Infiniti Counting on 2011 Version to Spark Sales of QX56 SUV

By Michelle Krebs May 28, 2010

Like most truck-based utility vehicles, the Infiniti QX56 has been in the midst of a long-term 2011 Infiniti QX56 - 323.JPG

decline in sales. But executives of the Nissan luxury division are counting on an even swankier yet more fuel-efficient 2011 version of the QX56 to recapture some of the brand's wandering customers and sell closer to peak rates marked soon after the original vehicle's introduction in 2004.

"We will have months when we sell 800 to 900 of these," Ben Poore, Infiniti's vice president in charge of sales and marketing, told Edmunds.com.

Poore's prediction equates to annual sales as high as 10,800 for the 2011 QX56. QX56 sales averaged 1,225 a month and totaled 14,715 in 2005, its record sales year.

By comparison, last year, the vehicle's worst, sales averaged only 536 a month as the U.S. luxury-vehicle segment cratered, and QX56 volume came in at just 6,440 for the year. But for the first four months of 2010, QX56 sales have ticked up significantly, averaging about 770 a month.

"Nissan needs to rethink their strategy for large vehicles," said Edmunds.com Senior Analyst Jessica Caldwell. "The Nissan Armada SUV, the Nissan Titan pickup and the Infiniti QX56 SUV consistently have heavy incentives yet maintain low sales numbers.

"Clearly," she added, "Nissan is missing the mark with consumers in these segments They can continue but need to plan for these vehicles to be niche, rather than high volume, like the Toyota Land Cruiser."

Indeed, the 2011 QX56 has wound up very similar in size, appearance and price to the current model, but Infiniti has packed the new version with improvements such as 14mpg fuel economy in the city and 20mpg on the highway, 2mpg better by each measure than the 2010 model; a seven-speed automatic transmission that replaces the current five-speed; and improved leather, wood and other materials in the interior.

Battling Headwinds

For the past few years, QX56 has been trying to clear three main obstacles to gain a path to the American consumer. First, it is a large, truck-based vehicle, and those have fallen out of favor. Second, it was a $70,000-plus vehicle at a time of cratering purchases of luxury automobiles. And third, Infiniti in particular has had trouble gaining traction against rivals such as Lexus, the Toyota luxury brand.

Overall, sales of truck-based SUVs dropped to just 23 percent of total utility-vehicle volume last year from 85 percent a decade earlier, while car-based crossover utility vehicles garnered 77 percent of such sales in 2009.

In Context: Infiniti QX56 vs. Total Infiniti, Large and Luxury SUV Sales

infiniti-chart.gif

Source: Edmunds

"SUVs in general are going out of style because consumers can make the distinction now between them and CUVs," said John Wolkonowicz, senior auto analyst for IHS Global Insight, a market-research firm in Lexington, Mass. "They may not be able to tell you the difference technically, but after they drive the vehicles they'll more likely choose the one built on a car platform rather than a truck."

The fate of luxury SUVs per se -- including QX56, Lexus GX, Cadillac Escalade and Lincoln Navigator - has mirrored that trend. Luxury-SUV sales peaked at about 682,000 in 2007 then dropped precipitously for two years, to 430,000 in 2009.

"These are truck-based products that are bigger and heavier than the CUVs that are available, and in that sense it doesn't matter if they're luxury vehicles," said George Pipas, Ford's head of U.S. industry analysis. "For most people, it's more vehicle than they need."

Afflicted Buyers

An outsized proportion of luxury-SUV buyers have hailed from regions that were particularly hard-hit by various aspects of the Great Recession. And for well-off consumers across America, as long as financial markets continue to gyrate, many will decline to pull the trigger on a luxury new-vehicle purchase.
 
"They have the resources to buy those vehicles at any point in the economic cycle, but they won't because they can be anchored to the most recent numbers in their stock portfolios," said David Whiston, automotive analyst for Morningstar, the mutual-fund and equities research firm in Chicago. "It's a matter of confidence." 2011 Infiniti QX56 interior - 359.JPG

Still, Infiniti never gave up on the QX56, however. It has achieved this year's revival of sales of the current version of QX56 in part by continuing to offer leases on the vehicle while some competitors didn't, Poore said. Lease penetration is just under 20 percent for the model today, he said, though a significant percentage of QX56 buyers simply pay cash.

And echoing the revival of QX56 sales through April of this year, the luxury-SUV segment has recovered at about a 27-percent pace compared with a 17-percent increase in overall U.S. vehicle sales, according to Pipas.

Infiniti Stands Alone

The QX56 and all Infiniti vehicles also have always faced the fact that their unique, sometimes dramatic, styling makes them an acquired taste to many U.S. consumers. Long Island, N.Y., is the brand's top market in America.

Last year, Infiniti sales were down 29 percent overall, while the company's Nissan division suffered only an 18-percent sales decline for 2009. Meanwhile, Lexus sales fell only 17 percent.

Infiniti QX56 Sales as % of Total Infiniti Sales


Infiniti QX56 sales - 483.JPG

Source: Edmunds.com

Some analysts believe quirky design is an especially relevant factor in the varied appeal of QX56 because, as a big hauler of people and cargo, its practicality is of the essence - as compared with, say, the rakishly styled Infiniti G sedan. Current QX buyers are the youngest of any Infiniti model, about 45 years old, and about 70 percent of them have families, the highest proportion for any Infiniti vehicle.

IHS's Wolkonowicz is among analysts who question why Nissan would keep making QX56 rather than a large CUV, perhaps one whose basic platform the Infiniti and Nissan divisions would share. One clue might lie in the fact that the 2011 QX56 is being built in Kyushu, Japan, instead of Canton, Miss., where the current version is built. Nissan has extra capacity at the Kyushu plant.

The relative strength of the yen to the U.S. dollar will put pressure on profit margins for the new QX56, noted Whiston. Infiniti's Poore declined to specify the cost difference but said, "We will make a profit." -- Dale Buss, Contributing Writer

Erin Riches, Inside Line Senior Editor, contributed to the reporting of this post and write the first test drive of the Infiniti QX56 for Inside Line.

Edmunds.com Analyst Ivan Drury provided the data analysis for this post.

Photos by Nissan

1 - The 2011 Infiniti QX56 is similar in size and appearance to the previous QX56.

2 - The 2011 Infiniti QX56 features upgraded wood and leather on the interior.









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jmess says: 11:00 AM, 05.28.10

Few people need to drive a barge and even fewer people need/want a luxo barge.

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