Our first question is how much share did the Japanese lose as a result of their mistakes, Tsunami/floods and competitive pressures from other OEMs? …. Final data is available for 2011 and this analysis is based on quarterly sales numbers to lesson month to month fluctuations.
Well how much share did they lose? … Peak ( 3’rd Quarter 2008 ) to Trough ( 2’nd Quarter 2011 ) the Japanese lost 10.6 points of market share in Canada which is massive given that OEMs fight over tenths of points of market share.
Second, were their other market share losers besides the Japanese during the last three years?
Yes GM also lost 6.9 points of market share in the identical timeframe as the Japanese lost share. Most of this was due to closing of brands but GM also lost share in their remaining core brands .. not much mind you but any loss of share in their core brands must be a concern since the whole idea of eliminating their non-core brands … Pontiac, Saturn, Saab, Isuzu, Hummer in 2009 and Oldsmobile in 2004 … was to allow them to concentrate on their core brands, since they also lost share in their core brands this strategy has not played out as planned, at least not in Canada). So collectively GM and the Japanese lost 17.5 points of market share between the 3’rd Quarter of 2008 and the 2’nd quarter of 2011. GM has obviously lost a lot more market share over time.
Third, who got it?
NOT GM obviously but virtually everyone else. Ford was the big winner gaining 5.8 points of share, the Koreans picked up 5.3 points of share, Chrysler gained 3.4 points of share and the Europeans picked up 2.9 points of share.
Fourth, can the Japanese get some of their lost market share back?
Well in the last two quarters of 2011 they recovered 6.2 points of share so the answer is yes … absolutely. And this is with Honda, in particular, but also Acura, Infiniti and Lexus still largely on the sidelines …. If Honda comes back this year as well as the premium brands it is possible that the Japanese could recover all their lost market share and indeed you could speculate that they have a possibility of exceeding their previous peak share in Canada. Maybe not in 2012 but it is certainly a possibility in 2013 especially since they have an unprecedented product offensive heading to North America … you might call it a Tsunami of a different sort.
The assumption by most analysts and industry executives is that the Japanese could pick up the share they lost due to the Tsunami and floods but most also thought it was going to very difficult for them to pick up the share they lost due to mistakes ( recalls and some specific products ), allowing their vehicles to age and due to competitive responses from other OEMs. They are belying this point of view and have very quickly gained back about sixty percent of their lost market share and are poised to pick up most if not all of the remaining lost share in the next 18 months. This will be the one metric analysts like myself will be watching carefully.
Doing this will be difficult and is perhaps reflects a too optimistic projection but the Japanese have certainly come back stronger and quicker than any analyst predicted. The conclusion … don’t count the Japanese out in Canada … they are very capable companies able to fully recover from any issue that arises.
Fifth can GM take back market share? … the answer to date is no. They only lost 0.1 points of share in the last period but holding share is also quite an accomplishment in the face of the Japanese picking up so much share. Can they continue to hold share as the Japanese and Europeans gain share? That is the $64K question since they are indeed vulnerable but you have to give them a lot of credit so far and they did perform better in the last two quarters than anyone predicted.
Sixth, if it wasn’t GM who lost share then who did the Japanese take their current share gains from? … Number one was the Koreans who lost 2.5 points which is a surprise since most believe that the Koreans would aggressively price to at least hold share and they have had some very successful products this year like the Elantra. This obviously wasn’t enough for them to hold market share. A close number two was Ford who lost 2.1 points of market share and have the oldest engineering in dealerships today at least of the full line vehicle companies.
This isn’t a surprise in that we know that Ford had a weak 4’th quarter but Ford is also the strongest of the Detroit Three so, if they choose, they could halt this market share slide and they are quickly addressing the age of the products in Dealer's showroom with a new Focus last fall and a number of new products this year.
Chrysler also lost 1.9 points of market share which is a bit of a surprise since they have done so well all year and were not noticeably down in the last quarter. They also have the most current engineering of the Detroit Three. Chrysler was hurt by dismal performance on the passenger car side of the industry though and this is their weak spot.
GM also partially was a surprised in that they held share with only 0.1 points of lost share but GM also lost 6.9 points of share as the Japanese tumbled so it isn’t exactly a stellar performance if the timeframe one examines is expanded.
Seventh, can the Europeans continue to gain share?
The answer is definitely yes as the move to European luxury brands continues ( they picked up about 20 points of luxury market share over the last few years) with these brands continuing to take share even though the Japanese have returned. At a slower pace of growth than when the Japanese were losing share but growing none the less. Indeed, it doesn’t appear that the Europeans are vulnerable at all in that their luxury brands dominate and don’t overlap the Japanese to a great deal ( Lexus the exception ). In addition , VW is moving down market and have tremendous strength in their diesel product so should be able to pick up share.
Eight, if the Japanese and Europeans reach their potential share gains which appears to be an additional 4 to 6 points of share gain over the next 18 months then who do they take it from?
Age of engineering provides some insights with Ford the most vulnerable with the oldest showroom age in Canada amongst major brands and the oldest age of engineering on a sales weighted basis. The average platform age in the total market is only 5.3 years. The Koreans age of engineering is the youngest in the market ( 3.2 years ) but is aging quickly so they might have some issues as they wait for new product, especially volume products. Chrysler lost some share but has relatively young engineering ( 4.4 years ) and is moving to even younger engineering as they enter some volume segments in Canada where they have been weak ( compact cars with the Dodge Dart is best example ). So Chrysler may hold share and could actually pick up share albeit with a weaker mix of vehicles from a profit perspective. GM is the wild card and the kindest thing to say is that GM IS T.B.D. GM’s dealer body is still reeling from restructuring and they have relatively older engineering at 5.7 years.
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Dennis DesRosiers
President
DesRosiers Automotive Consultants Inc.
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