April 1 (Bloomberg) -- A commercial showing the new Ford Fusion being driven off a cliff led David Bowhall to visit a dealer last month for a test drive. The owner of four Mercedes-Benzes in the last five years said it wasn’t much of a leap.
“Boy, that kind of looks like an Aston Martin,” Bowhall, who designs and installs audio-visual equipment, said of his first impression of the car. The hybrid version that Bowhall, 41, plans to buy has many of the same features as the Mercedes C350 he’s replacing, plus it will almost double the fuel economy of his German luxury car and cost about $17,000 less.
The Fusion, redesigned by Ford Motor Co. late last year, has vaulted into the top five models by U.S. sales early in 2013 and is leading a charge by U.S. automakers that are offering the best small and mid-size cars to take on Japan’s in decades. American sedans are providing stiffer competition to stalwarts like Toyota Motor Corp.’s Camry and steering U.S. auto sales to a fourth-straight annual gain, the longest streak since 2000.
Fusion also has been selling from dealer lots faster and at higher prices than Camry and Honda Motor Co.’s Accord, suggesting that the model is more than just a two-month wonder, said Kevin Tynan, an analyst for Bloomberg Industries research. While Fusion offers higher incentives than Camry, its discounts are slimmer than last year’s.
“Ford’s turning them faster, they’re doing it at higher transaction prices and lower incentives, and the volume’s there,” Tynan said by telephone. “If volume was there but you see a decreasing trend in pricing or increasing trend in incentives, that would suggest maybe this isn’t sustainable.”
Camry, the top-selling car in the U.S. for 11 years, remains a potent force, outselling Fusion by almost 13,000 cars in the first two months despite a decline in February.
And Fusion faces challenges in keeping up its torrid pace: Mid-size sedan owners don’t tend to jump from model to model, said Jessica Caldwell, an analyst with market researcher Edmunds.com. With millions of loyal owners on the road, Toyota and Honda are unlikely to lose their grip on the segment lead any time soon, she said.
“Two months does not make a pattern,” said Caldwell, who is based in Santa Monica, California. The car is “competing with the decades of dominance by Camry and Accord. Even though Fusion has sold well, the numbers don’t stack up.”
Still, with the new Fusion, Ford has its best shot to have a sedan lead in sales since the 1990s heyday of the Taurus, the last American sedan to top the Camry and Accord.
That comes amid a backdrop in which Ford, General Motors Co. and Chrysler Group LLC’s combined share of the U.S. small and mid-size car market will grow to 33 percent next year, from 26 percent in 2009, according to researcher LMC Automotive.
U.S. light-vehicle sales probably climbed 4.2 percent in March to 1.46 million, the average estimate of 10 analysts surveyed by Bloomberg. The annualized industry sales rate, which is adjusted for seasonal trends, may have risen to 15.4 million, the average of 15 estimates, from 14.1 million a year earlier. If that pace keeps up, it will be the highest total since 2007.
“No one is abdicating any segment to anyone else,” said John Mendel, the head of U.S. sales for Honda, who left Ford after more than 25 years in 2002. Ford’s previous approach was “screw cars” because their profit margins were narrower than trucks, he said. “Today, everybody is competing everywhere.”
Ford probably continued to outpace the industry’s sales gain in March by delivering 4.4 percent more cars and light trucks than a year earlier, the average estimate of 11 analysts surveyed by Bloomberg. The Dearborn, Michigan-based company’s sales increase topped the market in both January and February.
Through February, Fusion was the fifth best-selling model in the U.S., behind Ford’s F-Series pickup line, GM’s Chevrolet Silverado pickup, Camry and Accord.
Fusion deliveries may have surged 24 percent in March after rising 28 percent in February and 65 percent in January, Kelley Blue Book estimates. Fusion probably trailed Nissan Motor Co.’s Altima in March for the first month this year, the Irvine, California-based market researcher said.
Even if Altima sales topped Fusion last month, the effect that more competition is having on established leaders in the mid-size car segment is clear. Altima deliveries may drop 10 percent from a year earlier, and Camry sales probably will slip for a second-straight month, by 4.2 percent in March after February’s 9.5 percent decline, Kelley Blue Book said.
“Competition coming from the U.S. carmakers is at a much higher level,” Carlos Ghosn, Nissan’s chief executive officer, said last week at the New York auto show. “That’s good for the consumer, because they have a choice between much better products coming from everywhere. And it’s good even for the competitors, because whenever you have tough competition, it forces you to be a much better company.”
GM, which is introducing 13 new Chevrolets this year and showed a redesigned Cadillac CTS during last week’s New York show, probably led the industry in posting a 12 percent increase in sales for March, the average of 11 estimates. The Detroit-based automaker is shedding its reputation as just a “big Midwest truck company,” Mark Reuss, president of GM’s North American operations, told reporters last week in New York.
“All the effort, resources and marketing for the U.S. automakers used to be spent in getting people to continue to buy trucks,” said Tynan, who is based in Skillman, New Jersey. “You created a loyal customer base for your competition for a generation.”
GM, Ford and Chrysler are stemming that tide and luring younger buyers again. The three increased their combined share of retail registrations to 18- to 24-year-olds by 1.9 percentage points and to 25- to 34-year-olds by 1.5 points since 2008, according to R.L. Polk & Co. and Edmunds.com.
Honda may trail GM with an 8.5 percent increase in March, the average of eight estimates. Mendel, the head of U.S. sales for the Tokyo-based carmaker, in an interview forecast 138,000 deliveries for the month, which would be an 8.7 percent gain.
“You’re seeing Ford-GM-Chrysler now getting serious about selling cars, getting a lot smarter and a lot more competitive on the car side of the business,” Mendel said last week in an interview. “Nobody can give up any segment to anybody.”
Honda’s Accord outsold Ford’s Fusion by just 124 cars in February, the narrowest margin in 11 months. Ford is adding a second shift of 1,200 workers to its Mustang assembly plant in Flat Rock, Michigan, to start building Fusions there this year.
“One of our problems is that we don’t have enough production,” said Amy Marentic, a marketing manager for Ford’s global cars. “This summer, our inventories are going to be tight. Our dealers are asking for more.”
Ford’s additional Fusion production could spell trouble for Toyota’s Camry. The Fusion took 35 days on average to sell in February compared to 38 for Honda’s Accord and 62 for Toyota’s Camry, Bloomberg Industries said in a report last month, citing Edmunds data. Fusion’s average transaction price was $26,586 in February, $2,772 more than Camry.
“I’m not sure if ‘threat’ is the right word; I think they’re going to be a strong competitor” to Camry, Jim Lentz, who becomes CEO of Toyota’s North American operations today, said of Fusion. “When you have the No. 1-selling car for 11 years, it’s a nice rallying cry with your retail organization to keep that car No. 1,” Lentz said in an interview.
Toyota’s U.S. sales may rise 1.6 percent in March, the average estimate of eight analysts. Camry remained the best-selling car this year through February, with 11,244 more deliveries than Accord and 12,893 more than Fusion.
Toyota, Honda and Nissan may make it tougher for U.S. automakers to gain ground on them this month because of a push to boost sales at the end of Japanese companies’ fiscal year.
The three automakers collectively have posted bigger sequential increases in U.S. unit sales in March than the total industry each of the last three years, followed by larger drops in April deliveries, according to researcher Autodata Corp.
“March ends up being a higher-than-normal seasonal increase or push by Japanese brands,” Larry Dominique, president of TrueCar Inc.’s ALG and a former product planner for Nissan, said by telephone. “I always saw a push, some years stronger than other years.”
Nissan’s gain in March 2012 from the month earlier was 28 percent, the largest among Japan’s three biggest carmakers last year, and setting a record for the Yokohama-based company. Sales dropped sequentially in April by 48 percent, the biggest decline of the three companies.
Nissan’s deliveries this March may have dropped 2.1 percent from a year earlier, the average of eight estimates. Hyundai Motor Co. and Kia Motors Corp., the Seoul-based affiliates, may have combined to sell 6.8 percent fewer vehicles in March compared with a year earlier, the average of seven estimates.
The strength of Chrysler cars such as the 200, which was revamped since Fiat SpA took control of the company in 2009, may have helped the company sustain a 35-month streak of U.S. sales gains even as it feels a pinch from Jeep factories retooling for new models. Chrysler Group’s deliveries probably increased 3 percent in March, the average of 10 estimates.
“We were always kind of hit for the interior quality and fit and finish of our vehicles,” Saad Chehab, head of the Auburn Hills, Michigan-based company’s Chrysler brand, said in a Bloomberg Television interview. The 200 now has “incredible interiors, a much tighter suspension, it has the engine of the year inside of it. We’re really proud of this car.”
Volkswagen AG may post an 11 percent gain in combined sales for its Volkswagen and Audi brands in March, the average of four estimates.
Bowhall, the Mercedes owner, isn’t the first to see similarities between the new Fusion and Aston Martin, the maker of six-figure luxury cars that Ford divested in 2007. Columnist Jason H. Harper made the comparison in a November review for Bloomberg News, which also praised its fuel economy.
“The car has to look good to catch my eye,” Bowhall said. He expects to pay about $35,000 for the Fusion hybrid, compared with the $52,000 spent on his C350. “The Fusion doesn’t drive like a hybrid, it doesn’t feel like a hybrid, and if I’m saving money at the same time that I’m saving on my monthly payment, then, by golly, even better.”
(See attachment for chart showing estimates for March 2013 car and light-truck sales in the U.S.)
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