Infiniti's popularity soared during the early part of this decade with hot new additions such as the G35 coupe and sedan, the FX 35/45 crossovers and the full-sized QX56 SUV.
Dealers reported record profits in 2003 and 2004, and the marque recorded more than 100,000 sales in this country for the first time in 2003. That year dealers sold 118,655 units. That number increased to 136,401 sales in 2005.
But amid higher inventory and a dearth of new product lately, dealer profitability has begun to wane.
Ed Lennon, a New Jersey dealer and chairman of the Infiniti Dealer Advisory Board, tells Staff Reporter Kathy Jackson that Infiniti dealers still are happy. But he asks: "Where is the new product?"
What's the situation with the important issue of return on sales?
We had dramatic growth in '03 and '04 and the highest profitability we had ever seen as a percent of sales. It was over 3 percent in '03 and '04, but we finished '05 under 3 percent. Our goal is to be at 4 percent. A Tier 1 luxury brand should have at least a 4 percent return on sales.
What happened last year to cause the return on sales to slip?
We had good sales, but our inventory grew. As inventory grows, gross profit drops.
Why did the inventory grow?
There's nothing wrong with our product; our product is great. But what our customers want to see is change. The only new product we had in '05 was the M. The G35 and the FX have been out for a few years.
When the product is new, that is the best opportunity for profitability. That is when people are willing to pay.
What new product is in the hopper?
The G35 came out in the middle of '02. We will get a complete upgrade of the G sedan this fall as an '07 model. But after the G35 - what's after that?
We don't know.
They say over the next three years new product will come to market, but they keep it very close. That frustrates us. The dealers want to know.
Has Infiniti been too slow bringing fresh new product to market?
I don't think anyone was sure how successful we would be with new product like the G35 and the FX. Now, I think everyone from (CEO) Carlos Ghosn to Jed Connelly (head of Nissan in the United States) is surprised how well we did do with it. Still, the cycle has been a little longer than dealers would like it to be.
There has been a lot of talk about whether the GTR sports car will be a Nissan or Infiniti when it goes on sale in this country. Have the Infiniti dealers been told anything about this?
They're keeping the product plans for the next three to five years very close, but Nissan North America has asked Nissan Motor Co. to make it an Infiniti. That's what they've told the dealer body. The dealer body is encouraged. It will be a low-volume car at about $50,000 or over. That is better suited to be an Infiniti than a Nissan.
Does Infiniti need a smaller sport wagon than the FX?
That's an area they're looking at and where we need to be. That's an area where we're not competing. The FX is more male oriented and not hitting a big part of the market.
What other holes are in the lineup?
We need a coupe with a retractable hardtop. We believe we need a halo car to solidify us as a luxury marque.
The GTR would not be a halo vehicle?
The GTR is pure muscle. A retractable coupe under $50,000 would appeal to many people.
Overall, are the dealers happy?
We saw our most profitable years ever in '03 and '04. Average profits per store were over $1 million. '05 was down a little bit, to about $800,000 to $1 million on average, but still a very good year. We have a very open forum with the factory right now.
The product is the only thing they're holding close. The dealers are happy, but we could do better if we had more product.
Infiniti stores are taking on a new look. How do the dealers feel about that?
For any businessman to buy into that, we have to feel good about the future. I think the dealer body is more than willing to do the retrofits because they believe we will be successful.
Do you think Infinitis are priced right?
Until we reach the top, we will have to be the value story. If anything, I'm concerned about price increases for the brand. We have to be the value franchise until we can say we're a Tier 1. We have not reached our goal until we can charge more.
Which brands do you consider to be Tier 1?
Mercedes, BMW and Lexus. We would like people to throw us in there as No. 4.
Are you satisfied with Infiniti marketing and advertising?
Since Jan Thompson (vice president of marketing) came on board in mid-2004, I've been very impressed. She knows what Tier 1 is.
We're starting to spend the money we need to spend so Tier 1 buyers can see us.
What are you doing to reach those Tier 1 buyers?
Three years ago we weren't spending enough money in any area. In '05, we did well with network TV. Moving forward, we will focus on the Internet.