Chevrolet Malibu, Ford Fusion, Pontiac G6 Gain Traction in Crucial ‘C’ Segment

By Michelle Krebs April 30, 2008

By Dale Buss 2008_chevrolet_malibu_240

Chevrolet Malibu is helping put Detroit back on the map in the mid-size sedan segment. Even the three-year-old Pontiac G6 and Ford Fusion are helping out on that front as well.

Of course, the real Big Three of the so-called “C” segment of the market  remain solidly entrenched atop it: Honda Accord, Toyota Camry and Nissan Altima. Accord was the nation’s hottest-selling vehicle during the first quarter, according to Edmunds.com data, overcoming a sluggish start since the new model’s debut last fall to move 88,000 units from January through March. Camry, at 84,000 units, and Altima, with 76,000 sales, were right behind.

But domestic automakers nevertheless are encouraged by recent glimmers of hope in a crucial segment in which they haven’t been competitive for several years -- even though mid-size sedans used to be the Big Three’s bread and butter. At least the progress lately is a place to start.

First-quarter retail sales of the new Malibu, for instance, at 37,000 units, were up more than 110 percent over year-ago sales of the version it replaced about six months ago. And Malibu’s market share is 1.3 percent higher than during the same period a year ago.

Meanwhile, the three-year-old G6 posted sales of 46,000 units during the first quarter, putting it in fourth place overall in the C segment. Through March, Pontiac reported, retail sales of the G6 were up 1.2 percent over last year’s first quarter.

Fusion sales in March -- about 16,000 units -- were highest since the model’s introduction in 2005, according to Edmunds.com data. Full-quarter Fusion sales were about 40,000 units. Ford executives expect this momentum to keep building toward their introduction of a redesigned Fusion in early 2009.

Even more to the point is that Fusion, Malibu and G6 are making their halting progress to a large extent by taking sales away from Camry, Accord and Altima as well as the Hyundai Sonata. About 40 percent of sales for both Malibu and Fusion now are “conquest” purchases made by previous owners of non-Ford and non-General Motors brands.

“The one thing that is very clear is that Malibu just broke into the shopping list of mainstay Asian brands for new-car intenders in this segment,” said Art Spinella, president of CNW Research, an automotive market-research firm in Bandon, Ore. “I can’t think of another time in the last 10 years that a new car has done that so significantly and so quickly. We also see that a little bit with Fusion.”

All three vehicles also are helped by overall rising consumer interest in more fuel-efficient models – “largely small-car buyers moving up” to the C segment instead of leaping over it into SUVs and large cars, as more did a year ago, said George Pipas, Ford’s U.S. sales analyst. The C and D segments (think Ford Taurus and Toyota Avalon for the latter) are now up about three percentage points in their share of the total market, at about 15 percent, compared with a year ago.

Moreover, both GM and Ford recognize that the Asian makers aren’t going to stand still in face of any erosion in their C-segment dominance that is accomplished by Fusion, G6 and Malibu. Honda introduced a restyled new Accord last fall, for example, and after facing initial supply constraints on its six-cylinder engine that proved more popular with consumers than expected, Accord entered April on a healthy sales trend.

“Camry and Accord got to the level they got to over 30 or 40 years and built to it because their companies pleased customers with good small-car offerings, and lots of them,” Pipas noted. “We were basically missing in action [with a competitive C-segment car] for much of that time, and you don’t overnight re-establish yourself no matter how great your product is.”

Consumers Don’t Ignore Malibu

Launched by GM audaciously last fall as “The Car You Can’t Ignore” and as a vehicle that finally would dent the predominance of Accord and Camry, the 2008 Malibu so far has managed to meet the company’s lofty expectations even in the midst of a major downdraft in the overall market.

Besides the car’s general sales growth, GM points with enthusiasm at a few specific aspects of Malibu’s strong start. For example, Malibu sales are up dramatically in three import-heavy states “where improved performance is critical to our long-term success,” said Ed Peper, Chevrolet’s general manager. Florida sales have risen 91 percent over the 2007 model year; New York sales are up 135 percent; and California sales are 186 percent above 2007 levels.

Some individual dealers in those states are reporting astounding leaps in sales of the 2008 Malibu versus the 2007 version. At Community Chevrolet in Burbank, Calif., for example, the difference is a 675-percent increase so far this year, while at Hustedt Chevrolet in Centereach, N.Y., the new Malibu’s gain is 925 percent.

What’s more, Peper said, “Malibu customers are demanding more up-level models, reflecting buyers with higher household incomes than the previous model.” Malibu’s two highest trim levels account for 42 percent of sales. And of the 40-percent-plus of non-GM vehicles that are traded in for Malibu, the No. 1 swap is a Camry. Malibu’s average turn rate is 31 days.

Peper also noted that the average transaction price for the new Malibu is just under $21,000, about $4,00 more than the previous model – and about $200 more, he said, than the average transaction price for the Camry. Buyer demographics are much richer than before, Peper added.

When it comes to retail sales compared with fleet purchases, the six-month picture is even better for Malibu, said Jessica Caldwell, an industry analyst for Edmunds.com. That’s because sales to daily-rental fleets and end-of-model bargains for consumers helped keep the previous Malibu afloat during its last year, she explained, while GM has made a point with the 2008 Malibu to refrain from allowing it to become a commodity-like staple of daily-rental fleets.

In the same vein, the new Malibu is reaching consumers’ pocketbooks without the same heavy incentives that Chevy offered on its predecessor. In 2005, Caldwell said, “it wasn’t unusual for incentives on the [old] Malibu to reach $4,000 or more.” But since last summer, she said, the Total Cost of Incentives – a proprietary Edmunds.com formula – for Malibu has been less than $2,000. And most recently, all on transactions with the 2008 version, she said, GM’s TCI for Malibu has averaged around $1,200 per unit.

“Having TCI of $1,200 to $1,400 isn’t bad, especially for a model whose average incentive spending has been so much higher,” Caldwell said.

Even online shopping traffic supports GM’s optimism. Nearly 14 percent of online consumers “cross-shopped” Malibu in February after first checking out Camry or Accord on Edmunds.com, up from less than three percent for each car last September before the introduction of the 2008 Malibu.

CNW’s surveys show that Malibu has broken into the top three vehicles of interest for new-car “intenders” who currently own Honda Accord or Toyota Camry, especially in the Northeast and Southeast.

“Typically a Honda owner, for example, would look at a Toyota and down the list might look at Hyundai Sonata,” Spinella explained. “But rarely do you see a Detroit product on there, especially so early after a product’s launch.”

Spinella said that Chevrolet’s marketing of Malibu “has been good,” but the key to breaking onto the intender lists of so many import owners has been word-of-mouth and showroom visits. “Putting their hands on Malibu was a revelation for a lot of them,” he said, “—that something GM was building had the potential to be as good as what they were driving.”

GM’s own research also shows that, in terms of features and quality, Malibu is living up to consumer expectations that naturally could be high for a vehicle that was named the 2008 North American Car of the Year, as judged by an independent panel of automotive journalists (including Edmunds.com).

The company “hope[s] to earn” a Consumer Reports Recommended Buy Rating in November, said Mike Meloeny, Malibu’s chief engineer. And the car “is on track to be one of the lowest-cost warranty launches in GM North American history.”

In fact, the only immediate fly in the ointment for Malibu is a possible local strike at the GM plant in Kansas City, Kan., where Malibu is assembled. The company has some flexibility to ramp up Malibu production at its Orion Township, Mich., plant that makes both Malibu and the new Pontiac G6.

Fusion Builds More Slowly 2008_ford_fusion_240

Fusion has taken longer to build momentum than Malibu, but Ford is confident its new C-segment stalwart hasn’t nearly reached its potential either.

For one thing, Ford’s worthy new vehicle has had an even steeper mountain to climb than Malibu. After dominating the mid-size market with its Taurus for more than ten years -- from the mid-Eighties to the mid-Nineties -- as its bread-and-butter model faded, Ford essentially left itself without meaningful entries in the segment.

“From 1996 on,” conceded Pipas, “we were very nearly incognito in that market.” Even in Taurus’s later years, “almost 50 percent of the car’s volume was fleet sales, and in the later years, it was virtually 100 percent fleet sales” rather than retail sales to consumers.

Last year, Ford renamed its new Five Hundred D-segment vehicle as Taurus and has been trying to rebuild the Taurus-brand franchise that way. But the automaker has put much more effort behind Fusion and its Mercury Milan sibling and, more recently, the closely related Lincoln MKZ, all of which are built at its plant in Hermosillo, Mexico.

Incentive levels are one indication of the growing importance to Ford of making Fusion a respectable seller. Its Total Cost of Incentives for March averaged $2,280 per Fusion sold at retail, according to Edmunds.com – down significantly from $2,800 in January and February, but still “high incentives,” said Caldwell of Edmunds.com.

By contrast, Camry’s TCI in March was only $814, according to Edmunds.com. And Accord’s was about $500.

Fusion’s gradually building success certainly can’t be attributed to magic marketing. It was launched in 2005 with an advertising slogan, “Life in Drive,” which was “highly effective in getting attention,” maintained Jonathan Richards, Fusion brand manager. But Fusion-specific advertising since then has been undistinguished.

But Ford hasn’t even been trying to hype Fusion nearly as much as GM has touted Malibu, in part because Ford’s overall vehicle lineup needed much more attention, and in part because it has been pursuing a different strategy than GM with Malibu. At the same time, insisted Richards, Ford was counting on Fusion’s appeal to catch on one consumer at a time.

“You have to have a great product and great quality, as well as a functional product and brand name – and then earn credibility with it,” Richards told AutoObserver. “We’ve done that by virtue of more than three years in the market, but Camry, Accord and Altima are very strong competitors.”

Ford’s aggressiveness in comparing Fusion with Accord and Camry has been a keystone. In some early advertising, Fusion was the subject of a head-to-head challenge against Camry and Accord that was judged by Car & Driver magazine, which Richards said his product “won hands-down.”

Lately, Ford has been boasting especially about Fusion’s high quality ratings, which Richards said are “better than Camry.” He rattled off a list of “third-party endorsements” of Fusion’s quality, ranging from CNN Money to Parent magazine. “Newcomers to this segment need to establish that level of credibility to have sustainability in the segment,” Richards said.

Spinella agreed that Fusion is “one of those products that has to be around a relatively long time” before it breaks significantly onto import owners’ shopping lists. “But it has the potential over the long term to be like Malibu if Ford continues to upgrade it and make it better over time.”

Still, as Accord and Camry grow even longer in the tooth despite regular redesigns, Richards said that Ford is noticing a personality shift between the venerable Japanese brands and the relatively new Fusion.

“Accord and Camry have become very regular,” Richards asserted. “They lack some of the passion and individuality that some of the other competitors – including Fusion – now are offering in this segment. Folks looking at their third Camry are looking for something a little different having gone through the same thing over and over again.”

In fact, Richards said, Ford consumer surveys are showing that Fusion customers “are very emotionally engaged” with tier vehicles whereas Accord and Camry owners “typically view their cars more as functional. That helps give us belief in the long-term viability of Fusion as we launch the next generation next year.”

Ford hasn’t said much about the planned 2009 Fusion except that it will be substantially redesigned and will offer a hybrid-powertrain option. “The redesign will be good for Fusion,” Caldwell of Edmunds.com said. “It’s just hard to say whether it will take a bigger bite out of Accord and Camry. Because with the market and the economy being the way it is, many people just want to make a safe choice – and what’s safer than an Accord or Camry at this point?”

G6 Acquires Momentum

Retail sales for the G6 were up 10 percent for the first quarter compared with last year, 2008_pontiac_g6_facing_right_240 Pontiac reported. Gains are coming from consumers who like the model’s approach to their basic concerns of fuel economy, performance, value and sharp styling, said Chris Ayotte, marketing manager for G6.

“We ran at 105 percent of our sales objective for the first quarter,” Ayotte told AutoObserver. “And we are still seing strong performance through April, and we expect to be up for the year” compared with year-to-date 2007, when April sales figures are released today.

Ayotte said that Pontiac also has boosted G6 sales with the introduction of a high-performance GXP coupe and sedan last fall. For several weeks, more than 10 percent of the orders by Pontiac dealers for G6 models came in for GXP versions, he said. “GXP is definitely growing in popularity,” Ayotte said.

Midsize Contenders
RankVehicleVolume
12008 Honda Accord87,659
22008 Toyota Camry84,176
32008 Nissan Altima74,573
42008 Pontiac G645,951
52008 Ford Fusion40,050
62008 Chevrolet Malibu37,404

Source: Edmunds.com

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Dennis says: 9:44 AM, 05.01.08

Interesting on the G6. Retail up 10%, not a surprise with the consumer shift to cars. BUT...
The chart you have in the article on the Accords top spot shows total G6 sales up 64% for Q1. This car was in the 40%+ bracket for fleet sales last year. These numbers indicate a major increase in fleet sales (double?). So much for GM reducing fleet.
As retail was only 60% of last year MY sales the ten percent increase is only 6% of last years total.
58% increase from fleet!
The G6 must be around 70% fleet by now. GM must be so proud.

Hey Michelle, could edmunds put together a Retail Top 20?
That would tells us much more about who's hot and who's not.

BTW, good job to GM and Ford on the 'Bu and Fusion.

sheth says: 10:41 AM, 05.01.08

"As retail was only 60% of last year MY sales the ten percent increase is only 6% of last years total.
58% increase from fleet!
The G6 must be around 70% fleet by now. GM must be so proud."

The Grand PRix is being phased out so the G6 is likely picking up some of its sales. GM cannot abandon fleet sales altogether so some models will go to fleets. Right now the Impala, DTS and G6 are the only GM cars that I cant think of that are heavily reliant on fleet sales. The Aura, Malibu, Lucerne, CTS and G8 are not and that is unlikely to change anytime soon. The point is that Gm OVERALL is reducing fleet sales, not that the G6 itself is a fleet favorite.

I seriously doubt that 70% of G6s are sold to fleets based on the number of non fleet cars I see every week.

I wish Michelle had mentioned the increased sales of the Aura and the new 6 speed auto that is being added to Malibu I-4 models and Aura for 2009. Aura and Malibu will have best in class I04 fuel economy. Fusion is supposed to get a 6 speed standard for 2009 along with 170hp from a 2.5L.

Isaac says: 11:45 AM, 05.01.08

I thought that the C segment were compacts while B segments were subcompacts and D segments were midsize cars. Otherwise this article is quite informative.

Dennis says: 9:30 AM, 05.02.08

sheth-had a little more time to do the math. Based on the jump in G6 sales by 64% with a 10% retail jump and a know 40% plus fleet sales last year I cme up with approx. 60% fleet this year so far (70% was a geusstimate).
GP was about 77% fleet at MY 07.
I agree they need some fleet.
However in the second half of last year GM stopped breaking out fleet numbers and if you follow their model sales you see different models jump and drop dramatically for little reason. It is, IMO, an open question whether GM is truely reducing their fleet dependance.

Keep in mind that your local market may not be representative, many fleet vehicles have no indication of what they are and many privately own vehicles in high fleet models are purchased ex-fleet.
The last is a big part of the selling to fleet problem. These cars are relative bargains and destroy retail sales and resale value.

toyo says: 5:14 PM, 05.02.08

Edmunds, you need to be more honest. The Accord was NOT the top selling sedan in the segment. If you take away Accord Coupe sales, the Camry sedan sold MORE than the Accord sedan.

Also, are the Malibu, G6, and Fusion gaining traction simply because the segment is expanding, or it is due to conquest sales? Based on the current economic situation, I think it's simply more due to the segment expanding than to actual conquest sales. Camry sales for example have never been better; they are up this year so far.

jonny says: 7:20 AM, 05.03.08

In Canada we already buy 55 percent compact and smaller cars. The segment is very competitive and this is what the US market will look like sooner rather than later.

The fact that a Chevy Cobalt gets much worse gas mileage than a Civic and Corolla translated into Civic and Corolla dominating this segment. The Civic is 10 years bestselling car in Canada with the Corolla close behind. It also helps that both cars are manufactured here in Ontario, Canada.

When GM decides to focus on fuel economy and get rid of their old pushrod engines, people will take notice. GM saves over $1000 on every vehicle they sell with these antique, noisy motors. They are addicted to the savings. Notice how Ford, Honda, and Toyota have moved to the more expensive and fuel efficient DOHC designs.

GM has dropped to about 22 percent of the market and is also dropping in the Canadian market also. I used to buy their cars in the 80's but until they build a car that needs limited repairs for 10 years, has a modern engine, top in class fuel efficiency, and good resale value then I and thousands of others will continue to shun them.

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