Banner Revenue Year Predicted for Auto Industry

DETROIT – The U.S. auto industry in 2014 is enjoying a banner year in total revenues from sales, says John Krafcik, president of TrueCar, an online service.

Light-vehicle sales this year are expected to reach 16.4 million units, which falls short of the high-water marks set in the early 2000s when sales volumes exceeded 17 million some years.

But revenue rather than sheer volume “is the right way of looking at it,” says Krafcik, former CEO of Hyundai’s U.S. unit, who notes automakers can boost sales through heavy but sometimes unwise incentive spending.

He predicts the industry will garner $520 billion this year compared with $300 billion in 2009.

Measured in revenue from sales, “there’s never been a better year than 2014,” Krafcik tells the Automotive Press Assn. here.

Credit for that largely goes to higher transaction prices, but it’s not just automakers hiking stickers. Consumers by choice are buying more expensive vehicles with options. The average vehicle transaction price last month exceeded $30,000.

“The average price for a pickup truck is $42,000,” Krafick says. “That segment accounts for $100 billion in business with high profit margins.”

General Motors is expected to realize $100 billion from U.S. vehicle sales this year, followed by Ford ($83 billion), Toyota ($71 billion) and Fiat Chrysler ($66 billion), he says.

Toyota leads the pack when it comes to the most balanced sales mix of what Krafcik calls the industry’s super segments: cars, pickup trucks, utility vehicles and luxury vehicles.

Toyota’s well-weighted mix “didn’t happen by accident,” he says. “It came from great wisdom and strategy.”

Ford relies heavily on its pickup sales, says Krafcik, a one-time Ford product planner. “GM is a little more balanced” but is underrepresented in car sales. Its luxury division, Cadillac, is doing “very well,” bringing in $11 billion in sales revenue.

Chrysler lags in car revenue and Honda needs more pickup sales than its Ridgeline model has delivered, he says. “You’ve got to give credit to Nissan” for trying to balance its product mix.

He says his former employer, Hyundai, and its sister automaker Kia overemphasize cars. “They have a little slice of utilities, no pickup truck and not a substantive premium.”

Volkswagen also lacks a pickup truck at a time when that segment’s sales are strong and its profit margins high.

“In a year like this one, where the whole industry is going utilities and pickups and higher transaction prices, it’s tough if you aren’t strong in those areas to participate in the growth,” he says. 

Krafcik notes a 25% truck tariff all but bars pickup imports to the U.S. Many foreign nameplates, with the exception of Toyota and Nissan, are reluctant to build trucks in the U.S.

“The 25% tariff forces you to make a really big bet on pickups,” he says. “You have to make a $2 billion to $4 billion investment in the U.S.”  

Today’s automakers look at the industry more globally than ever. Toyota has an advantage there, Krafcik tells WardsAuto.

“Toyota has the benefit of a truly global framework. U.S. OEMs are getting there. Ford has made great progress. GM also is making some progress. But Toyota has been doing it for a long time.”

On the auto retailing front, TrueCar works with 9,000 dealer clients, providing them with customers who go to TrueCar’s website and affiliate sites for information on local car prices.

TrueCar charges dealers $400 for used vehicles and $300 for new vehicles sold through its system.

Most consumers using TrueCar are more price-conscious than price-obsessed, Krafcik says. “Two-thirds of the time, consumers choose the closest dealer, not the one with the lowest price, as long as the prices are reasonably close.”

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