Detroit 3 Increase Market Share

The Detroit 3 automakers were the first to introduce generous customer incentives to a maimed marketplace, and consequently their sales rates, while disturbingly low, are better than many competitors’.

That’s according to J.D. Power’s weekly report on the COVID-19 virus’ effect on the auto industry.

Industrywide, vehicle sales have been awful, largely because of stay-at-home orders in all but eight U.S. states.   

But combined retail market share for General Motors, Ford and Fiat Chrysler remained above 50% for a second consecutive week for the first time since 2006, rising 11 percentage points since the week ending March 15.

The Detroit 3 were the first to launch loan offers of zero-percent interest, 84-month terms and 120-day deferred payment on specific vehicles. On April 1, Hyundai, Nissan and Genesis introduced similar programs.

“The Detroit 3’s (customer) loyalty is virtually a fortress,” Tyson Jominy, J.D. Power vice president for data and analytics, says, referring particularly to the domestic automakers’ pickup truck buyers. Pickups have outperformed other segments in the weakened market.

Previously, 84-month loans represented about 7% of auto lending. They rose to 23% of vehicle transactions for the week of April 5, says Thomas King, J. D. Power’s president-data & analytics division.

For a second straight week, powered by relatively resilient pickup truck sales, net transaction prices set another record, reaching $36,300 for week ending April 5, he says.

Incentives also set a record, reaching an average of $5,100 per unit last week. Incentives averaging $7,300 per unit (highest on record) on light-duty pickup trucks were the primary driver of overall industry incentive spending growth, according to J.D. Power.

March 2020 retail sales ended at 725,000, a decline of 390,000 units (-35%) from J.D. Power’s pre-virus forecast, and down 500,000 units (-41%) from March 2019.

About 152,000 retail sales have occurred in April, a decline of 59% from the pre-virus forecast.

Another shift in the market is a decline in consumers’ trade-in equity. For the week ending April 5, the average equity a consumer had in their trade-in was $2,079. That is a 44% drop.

The average age of vehicles traded in dropped since mid-March from 6.5 to 5 years.

Many of the consumers who traded in their vehicles for new ones were attracted by the generous incentives.

“The decline in equity likely reflects money still owed on the trade-ins,” King says, noting that with consumers trading in vehicles earlier, the depreciation rate can outpace the loan amortization.

J.D. Power reports used-vehicle sales at franchised dealers fell faster (-67%) than new sales (-59%) in the past week. Historically, the used-vehicle market has outperformed the new-vehicle market during economic downturns as consumers looked to reduce expenses.

Wholesale prices on used vehicles are down 14%, King says. “This is another challenge to dealers” who usually make more money on used vehicles than on new ones.