The Industry's Leading Source For F&I, Sales And Technology

On the Point

Separating Fact From Fiction

June 6, 2012

Collectively, the Chevrolet Volt and Toyota Prius Plug-in accounted for more than 3,000 of the 3,500 electrics and hybrids sold in April.
Collectively, the Chevrolet Volt and Toyota Prius Plug-in accounted for more than 3,000 of the 3,500 electrics and hybrids sold in April.
I pulled up to my favorite Mexican restaurant. It was Cinco de Mayo. The parking lot was full, and cars were parked on both sides of the road for a quarter mile. Brightly colored balloons and streamers decorated the inside, while a genuine (sort of genuine, anyway) mariachi band, outfitted in oversized sombreros and black Charro suits, played hits like “El Rey,” “La Cucaracha,” “La Bamba” and “El Jarabe Tapatio,” known here in the United States as the “Mexican Hat Dance.”

My wife Debbie and I are a little too conservative for the one-quart strawberry margaritas and salted shooters of Don Patron Silver that a group nearby was throwing down. Sizzling shrimp fajitas for two, chips and salsa, and a couple of Tecates were all we needed. Besides, Cinco de Mayo isn’t even a national holiday in Mexico. The holiday is only celebrated in a few regions to commemorate the obscure Battle of Puebla, where the Mexican army — outnumbered five to one — routed the French in 1862. To Mexicans, the battle represents hope and overcoming adversity. It is not supposed to resemble a toga party like the scene in “Animal House” as we in the United States have made it out to be. It’s amazing how Americans have the ability to manufacture and fabricate what is obviously fiction, then reinvent it into something we believe is reality.

Fact Checking

Do you realize that virtually every automotive publication has a section dedicated to electric cars? Heck, everything we’re hearing today seems to be focused on the electric car. What’s clear is these guys wouldn’t admit the sky is falling even if it were to crash squarely on their damn heads. This was the headline in an April edition of The Detroit News: “April Sales of Electric Cars Fall Despite High Gas Prices.” According to the article, only 3,500 electric vehicles were sold. And this was coming off a record-setting month in March, when 4,000 such vehicles were sold. The article concluded that, as gas prices approached record highs, the buying public retreated from the high-priced, short-range electrics.  Excuse me, folks, but this is a major non-event. The problem, as I see it, is most of these new EV introductions are little more than over-technologized golf carts with air and tunes.

If there’s anything real and solid in this arena, it’s the Chevy Volt and the Toyota Prius Plug-in. Collectively, these models accounted for more than 3,000 of the 3,500 electrics sold in the United States in April. If there’s a future for EVs, it’ll be the leadership of these companies that will take the category there. And, no, it won’t be easy.

According to a recent report from R.L. Polk, about 65 percent of hybrid owners didn’t re-up when they traded in their old one. The public is rejecting the entire segment, yet the manufacturers, politicians and new-age industry hacks continue to push the hybrid/electric agenda and shove it down consumers’ throats.

Ford has yet to sell one Focus Electric in the last three months, and the vehicle has been out for six. They only sold a dozen or so total. I think this begs the question: Is there a need or purpose for electric and gas-alternative vehicles? The answer is “Yes.”

With China, India, Russia, and Brazil slurping up more of the world’s oil, I agree that we need to continue researching, developing and embracing alternative energy and fuel sources. All I’m saying is the market isn’t ready, the demand is non-existent and the technology isn’t there — yet.

In a separate story, The Detroit News covered a data analysis conducted by the University of Michigan, an authority on automotive trends. The study proved that, now that fuel prices appear to be retreating, consumers are once again buying more of the larger, less fuel-efficient vehicles. Imagine that.

It’s déjà vu all over again, folks. Remember the summer of 2008 when gasoline hit an average of $4.12 per gallon at the pump? As soon as those prices backed off, consumers went right back to buying those full-size vehicles.

Time to Plug In

It seems one of the biggest drawbacks to EVs is their short range. They’re averaging between 50 and 60 miles on a single charge, and some take more than 12 hours to fully charge. That’s why I like the Chevy Volt. It truly is capable of generating enough of its own electricity to get a decent range, regardless of whether you believe the government’s or GM’s estimates.

So it seems that GM, as well as BMW, Chrysler, Daimler, Ford and Volkswagen, are advocating for a standard for rapid-charging stations, as well as a standard plug for EVs. This would allow vehicles to fully recharge in about 15 to 20 minutes.

The holdouts are Mitsubishi, Nissan and several others that use different types of plugs. There’s no reason manufacturers can’t eventually bend to a reasonable standard if they want these vehicles to become mainstream. Standard charging would allow dealerships to offer the consumer one more reason to come back. For longer trips, gas stations would be the centerpiece. Already, manufacturers that are on board with the standard are working to establish a worldwide network of stations by 2017.

Chrysler CEO Sergio Marchionne said he’s committed to a total redesign of the minivan.
Chrysler CEO Sergio Marchionne said he’s committed to a total redesign of the minivan.
Soccer Moms Can Breathe Easy

Sergio Marchionne says Chrysler is committed to continuing its tradition as the world leader in minivan sales and production. I remember when Lee Iacocca introduced the Dodge Caravan in 1983. Thirty years later, Chrysler’s still pumps out nearly 85,000 of these vehicles a year in a segment from which most major players retreated. The Honda Odyssey and Toyota Sienna remain the most serious competitors, but Chrysler commands 40 percent of the market with the Caravan and Town & Country.

Now Sergio is turning his attention toward a total redesign of the minivan. I’ve always said Chrysler’s CEO was either a nutcase or a genius. Maybe he’s a genius nutcase? Well, after completing its 11th straight month of at least 20 percent sales gains in April, I’ve been leaning heavily toward genius. I’ve been working onsite with dozens of Chrysler-Jeep-Dodge-Ram dealers and the profitability and consumer-friendly atmosphere has never been stronger. It appears everyone is happy — dealers, customers and the manufacturer. Damn, that’s weird.

But is Sergio walking a dangerous line here? The main question for me is: Will they combine the two products into one minivan, or keep the brands with separate identities?

My two cents: I say they keep both nameplates and give each a distinct identity. To me, the Dodge Caravan should be the sports utility package, hauling around soccer teams, groceries and camping gear. The Town & Country, on the other hand, should represent the mature vacation touring vehicle, hauling suitcases, family, grown kids and grandkids. Upscale and more luxurious is how I tab this vehicle.

I think Chrysler has a real opportunity here to appeal to two distinct demographics. The two offerings are currently priced about $5,000 apart. I believe that gap can be closed with different accessories and totally separate identities. It’ll be interesting.

I love watching Sergio work and think. This guy is magic. After all, who would claim they were going to increase company revenue by 800 percent and then actually do it?

The Hyundai 750Li?

If there ever was a Cinderella story in the automotive history, it would have to be Hyundai and Kia. As I wrote last month, Hyundai has made great strides from the days when its vehicles were considered nothing more than special finance cars.

In the early 2000s, people thought I lost my mind when I was recommending that dealers get a Hyundai franchise. Fast forward to the present day and Hyundai and Kia are mainstream, A-tier manufacturers.

A few years ago, I was floored when Hyundai released the $30,000 Hyundai Genesis, followed by the $80,000 Equus. Was the public ready for a luxury Hyundai (or Kia)? All I kept hearing was, “Jim, you gotta drive one.”

My friend Raul Gomilla, general manager at Napleton (Fla.) Hyundai, finally got me to drive a Genesis. And, wow, did they do it right. It’s incredible. But it didn’t quite pass the Debbie test.

See, my wife is a great litmus test for product. I told her, “You have got to drive this new Hyundai Genesis. It compares to a BMW 5 Series, but for $20,000 less!” Her response was predictable: Without actually saying it, she made it clear she wouldn’t be caught dead in a Hyundai. And that’s the mountain Hyundai has had to climb, but they are scaling it pretty darn quickly these days. Public perception of the brand is becoming increasingly favorable.

Hyundai CEO John Krafcik maintains the company is not interested in creating a luxury brand.
Hyundai CEO John Krafcik maintains the company is not interested in creating a luxury brand.
I believe we’ll be seeing Genesis and Equus spun off as a separate luxury brand, much like Acura, Infiniti and Lexus. Hyundai CEO John Krafcik has said that’s not in the cards, but I believe the move is inevitable. It’s the only way to really accelerate the sales of those cars.

A recent blurb from Reuters caught my eye. It reported that Hyundai and BMW are in discussions regarding joint production of new engine technologies. It’s no secret that BMW has been trying to sell engines to other carmakers for years. The real benefit to a deal with Hyundai is the scale of production efficiency and labor. The real target here is the dark horse coming on strong that’s scaring the heck out of both BMW and Mercedes-Benz, and maybe even Lexus.

When you think of German engineering, Mercedes and BMW always come to mind. But now, almost every other luxury manufacturer is openly benchmarking Audi as the product to emulate. Not only is Audi coming on strong with market share gains and a lot of great new product, its cars have a distinct identity and fresh appeal to the luxury performance buyer. They don’t look like everything else.

Audi shares a perceived advantage with its parent company, Volkswagen, of sharing engines and technology. Being that Volkswagen is showing double-digit market share increases and an aggressive marketing plan, they’re scaring the hell out of everyone.

Of course, all of this is (wink) pure speculation since both Hyundai and BMW are denying all of it as just that.

Reports are circulating that BMW is in talks with Hyundai regarding a joint development of new engine technologies, and Da Man thinks he knows why.
Reports are circulating that BMW is in talks with Hyundai regarding a joint development of new engine technologies, and Da Man thinks he knows why.
The Cat’s Out of the Bag

Everything I am seeing these days is screaming that we’d all better pay attention to Jaguar. These guys are putting out some unique and beautiful product, if you haven’t noticed.

A couple of years ago, Tata Motors, the Indian conglomerate, purchased Jaguar from Ford. It was another one of Jacques Nasser’s silly-ass mistakes. Truthfully, I wrote them off as a second-tier nameplate that would probably never resurge. And, yes, I did write that Slurpee machines would be offered as standard equipment in the new XJ models. With no track record, perhaps I didn’t take these guys seriously enough.

Well, now we’re seeing Jaguar-Land Rover investing nearly $325 million in modernized British factories to build the new F-Type convertible. In the sports luxury market, they’re positioning it to go head-to-head with the Porsche Boxster, and everything coming off the drawing board says it’s got a real shot at the title.

I’ve been wondering where the company was, where it was headed and when it would make its move. In hindsight, it all makes perfect sense: They waited until the market came back before throwing resources at it. That exhibits the kind of discipline and staying power very few manufacturers could have pulled off. As for Jaguar, well, it now has a $2.5 billion war chest and a vow that it will introduce 40 new or redesigned models for the world market. And what we’ve seen so far is incredible. The luxury and luxury performance market is about to become the ultimate battlefield in our industry, with the near-luxury segment picking up a lot of former luxury market share.

But you know what’s really cool about all of this? Tata Motors has the Brits totally onboard. Those of you who know me know I have a lot of British friends. And even though Tata is an Indian company, they still perceive the brand as British. As difficult as it might be to believe, there’s a lot of national pride in these cars. 

Tata Motors has invested nearly $325 million in modernized British factories to build the new F-Type convertible. The carmaker has vowed to introduce 40 new or redesigned models behind a $2.5 billion war chest.
Tata Motors has invested nearly $325 million in modernized British factories to build the new F-Type convertible. The carmaker has vowed to introduce 40 new or redesigned models behind a $2.5 billion war chest.
Saved the Best for Last

What I am about to talk about has been one of my favorite subjects to write and speak about for nearly 20 years now. My opinion — and the result — never changes. It’s not that I’m smarter than others, it’s because some other people are so stupid. I’m not singling out any specific factory exec, but if the shoe fits, wear it.

I remember when Honda introduced the Honda Elephant, I mean, Element. It was going to be the vehicle of today’s youth. At the time, I wrote that that would never happen. Well, it didn’t, as seniors ended up buying that car, making me a credible pundit. That’s right, I called it.

The next stupid miscalculation was Scion. Once again, Toyota was going after the mythological youth market. We all know who really bought those cars despite Toyota’s efforts to fudge the figures and perceptions: That’s right, old folks bought them.

Oh, I could go on and on about all of the asinine factory executives throwing huge amounts of money chasing the youth market. They never learn, and they never listen to dealers and never will. That’s why they’ll continue to get their butts handed to them by the market.

Right now, everyone is throwing mega-money at the Millennials. Quit it already, please!

According to recent research from J.D. Power and Associates, Americans over the age of 50 are buying more than 62 percent of all new cars. I wrote about this 10 years ago and spoke about it in every speech before I even had stats to back it up. I knew it was true and so did you.

A few years ago I read that nearly 39 percent of Generation X income went to credit card debt. I’d like to see that stat updated, because I guarantee they’re tapped out. I’d also like to see age demographic breakouts on credit ratings and creditworthiness of these so-called “entitlement” generations. Seems to me we need to be throwing more advertising dollars at the older crowd, because these kids can’t even finance their tattoos and piercings, much less a $30,000 car. And hey, we Baby Boomers have, on average, five times the money they do, and don’t owe nearly as much.

It’s amazing to me that some factory types are buying into the intelligentsia quack factor. As I’ve said before, millennials do exist! They’ve found their footprints in the snow in the Himalayas.

Stop chasing these mythological generations and look at the facts. People buy more than 60 percent of the new cars they purchase in their lifetime after age 50. Well gang, that’s a wrap.

Jim Ziegler is the president of Ziegler SuperSystems Inc. E-mail him at jim.ziegler@bobit.com.

Comments

  1. 1. Doug Swank [ June 12, 2012 @ 12:46PM ]

    Great article Jim, as always! We appreciate the continued kind words of favor to the CDJR nameplates and Mr. Marchionne! Keep it up my friend!

  2. 2. Quinn Mallory [ June 12, 2012 @ 12:54PM ]

    One of my main issues with these electric cars -- aside from their short range -- is that even a 15-20 minute charge cycle is too long for me. I mean, what do they expect me to do? Sit around a recharge station waiting for the car to recharge? when I fill up, whether on gas or electrons, I want to be in and out of the station in five minutes. When they can make recharge cycles as short as the time it now takes to fill up the tank at a gas station, then I might consider one.

  3. 3. chargeback charlie [ June 12, 2012 @ 01:51PM ]

    Jim was right about wasting ad money on those who could not buy. But, he's dead wrong on the koombuya-mobiles. The people you see driving those pigs are either women looking for their brains or men looking for their balls. There is plenty of oil. Russia and China can supply their own needs for many decades to come. There are also more than enough proven reserves around the world to supply India with ease.

Comment On This Story

Name:  
Email: (Email will not be displayed.)  
Comment: (Maximum 2000 characters)  
Leave this field empty:
* Please note that comments may be moderated.

Author Bio

Jim Ziegler

President & CEO of Ziegler SuperSystems

Jim 'Da Man' Ziegler joined the magazine in 2011 to deliver his On-the-Point message about the car business to dealer principals and store managers. He'll offer strategy advice on everything from sales and F&I to marketing in the digital age. Catch him every month at www.fi-magazine.com.

» More