Tuesday, November 8, 2011

Car Wars

I was watching college football on Saturday, October 29th.  I watched my favorite team, Michigan, beat Purdue 36-14.  I also watched Nebraska methodically beat Michigan State and Illinois snatch defeat from the jaws of victory versus Penn State.  As night set in, I switched between two epic battles:  Ohio St vs. Wisconsin and USC vs Stanford. But, this bloggy bit is not about football.  It is, of course, about automobiles.  It is specifically about Honda and Toyota.

As good as a channel surfer that I am, I do end up watching a few commercials.  Perhaps it is just for nostalgic feelings for the days when one had to get up and walk across the room to change the channel.  Amongst the commercials I watched were two for Honda and Toyota.  Seeing car company commercials during a football game is nothing special.  These ads, however, stood out.  Both companies were offering 0% financing on their cars and SUVs.   This made me raise both eyebrows and wonder why.

I recall when my daughter Armene’ was buying her first car, we had looked at a variety of makes including Honda and Toyota.  Back then in late 2008 and early 2009, in the pit of the recession, Toyota and Honda were not really dealing.  Their dealerships were alive with shoppers whereas we were usually the only potential customers in any other dealership we visited.  It was very apparent.  As a result, Honda and Toyota simply were not dealing.  The salesmen at both Honda and Toyota basically said the same thing, “if you do not buy this car, someone else will soon.”  Well OK then, we went to Jeep, the SUV my daughter wanted anyway, and got a tremendous deal.

Toyota and Honda rarely given 0% financing.  I wondered what was up.  I simply assumed the entire automotive market had to be soft if Toyota and Honda was doing this.   With the power of the Internet at my fingertips, I can easily answer such questions.  So, I investigated.  A quick Google and a click took me to http://online.wsj.com/mdc/public/page/2_3022-autosales.html which is the Wall Street Journal’s Market Center - What’s Moving:  US Auto Sales.  

The site was graphs and tables.  I first saw that all segments were selling more than 2010 with the exception of large cars which is tracking 9.8% below last year.  Mid-Sized SUVs were a whopping 48.7% at the max end with Large SUVs up only 1.9% on the minimum end.  I was more perplexed why Honda and Toyota were offering 0% financing.

I scrolled more and found the section that told the story:  The Top 20 selling in the US were in this chart.  Everything was showing positive growth year over year except for five vehicles

  1. Toyota Camry        -  8.5%
  2. Honda Accord        -15.7%
  3. Toyota Corolla        -10.7%
  4. Honda Civic        -15.6%
  5. Nissan Versa        - 6.7%
Wow.  The top selling vehicles from these storied auto makers were down compared to last year.  

I am guessing this has to do with the all the turmoil in Japan due to the earthquakes and tsunamis.  Was supply constrained?  Or were consumers simply leery of buying cars they might be able to service so easy?  Given that both Toyota and Nissan are providing incentives, I have to conclude that if supply was a constraint, it is not now.

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