Buyers' loyalties loosen
Imports, domestics have billions at stake
Photo credit: KEVIN BROWN
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Owners of Japanese-brand vehicles buy Japanese-brand vehicles. Owners of domestic-brand vehicles buy domestics. So says auto industry wisdom.
But lately, that wisdom isn't such a sure bet.
Consumers have shown a recent willingness to cross-shop outside their traditional habits, according to market monitors. Prodded and lured in one direction by such factors as inventory shortages at import leaders Toyota and Honda, and shooed in the opposite direction by disappearing brands such as Pontiac, Saturn and Mercury, some consumers find themselves unanchored.
The billion-dollar question: Are they changing shopping patterns out of temporary inconvenience, or is a new attitude emerging in the consumer standoff between import and domestic brands?
Compete Inc., an automotive market research firm in Boston, finds that the tendency of Japanese import-brand shoppers to cross-shop Chevrolet, Ford and Dodge has trended steadily upward since the first quarter of 2010.
Similarly, J.D. Power and Associates reports that the percentage of auto shoppers who traded in an Asian import-brand vehicle and bought another one has declined slightly. Asian-brand loyalty dropped from a consistent 80 percent at the beginning of 2010 to 76 percent in third quarter 2011.
These may be modest changes, but they leave the industry uncertain.
'New sense of patriotism'
"Something is happening right now, it's just a little hard to say what it is," says Adam Lee, chairman of Lee Auto Malls, a Westbrook, Maine, group of import and domestic new-vehicle dealerships and 13 used-car stores.
"There is clearly a new sense of patriotism out there," he adds. "We can hear it when we talk to customers."
Lee thinks Ford, in particular, is benefiting from this trend, but patriotism alone won't sell cars: "It's not necessarily causing people to buy Fords; it's causing them to shop Ford. What's causing people to buy Ford is good products."
Lee doesn't own a Ford store. But he says he would like to. He owns Toyota, Honda, Nissan, GMC, Chrysler, Jeep and Dodge stores and sees Japanese brands getting hurt by post-earthquake inventory shortages.
"We're seeing some customers coming into our Toyota store and our Honda store, not finding what they want because inventory has been so low, and going off to look elsewhere," Lee says, noting that his typical 200- to 250-vehicle Toyota inventory stands at 45 units. "But are people going out to buy a Toyota Highlander and buying a Jeep Cherokee instead? I don't think that's happening."
The past three years of upheaval -- recession, bankruptcies, bailouts, lending crises, fuel-price spikes, Japanese product-quality glitches, disappearing brands and the catastrophic March 11 earthquake in Japan -- has shaken up some consumer habits. Japanese-brand dealers were hit hard this summer by inventory shortages. Nissan rebounded fastest, and its U.S. market share is increasing. Market shares for Toyota and Honda are down from a year ago. At the same time, market shares for Chevrolet, Ford and Dodge are up.
Better domestics
A big coincidence?
Not at all, says Joseph Yergeau, the 82-year-old vice president of Holloway Buick-GMC-Cadillac in Portsmouth, N.H.
"What's happening," he says, "is that the domestic manufacturers are delivering better-quality products right now, with better styling and fuel efficiency. Customers want to come see it. I don't care what you bought in the past.
"Look, I've been around in this business a long time," says Yergeau, who admits using his Cadillac Internet audio system to search out Guy Lombardo music. "I remember when the imports arrived. We thought, 'Let 'em go. Don't chase 'em. They'll go try the imports and they won't like them and they'll come back.'
"Well, we were wrong about that. But we learned. And you're going to see them coming back now."
Or maybe not, counters Toyota spokesman Joe Tetherow.
"A lot of this change in numbers has to do simply with the inventory problems we've dealt with this year," Tetherow says, referring to the global Japanese production crash caused by the earthquake. "Our customers tend to be pretty loyal.
"I hear our competitors say they're conquesting our sales. They'd better enjoy it while it lasts because it won't last much longer."
Lincoln Merrihew, managing director for transportation at market researcher Compete, believes the domestic brands are partially benefiting from picking up "the leftovers" of domestic brands that were killed -- Saturn, Pontiac, Hummer and Mercury.
But he cites Compete shopper data to say that there is also organic growth. Combined Detroit 3 market share is up more than 2 points for the first nine months of this year, while Japanese-brand share is down nearly 4 points.
Compete tracks online car shoppers from auto site to auto site to see what other vehicles they are considering.
Merrihew says import shoppers were warming to domestic model considerations before the earthquake.
Compete data show that in July the ranking of Chevrolet, Ford or Dodge vehicles for Toyota shoppers was 4.5, meaning typically their fourth or fifth choice. By comparison, in fourth quarter 2009, the Detroit 3 vehicles were a more distant 5.5 choice.
Honda loyalty stands out
Honda shoppers appear to be the most import-loyal of the Japanese market leaders. Compete reports that in December 2009, a Chevrolet, Ford or Dodge vehicle was a seventh-place choice for Honda shoppers. By July, those choices had risen, but only to fifth.
Nissan intenders ventured to a Chevrolet, Ford or Dodge vehicle as their sixth choice in late 2009, according to Compete. By this summer, those choices had risen to about 3.5.
Al Castignetti, vice president of Nissan sales at Nissan North America, says model segment offerings will determine where customers will shop. Because few brands offer minivans, for example, Chrysler minivan shoppers also will consider Nissan's recently reintroduced Quest.
"We look at cross-shop data, and it is different for every segment," he adds.
Ford's decision to leave the compact pickup business will mean that those owners likely will consider a Nissan Frontier, Castignetti says.
Nissan's recently introduced compact sporty crossover, the Juke, "is a white-space product," he adds, with no similar models. Therefore, it is drawing shoppers from both sides of the import-domestic aisle.
Castignetti says he doesn't care where his new customers come from. He believes the old perceptions of "import" and "domestic" are outdated. Regardless of who is shopping what, he points out, his market share is up. And he vows that "we'll keep these new customers in the Nissan family."
You can reach Lindsay Chappell at lchappell@crain.com.
