Your predictions for the US auto market and industry for 2013

benjaminh

Four years from now, in the summer of 2013, what do you think the US auto market is going to look like? Several major events in the last year seem to be giving us a clearer picture.

It looks like Pontiac, Saturn, Saab, and Hummer will probably be gone. Will others be added to the list?

What's your guess for market share for the other major players?

Here are my guesses. And they are that, totally guesses. I know I could be way off...(In parentheses I have each company's 2009 YTD market share according to the WSJ.)

Re-organized GM hangs on to c.14% of the market. (c. 19.1% in 2009 so far ytd)

Ford hangs on to c. 12 (14.6% in 2009)

Chrysler more or less vanishes, although maybe sells
some trendy Fiats for 3 percent of the market. (9.4% in 2009)

Toyota might be the biggest player, at c. 20% (16.1 in 2009)

Honda about where GM is at c.14% (11% in 09)

Nissan 9% (7.3% now)

Hyundai 6% (4.3)

VW 6% (3.5)

Kia 4% (3.1)

Mazda 3% (2.3)

Subaru 3% (1.9)

BMW 3% (1.9)

MB 3% (1.8)

I think that equals 97%, with the remainder going to Tato, Volvo, or whatever other new or existing niche players you could name.....

Your thoughts or predictions?

benjaminh

Of course the guesses reflect that Toyota is really Toyota/Lexus/Scion, Honda is really Honda/Acura, VW really VW/Audi, etc. With that in mind I suppose I should have put Hyundai and Kia together. My prediction is that together they might be at c.10% of the market in 4 years, compared to 7.4% today. I'm thinking that a lot of people who used to buy Pontiacs, Saturns, Chryslers, etc., might end up there....

hpmctorque

Given what's happening in the auto industry, I think the future is virtually unpredictable. If I were forced to take a wild guess at rankings, with percentages being just too unpredictable, I'd list the top 10 as follows, in descending order:

1. Toyota/Lexus/Scion
2. Ford Motor Co.
3. GM
4. Honda/Acura
5. Nissan/Renault
6. Hyundai/Kia
7. VW/Audi/Porsche
8. Fiat/Chrysler/Dodge/Jeep/Alfa Romeo/Opel (or whatever)
9. BMW/MINI
10. Mercedes/Smart

I have no idea of where brands like Mazda, Volvo, Saturn, Suzuki, Jaguar, Land Rover, etc. will fit in. Also, someone may buy Volvo, Saab and and Hummer. Finally, there's a good possibility for something that's currently unforeseeable to occur. For example, a Japanese or an Indian company, or Roger Penske, may buy an existing brand, such as Saturn, and eventually sell a significant number of vehicles.

The only certainty is that the situation is very fluid.

berri

I pretty much agree with you except I can see Hyundai climbing ahead of Nissan. GM may fall more behind Ford more than people think due to bankruptcy complications dragging on and the risk of importing low quality Chinese products and parts to their product line. If gas shoots back up to $4 or better during this time frame I can see Honda, and possibly Hyundai passing up GM since truck sales will then plummet again. Despite all this media coronation of "King Carlos", I think Nissan has cut into muscle and now will lack sufficient appealing product over the next few years. Ford does have some risk during this period as well though since a quick and successful GM bankruptcy may end up giving them some serious cost advantages over Ford. If that happens, GM could be #2.

benjaminh

hpmctorque: good ranking. Like me it looks like you see the Fiat/Chrysler merger being only marginally successful.

berri: you brought up a point that I've wondered about. Ford has some very sharp products--now and coming up in the future--but if GM and Chrysler dump their debt, excess dealers, and uaw contracts through bankruptcy won't that give them a cost advantage over Ford? Might Ford be forced by them to go down that path too? Ford seems so overloaded with debt it kind of reminds me of Spock getting radiation in The Wrath of Khan. Scotty says of Spock "He's dead already!" Even though Spock hasn't quite yet died at that point. But maybe like with Spock and genesis Ford could be reborn with bankruptcy too?

And I also agree with some of what berri says about Nissan cutting costs in some places maybe too much. Here's a little example. They decided to put a stripper base model Versa on the market for $10.5k. It has little safety equipment, no ac, no radio, not very comfortable, mediocre handling, and gets weak reviews in the auto press. They sell only a few of them, and most people who buy them probably rue the day.

Honda, in the meantime, has the Fit, which is only sold very nicely equipped with stereo, ac, safety stuff, nice handling, simple but nice interior, etc. Yes, the fit costs more like $14.5K for the lowest model--in other words about 40% more than the base Versa--but customers are satisfied, the press raves about the car, etc. Most of that $4,000 goes into better engineering of a better tricked out nice small car. Some of it no doubt goes for a bit of profit which they earned fair and square as far as I'm concerned. In other words, Honda doesn't try to chase after the absolute bottom of the market, and I don't really think they ever have.

In the mid 70s I remember Toyota and then Datsun went back and forth claiming to have the "lowest priced car in America" with the Corolla and the B-210. The Honda Civic I don't think ever claimed that. It was only a few hundred dollars more, I think, but that money went into a more advanced engine, suspension, front wheel drive when few others had it, etc. That's how Honda started to build their near-cult-like following.

Still seeing some of that today, I think. The bottom of the line cars from Toyota (Yaris?) and Nissan (Versa) are rather punishing things engineered for lowest cost. The Fit is maybe the best car in its class.

hpmctorque

In my second from last paragraph I said, "... a Japanese or an Indian company, or Roger Penske, may buy an existing brand, such as Saturn..."

I intended to say a "Chinese or Indian company," since this would be a way to gain quick entry into the North American market. They could then supplement their North American models with small, low cost, fuel efficient models from their respective country.

hpmctorque

You may certainly be right, but to me it looks like a flip of the coin as to whether Hyundai/Kia will surpass Nissan by 2013. If forced to bet, I'd put my money on Nissan, since it's easier to maintain the lead than to overtake a rival.

hpmctorque

"Like me it looks like you see the Fiat/Chrysler merger being only marginally successful."

I see the Fiat/Chrysler merger as a wild card. Sergio Marchionne is taking a huge calculated risk, based on sound strategy, in my opinion. He's convinced that Fiat has only two options, in the long run; sell out to a major rival or go on the offensive. He's chosen the latter course, which is admirable and gutsy.

Marchionne has shown considerable talent in turning Fiat around, but his latest gambit faces long odds. Whether he can make this merger work, and also buy and absorb Opel, won't be known for some time. The new company could implode or it could be successful, but from now until 2013 doesn't give him sufficient time to become a top tier player in North America. The outcome might be very different with a longer time line.

berri

Well, I think Chrysler is already sort of a marginal player. Its quality is behind most, it lost its excitement mojo and I don't think most really care if it sticks around or not. I think the Jeep name goes on, but I don't know about Dodge or Chrysler? I don't see a bunch of small Fiat's making much of a dent either. Maybe Maserati can boost sales, but that market is kind of saturated, particularly in a deep recession with Lexus, MB and BMW already. I can see sense in Fiat getting Opel, but I think the US market and Mopar is a crap shot at best (then again, once in awhile a long shot wins big on the craps table, but the odds are tough).

hpmctorque

Fiat also owns Alfa Romeo (and Lancia), which could give BMW and Infiniti some competition. Alfas are highly regarded in Europe.

I'm very aware of Fiat's poor legacy in the American market, but that was then and this is now. I say this because there's an entire generation of Americans who don't have a preconceived notion about Fiat, because Fiat has been absent from our shores for 25 years. Quality and reliability have improved significantly since Fiats last plied our roads. Also, Fiat is a world leader in fuel economy, and has leading edge diesel technology. These attributes carry more weight than they did in the '60s, '70s and '80s. Further, unlike Toyotas, Fiats are fun to drive. They've got character. Now, these attributes don't guarantee success in the marketplace, but I think it's premature to count Fiat out before the first new models have even been introduced. Will Fiat be a big seller by in North America by 2013? It's highly doubtful, but it just might beat the long odds and be a meaningful presence by, say, 2019. After all, look how long it took Toyota, Honda, Nissan and Hyundai to get established here. And their cars were crap at first too.

Marchionne's no fool. He know's what he's up against.

benjaminh

Had a friend of the family with an Alfa Romeo in the early 80s. I thought it was very stylish, comfortable, and sporty. Nice, nice car. Don't know about reliability, but I think it was spotty..

I like the looks of the Fiats *a lot*. I wish them success sooner than 2019. If Mercedes Benz can't wait that long to make Chrysler work, I don't think Fiat's going to have deep enough pockets to wait that long. They need some success in four year or the losses are going to be staggering even if they get Chrysler "for free." My guess is that the losses will be staggering. Chrysler vehicles just don't seem that competitive for the most part. Consumer Reports has been shocked the last couple of years at the poor design and quality of some of their vehicles, which often came in dead last in their comparison tests. And they've cut research and development to the bone. It's not like there are many (or any?) good models just about to be introduced, I don't think.

And so I hope they start bring over Fiats asap. But of course they have to do it right and make sure they have the parts, the training for the mechanics, modified engineering, etc. Can Fiat just take over one of Chrysler unused factories and start building some Fiats over here?

hpmctorque

I'm not suggesting that Fiat/Chrysler can't be successful in North America before 2019. it will take several years - I used 2019 just to cite a year -for it to "be a meaningful presence..." What I mean by that is that it's likely to take that long to regain a significant market share.

I agree that if Fiat isn't profitable here long before then, say in 3-4 years, it will be gone. I think we're in agreement.

benjaminh

From today's New York Times:

"Under the new standard, the national fleet mileage rule for cars would be roughly 42 miles a gallon in 2016. Light trucks would have to meet a fleet average of slightly more than 26.2 miles a gallon by 2016"

That's, of course, 42 mpg according to the way they tested mpg a quarter of a century ago. I'm not sure what that translates into for EPA's way today of calculating mpg, but I think it's a lot less. A lot. Total guess here, but maybe 30 mpg. Still, there aren't that many cars that get a combined city/hwy 30 mpg. The 2009 Civic, for instance, gets 26 in the city and 34 on the hwy, for a combined 29. That would about do it. In other words, we're probably going to be seeing a lot more new cars that are around the size of the Civic 5 years from now.

But they seem to have left a truck sized loophole for trucks, vans, suvs, etc. 26mpg? That's all?? By the old standard? That's not that much above what those vehicles make now. In other words, it seems like this standard like the last one encourages vehicle makers to make vehicles that are not strictly "cars" to get around the standard, which is silly, imho.

I think both should be held closer to the same standard. Well, maybe there could be a difference, but not that big.

Given global warming, declining supplies of fuel (and the relationship to terrorism, etc), pollution, etc., I think new stricter cafe standards are needed. But I'm not sure they've got it quite right. I also think our crumbling highway and mass transit infrastructure are in desperate need of huge amounts of money. It makes sense to raise the gas tax a bit for that, which would also help companies make the new cafe requirements.

I think all of this probably helps Honda and Toyota. Their vehicles tend to get slightly better mpg already. Although the Ford Fusion is already the MPG champ when it comes to midsize! That car already would make the new standard by a mile.

By 2013 I think this new cafe requirement will really start to have an effect on the cars we see on the road. It might make engines a little smaller too.

gagrice

But they seem to have left a truck sized loophole for trucks, vans, suvs, etc. 26mpg? That's all??

I cannot think of a decent work truck in the US that gets close to 26 MPG combined. My gutless Ford Ranger is lucky to get 15 MPG with a 3.0L V6. If it had the 4 cylinder I would not get up the hill to home. The only way they will reach that figure is with a small diesel PU Truck. EPA and CARB will shoot them down. It will continue to be dueling government agencies with nothing getting done.

benjaminh

That's 26 mpg under the old fashioned and "easy" testing standards from when cafe was first instituted back in the 70s, back when they tested hwy mpg at lower speed without the ac running. In other words, a 26 by the old system (but still used by the new cafe) might only equal something like 19 mpg (just a wild guess) with the new system used by the MSRP stickers on new cars today. Still, from what you are saying, that would be a 4 mpg improvement over what you're getting...

With a new sophisticated engine of the same size, that number is probably possible.

Still, the bottom line remains. They are asking for a pretty big leap for cars, and a rather small jump for trucks, suvs and mini vans. In other words, if you want a bigger vehicle it's more likely 5 years from now that there might be a "truck" in your future.

benjaminh

To clarify further, I think there have been at least three standards that the EPA has used over the years to measure mpg.

The first was the super easy one that lasted from c.1975 to maybe around 1984 (not sure on that, can someone help me). Call this EPA test #1

But everyone complained that it was impossible to get EPA's numbers, and so they came out with a new standard in c. 1985. This standard shaved some mpg off of the numbers of the earlier standard. And so we had EPA test #2

It still, however, was out of whack with real world mpg, and so in 2008 the EPA devised a new test that took into account higher speeds, ac use, etc. This one finally got it right, I think. A lot of people are getting pretty close to the numbers. EPA test #3

CAFE, however, is still based on that earlier, very flawed and inflated mpg number from c. 1975, EPA1. And the car companies, not surprisingly, like it that way. When they say they are going to move the average mpg to 42, it sounds amazingly high. 42 mpg!!!! That would imply that starting in 2016, when the standards are fully in place, almost all the cars would be tiny or hybrids, or all electric, or whatever.

But that is not the case. What the cars really have to get by 2016 is not 42 mpg by today's test, but maybe (again, a total guess here) more like 30 mpg. It's still a big jump, no doubt about it.

To attempt, maybe foolishly, to try to explain it a different way, imagine a 4 cylinder mid size car, say a 2007 Honda Accord auto 4 cylinder. Go to the EPA's website where they have a conversion to show what your car made in EPA 2 would get under the new EPA 3.

http://www.fueleconomy.gov/feg/ratings2008.shtml

Looking it up, under the EPA 2 test our 2007 Honda Accord auto got a combined city hwy mpg of 28. It converts to the new EPA 3 test to a combined mpg of 25.

But the old number of EPA 1 used for CAFE was wildly inflated. I remember in 1981 the Chrysler K-car was widely advertised as getting "41 mpg."

Totally guessing here, but I think Honda's 2.4 liter vtec is much more advanced and efficient than Chrysler's 2.2 from 1981. In other words, under the EPA1 test I think a 2007 Accord might have beat a K-car under the same testing conditions.

Total guess, but I'm thinking a 2007 Accord under EPA1 would get something like 30 in the city and 44 on the hwy, for a combined mpg of something like 36.

Now c. 36 is the number to think about, and no doubt Honda's engineers are thinking about it (or whatever the actual number is) now. Between now and 2016 Honda needs to move the Accord number from this 36 (today's 25 under EPA3) up to 42.

If they make the Accord just a couple of inches smaller (and it has grown to a rather large size, which I have to admit I like) and shave a few hundred pounds, put a slightly smaller but mostly just more efficient engine in it (Honda is apparently has been working for years on its own version of something like BMW's "valvetronic" technology, which increases efficiency) you'll move up to 42 under EPA 3.

In other words, my guess is that the next generation Accord (due c. 2013 or 2014) will probably be able to meet the new standard, or at least get very close. And of course, CAFE is about averages, and so they could still sell some high powered 6 cylinders that didn't meet the standard, as long as they sold enough Civics, Fits, and Insights that beat the standard.

Sorry this is so long.
(I'm on vacation, and so I get to enjoy wasting a bit of time thinking about all of this stuff...)

Any one else have any thoughts on all of this? Man am I wordy. Apologies...

gagrice

You have touched on just how convoluted the EPA tests have been over the years. They use a one size fits all and it does not work that way. The last change came about as a result of the hybrids having a much higher rating than most people were able to get.

Now my understanding of the CAFE numbers is this: They take raw mileage figures from the EPA tests and those are used for the CAFE standards. In reality they are much more optimistic. I don't think it will be close to fixed by 2013. It has been a joke since the implementation in the 1970s and only gotten worse. Just because Congress mandates that you will get 26 MPG combined in a PU truck does not overcome the physics of building such a truck. I need a truck that is not gutless, just to satisfy some fat cat politician trying to please the enviro wackos lobbying Congress.

PS
I would look for VW diesels to be major players by 2013

benjaminh

gagrice: It is convoluted.

I think I'm more worried about global warming and our dependence of oil from the middle east than you are. But that's fine.

But one of my main points is that you won't have to have a gutless truck. The "truck" loophole means that large trucks with powerful V-8s (or large and advanced V-6s that get the power of V-8s) will still be around because of the truck "loophole."

Ditto with large and powerful SUVs, minivans, and the like. They'll still be here in 2016. They'll just have more advanced engines, and some will be hybrids. And, of course, like today there will be some small trucks, SUVs and vans that will exceed the average, which will allow others to get well under the average and still be for sale.

Agree with you about diesels. May have a future...

euphonium

Superior motovation to preserve & drive the performance cars of the 60's.

GW is mentioned, but why give credance to a political myth?

hpmctorque

CAFE must have been modeled after our tax code. Both are needlessly complicated, confusing and full of logic defying loopholes. And, as if that weren't enough, they're inefficient and inequitable. Other than that, they're brilliant.

If the folks who created our federal tax returns swapped jobs with those who designed CAFE, nobody would realize there had been a personnel change.

benjaminh

Funny! Ain't that the truth.

In fact, it's so confusing I made at least one little mistake myself. I can't edit it any more, so I'll just put the corrected (I hope) version of the part with the mistake below:

"Now c. 36 is the number to think about, and no doubt Honda's engineers are thinking about it (or whatever the actual number is) now. Between now and 2016 Honda needs to move the Accord number from this 36 (today's 25 under EPA3) up to 42.

If they make the Accord just a couple of inches smaller (and it has grown to a rather large size, which I have to admit I like) and shave a few hundred pounds, put a slightly smaller but mostly just more efficient engine in it (Honda is apparently has been working for years on its own version of something like BMW's "valvetronic" technology, which increases efficiency) you'll move up to 42 under EPA 1, which is used for calculating CAFE."

The end of the last sentence is where I made the correction.
(originally I wrote EPA3 where I meant to write EPA1.)