Global Investing

Intellichoice.com editor sizes up U.S. auto market

January 12, 2009

Reuters spoke with James Bell, editor of the website Intellichoice.com, a website that allows consumers to compare the cost of ownership on vehicles. Highlights follow:
    
Q: What kind of shape are the U.S. automakers in?
 
General Motors
 
“What was incredible for me was during the Senate hearings, how that company was forced to kind of drop their pants and show an ugly side that maybe they were hoping to kind of keep hidden, but I think the company is going to be better for it.”
 
“Everyone needed to get over the fact that they’re not No. 1 anymore. It’s Toyota.”
 
“There’s still a sense of ‘Why would I buy a GM or Chrysler when I can rent one?’ and that’s a bad spot for them to be in. To the general consumer there’s still a big gap.”
      
Ford Motor – 
 
“Ford go a lot of credit for not going to the (government bailout) well, but that’s only because they already mortgaged their future.”
 
“They’ve done a nice job of distancing themselves from the other two, but it’s not because they’re doing so well. It’s because they’ve already paid the piper, so to speak.”
 
“From a product perspective, they need to make a ton of noise about their hybrids because Toyota has done a fine job of positioning themselves as a hybrid-green-efficient company while they were still pushing Tundras and Sequoias. Whereas General Motors or Ford is seen as an SUV and pickup truck company who had a couple green cars on the side.”
 
“That could be a perception gap closer because I think in a lot of consumers’ minds a company that can do a hybrid well can do a gasoline standard car very well, and Ford’s doing hybrids very well now.”
    
Chrysler –
 
“Their product line is awful. It’s unfortunately true and I’ve driven them all and I’ve tried to find the rose among the thorns and I can’t.”
 
“The (Chrysler) brand is kind of damaged goods now. Dodge still has some equity as being more of a budget, fun, little more of a spirited brand, probably younger skewing as well. Jeep has equity beyond belief. I just think the Chrysler brand is falling into a Plymouth trap of being somewhat irrelevant.”
    
Q: Is the Chevy Volt all-electric car (pictured at LA auto show in November) a potential game changer for GM?
 
“Probably not as much as they would hope because it’s going to be expensive and it won’t be on every street corner like a Prius is in certain cities. The Volt … better arrive at the end of 2010. I don’t think it’s going to bring them the big wave that Prius did for Toyota. It will definitely help, but it’s more a matter of you have to do it just to keep in the game.”
 
“I don’t think consumers are going to shy away from those products because a lot of people got burned pretty hard driving that Yukon and finding out that the ATM card would only let you go up to $75 at the fuel pumps.”
 
“If they put a date on something and they don’t deliver, they’re really going to be done in the public’s eye.”
    
Q: How will the luxury auto market be affected by the recession and has easy credit goosed that market up to now and it will inevitably fall off?
    
“Easy credit has been goosing that market for years as is the leasing business. That really allowed people to drive a vehicle that’s way beyond their means.”
 
“BMW, Mercedes, Lexus, they can weather the storm and I think what they’ll probably do is right-size the business. We are going to a period of austerity for a bit where somebody goes shopping for the Lexus and realizes, ‘We’re really more of a Toyota Avalon household’”
 
“Luxury is going to be defined a little differently going forward. It’s not going to mean the mega V-8 engine with leather everywhere and killer sound system. It might mean efficiency, but with niceties.”
    
Q: What do younger buyers want?
    
“I don’t think (customization) is going to be the Holy Grail. It’s going to be solid product with plenty of creature comforts at a fair price as well as a strong image perception.”
    
Q: What other factors will be important in the overall sales market?
    
“The car business isn’t going to dry up. They still need to get cars. They’re just going at it from a much more rational way. Resale value is going to become a very big factor in people’s purchase decisions.”
  
“There’s just going to be more of a rational look at things and not just going for that new car smell all the time.”
    
(Photo/Reuters)

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