What We're Saying: Toyota-Tesla; Ford Sales; Electric Cars; Best Family Cars; and GM's future
By Michelle Krebs May 22, 2010Edmund.com analysts talked with the media in recent weeks about the Toyota-Tesla link, a drop in Toyota's sales, a rise in Ford sales, conventional versus electric cars, the best family cars, leasing and General Motors marketing and rising profitability.
Here are highlights:
Toyota Links with Tesla
Media called on Edmunds.com experts to comment on the unexpected blockbuster deal announced -- that Toyota will invest in Tesla.
Edmunds experts told the Associated Press, The New York Times and a number of California media outlets, notably the San Francisco Chronicle and San Jose Mercury News, that the Toyota-Tesla link, which re-opens the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, Calif., is a win-win.
"This seems like a good deal for both parties, especially Toyota, from being able to avoid the political fallout from shutting NUMMI down to being able to offering a new electric vehicle with just a low initial investment cost," said Jeremy Anwyl, CEO of Edmunds.com.
John O'Dell, Senior Editor of GreenCarAdvisor.com, said Toyota's investment enhances Tesla's credibility. "Many had doubted the company's ability to deliver on all its promises, but Toyota must have conducted substantial due diligence before making this investment."
Linking with a cutting-edge small company helps Toyota's image as well. said AutoObserver Editor at Large Michelle Krebs:"Toyota has recently been seen as a stodgy, conservative, hierarchical company that doesn't do anything quickly, while Tesla has the opposite image."
May Sales Forecast
Jessica Caldwell, Edmunds.com senior analyst and director of Pricing and Industry Analysis, told Reuters that part of why Toyota's U.S. early May retail sales are down 12 percent from April is the automaker's buyer incentives are losing their impact. She said the brand has not recovered from recent image problems. Meanwhile, GM sales for early May show a 9 percent increase from April.
Regarding Ford gaining U.S. market share, Caldwell told Investors Business Daily that because Ford has boosted sales more than 20 percent in each of the last five months compared to a year earlier, she predicts the company will surpass Toyota as No. 2 in U.S. market share this year.
Caldwell confirmed with Jacksonville.com that leasing cars makes sense again. She said dealers use it as a hook to get buyers back in the showroom at regular intervals.
Bloomberg Business Week reported that Toyota forecasts a 48 percent profit gain as it recovers from recalls and expands sales in Asia. Caldwell said that Toyota will have a challenge in battling competition in the United States from Ford and Hyundai's new models.
Gasoline versus Electric
Edmunds.com editor-at-large and senior analyst Karl Brauer told Investors Business Daily that the higher price tag of electric cars will cause the majority of buyers to purchase conventional cars. He said the popularity order will be conventional, diesel and hybrid. Batteries make hybrids costly to manufacture, driving up their price to buyers.
Best Family Vehicles
Edmunds.com has teamed up with Parents Magazine to release the best family cars for 2010. Brauer was interviewed by television stations to weigh in on his favorite family cars and to talk a little bit about the shift from a buyer's to a seller's market.
On Fox 5 News in Washington D.C. and Fox Detroit, he said the beginning shift in the economy has reduced overcapacity of vehicles creating a buyer's market. He emphasized the need for good credit when buying a car. Meanwhile, his family favorites in the budget category included the Kia Soul, Mazda 5 and Honda Fit, all priced under $20,000, roomy and versatile with great safety scores.
A story on WCPO Channel 9 in Cincinnati rated Edmunds.com and Parents Magazine's best cars for families in five categories. Besides the best budget buys, it listed the Subaru Legacy, the Honda Accord and the Volkswagen Jetta TDI as best sedans. Crossovers included the Chevrolet Equinox, the Honda CR-V and the Toyota RAV4, and the best environmentally friendly cars were the Ford Fusion Hybrid, the Toyota Prius and the Honda Insight.
Customer Loyalty
The Sacramento Bee reported that Edmunds.com said while Toyota's loyalty slips, it still retains the top loyalty spot. The first three months of this year, 57.6 percent of Toyota trade-ins resulted in the purchase of a new Toyota, down 4.2 percent from the first quarter of 2009. Ford was second with a 56.1 percent trade-in/purchase rate, up 10 percent from a year ago. Michelle Krebs, Edmunds.com senior analyst, told the Bee that while Toyota's loyalty incentives are attractive, automakers such as Ford, Honda and Chevy are generating loyalty without paying for special marketing programs.
GM, Toyota Profits
GM chief financial officer Chris Liddell said in a Bloomberg Businessweek piece that the company's profitability is moving it closer to a stock sale. Anwyl told the online news site that with the U.S. market showing signs of a rebound, GM should be able to boost its profits further.
GM made $1.2 billion even though the U.S. economy is still weak, selling at a pace of 11 million vehicles in the quarter. Consider how well GM could do in a market selling 14 million vehicles a year. He estimates GM's retail sales so far in May are up 8 percent from April, while Toyota is down 15 percent.
He told USA Today that Toyota's $2.3 billion profit in the first quarter of this year is due to its latest round of incentives. He said Toyota's spending on U.S. incentives is up 24 percent this year from a year ago while the industry average is down 12 percent.
Anwyl addressed GM getting criticized for its advertising that it fully paid off its government loans. According to the Detroit Free Press, the Competitive Enterprise Institute objected saying GM only paid a fraction of what it owes. The real payoff is when GM goes public again and the government can sell stakes in the company. Anwyl told the Free Press that the automaker took risks with the ad campaign that could hurt its credibility.
Google-OnStar Link
Doug Newcomb, senior technology editor for Edmunds.com, told just-auto.com that the partnership between Google and OnStar gives GM a marketing boost, but it ignores millions of consumers with phones who cannot use it since it is only applicable to one vehicle -- the Chevrolet Volt. By comparison, Ford's Sync system is available on most Ford models.
Compiled by Contributing Writer Marti Benedetti
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