenge its German rivals, if not surpass
them;
• Mercedes-Benz, still smarting from such a razor-thin
loss to BMW at the end of 2011, will be more eager
than ever to surpass its German arch-rival; and
• Only Lincoln, which is going through an acknowl-
edged re-building phase, will not have the product
in the near term with which to compete with the
aforementioned makes.
And, similar to the non-premium makes, none of
the premium brands hold a dominant position in the
marketplace with which it can exert exceptional influ-
ence over its rivals. In such an environment, each make
believes, in a sense, it controls its own destiny.
Having addressed the challenges of the recent past,
the market will be as competitive as any we have
recently witnessed. This will put upward pressure on
incentives, downward pressure on transaction prices,
and thereby subtly pull up overall consumer demand.
We are already seeing a tinge of this effect in early
2012 with January and February deliveries stronger
than anticipated. Given this pace with an annual
outlook in mind, Polk expects total new light vehicle
registrations in 2011 to be 13.7 million with just over
half of these units going to passenger cars.
It will be interesting and fun to watch the market
unfold as the year progresses. We will now see which
OEMs and their makes, with “no more excuses,” so to
speak, naturally excel in the eyes of the ultimate judge,
the consumer.
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”
“We will now see
which OEMs and
their makes naturally
excel in the eyes of
the ultimate judge,
the consumer.
Figure 2: 2011 U.S. Market Share for Five Leading Premium Makes