Big Three to Lose Market Share in North America in 2004: Scotiabank Economist

The Big Three’s share of new vehicle sales in the United States fell below 60% in August for the first time on record and is only 56% in Canada, down from 70% in both countries as recently as 1998, according to the latest Canadian Auto Report released by Scotia Economics. Further market share losses are likely over the next year in both
Canada and the United States.
“In recent years, the Big Three have steadily boosted incentives in an attempt to stabilize their market share, while also intensifying efforts to develop new cars and light trucks, now beginning to arrive at dealerships,”
says Carlos Gomes, Scotiabank’s auto industry specialist. “However, new vehicles from the Big Three are not coming to market fast enough to boost their market share. New and redesigned vehicles are likely to account for only 20% of overall sales during the coming year.”
According to the report, the Big Three will only introduce enough new cars and trucks to stabilize their market share by the 2005 model year – starting in late 2004. This development should also allow the Big Three to
pare back existing generous incentives.
The proliferation of new and redesigned vehicles by the Big Three means that in 2005 alone North American automakers will replace at least one-third of their existing line-up. Furthermore, more than half of the Big Three’s offerings – about 53% – will be redesigned by 2005, a replacement cycle far surpassing competitors.
“Japanese, Korean and especially European automakers will also be introducing new products over the next two years,” adds Gomes. “However, we estimate that Asian automakers (Japanese and Korean) will replace or redesign
only about one-third of their line-up by 2005. Europeans have a more aggressive replacement schedule, but even then, only a weighted average of about 40% of their sales are expected to be new or redesigned vehicles by 2005.
“A sharp increase in the number of new offerings from the Big Three is only the first step for North American automakers on the road to some recovery in market share,” continues Gomes. “The Big Three will also have to work hard
to continue to improve vehicle quality, and attempt to change consumer attitudes. Buyers continue to rank imported models as superior in both quality and durability.”
Turning to overall market conditions, new car and light truck sales in the United States surged to an annualized 19.0 million units in August, from an already strong 17.3 million in July, as the Big Three enhanced incentives further. In Canada, car and light truck sales fell 4% below a year ago in August, dampened by the blackout in Ontario in the middle of the month. However, on a seasonally adjusted basis, purchases averaged a solid 1.69 million units, up from an average of 1.62 million during the previous seven months.