Friday, January 20, 2006

Understanding Auto Shows

Recently we have seen the Los Angeles and Detroit Auto shows come and go. What can be drawn from these press party PR galas? I think a lot.

If a car brand has only concepts showing, and no new models, you can expect their sales to decrease for the following year. Chevrolet had no new models for the Detroit show, but they did have a new concept. I expect Chevrolet's sales to decrease.

New models are usually introduced to the public formally a few months after their introduction at an auto show. The new models give us a good idea of the styling focus for a brand, for better or for worse. Jeep showed us its new Compass, a bloated sluglike car based SUV, and their new slightly altered Wrangler. I expect Jeep's sales to decrease.

Auto shows rarely showcase exciting new vehicles from the Japanese. The biggest most exciting introductions are usually European and American. Americans still know how to put on a show. The Japanese in many ways don't need autoshows. Perhaps auto shows are a waste of money, especially if your vehicle is a multi million dollar concept that never gets produced. The Japanese seem to do quite well without them (or without success stemming from them). Do we still need them?

I think we do. They benefit a company through the following:

1. They are great for press relations. The press love a free junket.

2. They attract some buyers, mostly male. An autoshow is a mostly male experience for better or for worse, and they get the middle class of a society a chance to sit in any car they want. I'm middle class and I love sitting cars I can't afford. Right now that means any new car on sale in the Western world.

3. They are a litmus test to see if your car is going to sell. You'll have a very good idea most of the time whether your vehicle is beautiful or hideous. There is such a thing as ugly in the auto world, and it is told in sales numbers. The Chrysler Imperial and Jeep Compass are ugly. They will not sell.

They are also a huge waste of time. How many bizarre vehicles that have no bearing in reality are produced and have been produced by the auto industry? How often do we see great concepts never produced? How often do we see concepts that are watered down to nothing when they are sold to the public? It probably would make sense for some companies like Toyota to not attend an auto show. But the press backlash at not getting free stuff, and the fear of the possibility of other companies succeeding because a competitor dropped out keeps everyone attending. Except Isuzu, and they'll soon be bankrupt.

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Thursday, January 19, 2006

The Japanese: Predictions for 2006

Toyota: As an American living in Europe, I am not used to seeing a powerful company like Toyota be an also-ran to not one, but many other companies. Quite simply Toyotas are not the best selling vehicles in the UK or Europe. They are respected and have a good reputation, but Europeans consider them boring. However, I think Toyota is bound for yet another great year in 2006. I think their European arm will not make a profit, if it ever has. But in America with vehicles like the upcoming FJ Cruiser, the new Camry, and the sales success of their hybrid line, Toyota will probably beat General Motors for the worldwide sales crown in 2006. This is a company that rarely makes mistakes. It has replaced the absurd Echo with the Yaris, a decent supermini. It has made a class leader in the FWD realm with its new Camry. And its Scion lineup is quite good. Lexus will continue to do well. If American consumer tastes ever go towards those of Europe, where handling and aesthetics are more important than reliability, expect Toyota to be in trouble. But that day has not arrived and may never. I'm not going to bet against this company.

Honda: Again, as an American who lives in Europe I am privy to seeing multinational corporations I am used to seeing be successful, struggle. Honda, like virtually all the Japanese car companies, has a troubled reputation in Europe. Their cars are considered bland and only good for old people. To combat this they have introduced an all new Civic in hatchback form. It is the most daring design to come out of a car company in years. I have yet to see one on the road in the UK, but did spot one in Spain while on holiday for New Year's. It is a stunning vehicle, and is a committed attempt by this company to make itself exciting. In America though I expect Honda to continue steaming ahead because of its introduction of the new Civic (different from the European version) for the US, and the new Honda Fit. Like Toyota, Honda has decided that oil prices will be high for the long term, and they have hedged their bets by introducing a small car that gets great mileage. Chrysler and Ford are nowhere to be found, and Chrysler has gone so far as to replace its Neon with a small SUV that will have worse mileage. Ford at least has the ability to import over its Fiesta, a competent small car. Actions like these make my hobby as an analyst quite easy. I expect Honda to do well in 2006.

Nissan: Nissan has a strong presence in Europe thanks to its partnership with Renault. The Nissan Micra is a best seller in the UK as well. But I do not expect Nissan to do well in overall in 2006. Why? They don't take gas prices seriously. Carlos Ghosn shows no interest in hybrids, and while I understand his argument that they are an expensive technology that does not produce a profit, he has offered no fuel efficient alternative for his customers. The new Sentra is not really competitive with the offerings from Toyota or Honda. Infiniti is doing somewhat well, but the G35 is in need of replacement. The company has been too aggressive with large SUVs and pickups and has failed to realise that this is an area that the Big 3 will always dominate, and it is a market segment that is on the wane because of gas prices. In many ways Nissan is an American car company with Japanese designers and engineers. By not offering fuel efficient vehicles, or competent small cars, this company stands to suffer in 2006. The fact that many of its pickups built in Mississippi were built poorly because of an incompetent rural workforce didn't help matters. They are bringing over the small Verso, and that may stem the tide, but this company needs to be focus more on fuel efficiency and less on emulating highly flawed companies like GM and Ford.

Mazda: Until I came to the UK, Mazda was my favorite company. Their emphasis on design, sportiness, and experimentation attracted me. The company continues these trends, but there are problems. While their new CUV looks great, it still remains a vehicle that does not get great mileage. Their new Miata (MX-5) to me doesn't compete in the looks department, especially when compared with the Pontiac Solstice. It might handle better, but the design is simply too Japanese for American tastes. Sales figures reflect this. The 3 and 6 will continue to do well, but where is a small car below these two vehicles in size? I have seen the Mazda 2 over here, and it is a disappointment. Mazda needs to make a small supermini with a sporty attitude. Because of its "sport" nature, it may be able to weather gas crises more strongly than its competitors. I think it will perform adequately in 2006.

Mitsubishi: Here is a company in dire straits. Mitsubishi is a company that decided to try and emulate the Big 3 with a series of poorly made SUVs and didn't have the dealership network, nor the brand cache behind it to pull off such a stunt. The result has been disaster. Its subsequent embrace of cars has helped somewhat. The Eclipse is a good looking vehicle, but what next? Mitsubishi should attempt to bring over its small car lineup from Europe. They also need a competent FWD midsize car. Unless something dramatic happens I can't see this company remaining for too much longer in the US. I don't see good things in 2006 for Mitsubishi.

Suzuki: Suzuki builds one of the most competent and stylish superminis in the Swift, but its a vehicle most Americans will never see. They should bring it over to the US. This is a company most Americans see as specialising in small car based SUVs. It needs to change that reputation, especially as it is quite able to do so based on its European and Japanese lineup. The SUVs it makes are good, but its attempts at making a small sedan are dismal. I think it will perform adequately in 2006.

Subaru: I am not a fan of this company's new design emphasis. I think their cars have always been rather ugly, but now they are godawful. However, time and again they have proven my maxim that aesthetics are everything wrong. Will it continue? AWD cars are not fuel efficient. Gas price increases will hurt this company. Subaru has recently become a part of the Toyota empire, so I expect to see something good in the small car department. I think 2006 won't be a great year for them, but 2007 probably will be a bit better now that Toyota is running the show.

And that's about it. I ignored some of the lesser players, like Isuzu, who I think will finally die in 2006 at some point. I plan on talking a little about my trip to Spain, and viewing a country that is very dependent on motorcycles and scooters for the first time. I see a big future for motorcycle and scooter manufacturers, especially if fuel prices continue to rise. The entire Southwest United States uses far too many cars for the weather it has. If I had a few spare dimes I'd plunk it into some motorcycle company stock. Harley's looking better every day.

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