It’s a big question for local markets in 2013:
Where will the local automotive industry take us over the next 12 months?
To answer this, we should take a glance at the rearview mirror while we make our moves for the year ahead.
In 2012, the US automotive market finished just under the 14.5M-unit mark, up 13% over 2011′s final tally. This was another solid year of recovery for the industry, and the high-water mark since 2007. Worth noting is that the SAAR (seasonally adjusted annual sales rate) for December was just under 15.4M, meaning the market is still trending upward.
However it wasn’t all good news, as Detroit’s Big 3 had a year full of share erosion for the most part. Additionally, there were occasional blips in inventory supply that didn’t allow all dealers to fully exploit the market’s pent-up demand.
Looking forward to the rest of 2013, what trends should be front-and-center on the local market’s radar? Let’s start with three potential game-changers:
1. Just Ahead: Intensified CompetitionExpect a higher level of intensity in your 2013 auto market.
Analysts are already calling for a more subdued market in 2013, with gains being in the single-digits. This would be the first year in the last four that we will not have seen a double-digit growth. Why is this important? Expect competition to intensify across brands.
For 3+ years, riding the wave of the market’s gains has been a profitable venture for dealers and automakers alike, even if some trailed the market by a few points. In 2013, this will not be the case at all. Expect both dealers and manufacturers to get more aggressive, as ever-changing sales boundaries are redrawn again. And as boundaries move, dealers will need to find media efficiencies over broader areas to sustain growth. This presents a big opportunity for those with media solutions offering both scale and efficiency for the car dealer in 2013 and beyond.
2. How Will the Consumer Respond?Consumer confidence can be a fleeting thing.
As far as the automotive market is concerned, the consumer showed signs of confidence last year. As financial / lending markets thawed a bit, this bolstered the momentum during 2012. Heading into 2013, we’ll see a few more speed bumps along the way. This year’s car-shopper will be burdened with uncertainty due to increasing tax burdens and healthcare expenses, which have already taken a shot at overall consumer confidence. While the average age of the current market’s fleet is still old enough to suggest new car purchasing will continue during the next 12 months, the shopper and dealer will need to work harder to find the middle ground with these extra burdens. Dealers who don’t infuse value or urgency into their local marketing will find the road somewhat challenging.
3. The Share WarWho will rule the day in 2013?
If pendulum swings are any indication of future momentum, there are a few major automakers who could be labeled as “hot” heading into 2013. VW, Toyota, Honda enjoyed gains of 30%, 27% and 24%, respectively, while Chrysler’s gain (+21%) was the lone bright spot for a lagging domestic recovery back home. These four brands accounted for two-thirds (1.14M units) of the incremental 1.7M vehicles gained in 2012.
On the other hand, GM (+4%), Ford (+5%) and even Hyundai (+11%) lost share over the course of 2012, trailing the market’s overall gain of 13%. While most brands were positive for the year, “trailing the market” in 2013 by 5-10 points could result in a decline in sales.
The plan for 2013 is fairly straightforward, and challenging. Dealers need to decide if and how their “destination stores” can answer the call for a wider radius. Some are already squarely on this path. The dealers that go “too local” might not find the riches-in-niches they are seeking.
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Dave Eckstein is a Partner in the firm ESA & Company. He specializes in highly profitable market share growth for local businesses and gets a kick out of demonstrating a declining cost of customer acquisition. He plays baseball, but isn't that Dave Eckstein.