Suddenly Vulnerable

The Top Six auto makers in the U.S., especially the Big Three, compete not only with each other but with the “rest of the industry,” or ROI.

The ROI sector has carved out enough of a niche to take market share from the Top Six: General Motors Corp., Ford Motor Co., DaimlerChrysler Corp., Toyota Motor Corp., Honda Motor Co. Ltd. and Nissan Motor Co. Ltd.

Market share for the ROI, currently made up of 10 companies and 13 brands, increased from its most recent low of 7.3% in 1996 to a peak of 13.4% in 2002.

The growth leaders in the group were Hyundai Motor America, Volkswagen/Audi of America Inc., Kia Motors America Inc., Mitsubishi Motors North America Inc. and BMW of North America LLC. Only Mazda North American Operations, American Isuzu Motors Inc. and the defunct Daewoo Motor America lost share during that period.

Most of their share came from the U.S. Big Three and Nissan. Toyota and Honda continued to grow during that 6-year period.

The ROI growth was due to better products and, more importantly, expansions into new segments. Since 1996, the ROI companies have introduced 23 new vehicles into segments where the seller was not previously competing.

The result was increased share in every light-vehicle segment except pickups. The biggest gains were in small cars and cross/utility vehicles. Share of the small-car segment increased from 16% in 1996 to more than one-third in 2002, while it went from zero to 20% of the CUV segment.

However, sales have slowed for the ROI. After six years of increases, market share for the group dropped to 12.8% in 2003 and has fallen to 12.1% in January-March of this year. Plus, the ROI share has declined in each segment except midsize cars and CUVs so far this year from like-2003.

The Europeans can blame some of the decline on currency exchange rates. BMW still saw growth in 2003, but its market share is flat on a slightly lower volume so far in 2004. VW has seen its market share plummet from 2.6% in 2001 to 1.7% this year.

Hyundai, which had 45 straight monthly year-to-year increases, recently has shown signs of weakness, while Mitsubishi's market share has dropped to a 5-year low and Subaru of America Inc.'s sales were down slightly from year-ago in first-quarter 2004. Kia, Mazda, Porsche Cars of North America Inc. and American Suzuki Motor Corp. have better sales so far this year, but only Porsche's and Mazda's increases are enough to improve their market shares.

The main reason for the drop in ROI share is aging product. And the ROI doesn't have the raft of new vehicles coming that propelled it in the late 1990s and early 2000s. With some exceptions, the majority of these auto makers don't have the resources to expand their lineups.

Hyundai is the only company with any significant product expansion coming in the near future. It adds a second CUV (Tucson) to its lineup this year and has slated its first minivan to arrive in 2006.

Furthermore, competition from the Top Six is getting stiffer.

Although ROI volumes are small, the big guys — especially the Big Three — may have an opportunity to muscle down on the little guys. Even a small market share gain makes for good headlines. Some of the small OEMs might even get pushed out of the market.