Vehicle manufacturers update their light-vehicle products for many reasons. Generating new business always is an important consideration. So, results are worth evaluating.
A study we conducted at W.P Browne Consulting measured whether major or all-new vehicle improvements generate more business than minor updates. Portfolio additions also were evaluated. Did all the spending improve volume and share?
For Asian brands, generating new business appears to have been a top consideration. A significant number of their product programs resulted in increased volume and share over the past few years – outperforming minors. Additionally, from 2013 to 2016 Asian-brand new programs outperformed Detroit’s updates in every evaluation category: minors, majors and vehicle additions.
Our first installment focused on the Detroit Three: General Motors, Ford and Fiat Chrysler (Detroit Three: Vehicle Improvements Show Mixed Sales Results). This update, using the same metrics, evaluated new programs at Japanese automakers Toyota, Nissan, Honda and Subaru, plus Korea’s Kia. Individually, these manufacturers bring serious metal to the competitive arena; collectively they represent 39% of the U.S. light-vehicle market.
Group 1: Minor Program Improvements (10 Programs Form the Baseline Group)
From the period 2013 to 2016, we evaluated 10 programs that received minor improvements. Overall, Group 1 averaged 58% of their maximum potential score – a combination of sales and share improvements that was only slightly better than the 54% score of the Detroit Three (for metrics see previous article).
Passenger cars within Group 1 performed poorly at 24%. As with minor programs of the Detroit Three, there was a wide bandwidth of results (see footnote on chart below for ratings scale).
Strong performers: Two vehicle programs really leveraged minor improvements: the Lexus GX, with a new grille and interior improvements, generated an 87% increase in 2014 launch sales and a maximum potential score of 137%; the Toyota Tacoma’s color-matching body parts and off-road packages kept it competitive through the 2013-2015 evaluation window, scoring 81%.
Unfortunately, Group 1 had two programs that scraped the bottom of the barrel: the Toyota Prius, the industry’s hybrid leader, boosted sales 73% in 2012 with three versions. This was followed by sales and share declines every year through 2016. The result: New competitive entries eliminated all their volume gains, driving volume back to 2011 levels. This darling of the Left Coast, earned the only zero score in the study.
The Nissan Maxima’s minor improvements also generated negative sales over the evaluation window, resulting in a maximum score of 9%.
The average score of Group 1 entries now sets the baseline to determine if all-new programs and vehicle majors generate more business than less-expensive minor upgrades.
Group 2: Major/All-New Program Improvements (28 programs)
Overall, the Asian Group 2’s maximum potential score of 90% represents a bonafide improvement over its baseline group and would justify serious program spending. Additionally, the Asian group beat the comparable Detroit Three entries by a wide margin: 22 points. Likewise, their sales increase at launch averaged 26%, more than twice the Detroit Three average. (Note: each group had roughly the same amount of car and truck programs).
Winners: Twelve vehicles in Group 2 achieved an excellent rating (100%+), double the Detroit group. The Toyota Avalon topped the list with a maximum potential score of 189%. Toyota went upmarket with the all-American Avalon and generated a whopping 140% increase in launch sales.
In second place, Nissan’s 2013 Pathfinder crossed over to higher sales with a new platform; launch sales jumped 108%. Unfortunately, the Pathfinder has poor quality scores and resale value.
Toyota’s 2014 4Runner, with a low-cost major that established its rugged-but-refined chops, and the all-new RAV4 had great launch performance and sustained it over time. The RAV4’s overall sales performance was boosted by adding a hybrid to the powertrain mix. With 2016 sales of 45,097 units, RAV4’s hybrid ranked second in sales behind Prius.
Nissan’s Rogue, ranked 10th in overall light-vehicle sales last year and with a study score of 115%, established itself as a top-tier CUV player. Portfolio partner Murano was even better at 127%. These programs represent what every product planner and sales executive dreams about: Strong launch performance, followed by an ability to hold share against competitive reactions.
It’s not just about trucks. Asian leaders’ mainstay car programs also generated high volume and sustained performance. In an era where cars are not “trending,” three small models delivered excellent results.
Toyota’s Corolla, opting for a longer wheelbase and new transmission in 2014, generated the only 90-point sustainability score in the study, and a 113% maximum potential score. Nissan Sentra’s seventh-generation update was right behind with 104%. The Sentra delivered annual sales increases over the complete evaluation window during a time when it was in short supply. The Subaru Legacy also captured 113%.
Additionally, the Kia Forte, Soul and Optima, Nissan Altima and Honda Accord all generated superior scores (75%-99%). The 2013 Altima and Accord particularly are noteworthy, as they are high-volume cars that boosted sales and share at launch and continued to grow in 2014.
High-volume misses: Two perennial top-10 volume players held on to their rankings, but as new programs did poorly. The extensive major on the ʼ15 Toyota Camry solidified its position as the fourth most-popular vehicle in the market, but generated no sales growth and chalked up below average sustainability; it scored an average 61%.
The wave of new, high-volume CUVs didn’t knock Honda’s CR-V off its No.1 standing, but certainly ate into its potential. Results: a poor score of 27%.
The 2014 Honda Odyssey, with safety and creature comforts, scored a paltry 33% maximum potential score. Result: It lost its top minivan spot and slid to the bottom of the minivan pack.
Group 3: Portfolio Additions (3 Programs)
Portfolio additions all were successful for the Detroit Three. The same was true for Asian leaders. With an average maximum potential score of 140%, the Asian group exceeded the score of the Detroit Three by 22 points. (Note: the combined volume of the Detroit Three was considerably higher).
Winners: Infiniti’s Q50 had the highest score at 204%. The sports sedan has become a significant entry in Infiniti’s car portfolio with rear- and all-wheel-drive variants. It is a shame that it is rated low on quality and resale. The Honda HR-V and Subaru XV Crosstrek had great launches and scores of 130% and 86%, respectively.
Misses: None.
Asian Leaders: New Program Conclusions
This addition to our market-reality snapshot provides a real benchmark of what new product improvements should deliver in sales and share gains. If you are a planner, the next time you ask for new program money you might want to show this type of historical performance as your lead slide: Among the 13 all-new programs from Asian leaders, 92% of the entries generated a score of superior or excellent. This compares with 33% for the Detroit Three.
Perhaps the buyers gravitating toward Asian brands respond better to feature improvements than the Detroit crowd.
Best Performers: Nissan’s 2014 Rogue was the winner among the light-truck group. Rogue achieved excellence on all the metrics: launch growth, sustainability and the impact on Nissan’s truck portfolio. The Rogue team navigated through three years of short supply and nearly tripled volume. Performance was extraterrestrial! (Sorry, couldn’t resist.)
The 2014 Toyota Corolla is the car winner. Its sales and share performance was “trend-bending,” avoiding the overall decline in industry car sales. Corolla, ranked sixth in industry sales, was a bright spot for Toyota cars in 2016 and helped boost the Toyota Div. to the No.2 spot in divisional sales last year. (Yaris, another small car, also helped).
Asian Group Summary: Money well spent. Major and all-new programs (Group 2) scored better than Group 1 (minor) improvements by a wide margin. Additionally, Group 2 sales increases during the launch year were almost double Group 1.
Likewise, sustainability was rated higher by 14 points: 22 of 28 programs scored better on sustainability than Group 1 – a proportion remarkably different than Detroit Three results.
Yet, some Asian brand products received a “thanks for showing up” trophy. Prius was at the front of the line followed by Kia Sorento, CR-V, Odyssey and Toyota Tundra.
Product additions did their jobs and became significant entries.
Overall, Asian brands’ program improvements helped gain overall light-vehicle market share. Two divisions stand out as clear winners: Nissan and Subaru. Their results are eye-opening. Nissan’s planners clearly listened to their chairman who once proclaimed, “Failure is not forbidden” and drove new programs in the opposite (positive) direction. Every Nissan program in the study achieved a superior or excellent rating. Bottom line: market share up 1.1 points since 2012.
Subaru, which seems to have captured the safe-vehicle space once reserved for Volvo, achieved even better results. All of its programs were rated superior or excellent, and its light-vehicle market share is up 1.2 points. Remarkably, these two divisions captured 22.5% of industry sales growth since 2012. Jeep and Ram, stars of the Detroit Three study, got an additional 23%. New programs at these four divisions did their job. The other 30-plus divisions got the remaining 54.5%.
Not everybody is going to win. Car guys and bean counters alike should be looking to the Asian brands’ results as performance targets during program approval.
BMW, Audi, Mercedes-Benz and VW will be evaluated next month.
Warren Browne is an adjunct professor of economics and trade at Lawrence Technological University, and has his own consulting firm. He led the vehicle forecasting team at General Motors in the 1980s.
