Chevrolet Malibu, Ford Fusion, Pontiac G6 Gain Traction in Crucial âCâ SegmentBy Michelle Krebs April 30, 2008
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 âCâ segment of the market remain solidly entrenched atop it: Honda Accord, Toyota Camry and Nissan Altima. Accord was the nationâs hottest-selling vehicle during the first quarter, according to Edmunds.com data, overcoming a sluggish start since the new modelâs 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 havenât been competitive for several years -- even though mid-size sedans used to be the Big Threeâs 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 Malibuâs 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 yearâs first quarter.
Fusion sales in March -- about 16,000 units -- were highest since the modelâs 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 âconquestâ purchases made by previous owners of non-Ford and non-General Motors brands.
âThe 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,â said Art Spinella, president of CNW Research, an automotive market-research firm in Bandon, Ore. âI canât 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.â
All three vehicles also are helped by overall rising consumer interest in more fuel-efficient models â âlargely small-car buyers moving upâ to the C segment instead of leaping over it into SUVs and large cars, as more did a year ago, said George Pipas, Fordâs 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 arenât 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.
âCamry 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,â Pipas noted. âWe were basically missing in action [with a competitive C-segment car] for much of that time, and you donât overnight re-establish yourself no matter how great your product is.â
Consumers Donât Ignore Malibu
Launched by GM audaciously last fall as âThe Car You Canât Ignoreâ and as a vehicle that finally would dent the predominance of Accord and Camry, the 2008 Malibu so far has managed to meet the companyâs lofty expectations even in the midst of a major downdraft in the overall market.
Besides the carâs general sales growth, GM points with enthusiasm at a few specific aspects of Malibuâs strong start. For example, Malibu sales are up dramatically in three import-heavy states âwhere improved performance is critical to our long-term success,â said Ed Peper, Chevroletâs 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 Malibuâs gain is 925 percent.
Whatâs more, Peper said, âMalibu customers are demanding more up-level models, reflecting buyers with higher household incomes than the previous model.â Malibuâs 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. Malibuâs 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 â 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. Thatâs 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 consumersâ pocketbooks without the same heavy incentives that Chevy offered on its predecessor. In 2005, Caldwell said, âit wasnât unusual for incentives on the [old] Malibu to reach $4,000 or more.â But since last summer, she said, the Total Cost of Incentives â a proprietary Edmunds.com formula â for Malibu has been less than $2,000. And most recently, all on transactions with the 2008 version, she said, GMâs TCI for Malibu has averaged around $1,200 per unit.
âHaving TCI of $1,200 to $1,400 isnât bad, especially for a model whose average incentive spending has been so much higher,â Caldwell said.
Even online shopping traffic supports GMâs optimism. Nearly 14 percent of online consumers âcross-shoppedâ 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.
CNWâs surveys show that Malibu has broken into the top three vehicles of interest for new-car âintendersâ who currently own Honda Accord or Toyota Camry, especially in the Northeast and Southeast.
âTypically a Honda owner, for example, would look at a Toyota and down the list might look at Hyundai Sonata,â Spinella explained. âBut rarely do you see a Detroit product on there, especially so early after a productâs launch.â
Spinella said that Chevroletâs marketing of Malibu âhas been good,â but the key to breaking onto the intender lists of so many import owners has been word-of-mouth and showroom visits. âPutting their hands on Malibu was a revelation for a lot of them,â he said, ââthat something GM was building had the potential to be as good as what they were driving.â
GMâs 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 âhope[s] to earnâ a Consumer Reports Recommended Buy Rating in November, said Mike Meloeny, Malibuâs chief engineer. And the car âis on track to be one of the lowest-cost warranty launches in GM North American history.â
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
Fusion has taken longer to build momentum than Malibu, but Ford is confident its new C-segment stalwart hasnât nearly reached its potential either.
For one thing, Fordâs 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.
âFrom 1996 on,â conceded Pipas, âwe were very nearly incognito in that market.â Even in Taurusâs later years, âalmost 50 percent of the carâs volume was fleet sales, and in the later years, it was virtually 100 percent fleet salesâ 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 â down significantly from $2,800 in January and February, but still âhigh incentives,â said Caldwell of Edmunds.com.
By contrast, Camryâs TCI in March was only $814, according to Edmunds.com. And Accordâs was about $500.
Fusionâs gradually building success certainly canât be attributed to magic marketing. It was launched in 2005 with an advertising slogan, âLife in Drive,â which was âhighly effective in getting attention,â maintained Jonathan Richards, Fusion brand manager. But Fusion-specific advertising since then has been undistinguished.
But Ford hasnât even been trying to hype Fusion nearly as much as GM has touted Malibu, in part because Fordâs 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 Fusionâs appeal to catch on one consumer at a time.
âYou have to have a great product and great quality, as well as a functional product and brand name â and then earn credibility with it,â Richards told AutoObserver. âWeâve done that by virtue of more than three years in the market, but Camry, Accord and Altima are very strong competitors.â
Fordâs 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 âwon hands-down.â
Lately, Ford has been boasting especially about Fusionâs high quality ratings, which Richards said are âbetter than Camry.â He rattled off a list of âthird-party endorsementsâ of Fusionâs quality, ranging from CNN Money to Parent magazine. âNewcomers to this segment need to establish that level of credibility to have sustainability in the segment,â Richards said.
Spinella agreed that Fusion is âone of those products that has to be around a relatively long timeâ before it breaks significantly onto import ownersâ shopping lists. âBut it has the potential over the long term to be like Malibu if Ford continues to upgrade it and make it better over time.â
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.
âAccord and Camry have become very regular,â Richards asserted. âThey lack some of the passion and individuality that some of the other competitors â including Fusion â 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.â
In fact, Richards said, Ford consumer surveys are showing that Fusion customers âare very emotionally engagedâ with tier vehicles whereas Accord and Camry owners âtypically 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.â
Ford hasnât said much about the planned 2009 Fusion except that it will be substantially redesigned and will offer a hybrid-powertrain option. âThe redesign will be good for Fusion,â Caldwell of Edmunds.com said. âItâs 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 â and whatâs safer than an Accord or Camry at this point?â
G6 Acquires Momentum
Retail sales for the G6 were up 10 percent for the first quarter compared with last year, Pontiac reported. Gains are coming from consumers who like the modelâs approach to their basic concerns of fuel economy, performance, value and sharp styling, said Chris Ayotte, marketing manager for G6.
âWe ran at 105 percent of our sales objective for the first quarter,â Ayotte told AutoObserver. âAnd we are still seing strong performance through April, and we expect to be up for the yearâ 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. âGXP is definitely growing in popularity,â Ayotte said.
|1||2008 Honda Accord||87,659|
|2||2008 Toyota Camry||84,176|
|3||2008 Nissan Altima||74,573|
|4||2008 Pontiac G6||45,951|
|5||2008 Ford Fusion||40,050|
|6||2008 Chevrolet Malibu||37,404|