Chrysler Is Burning Up The Minivan LaneDavid Woodruff
In July, when Gary and Robin Long traded in their five-year-old Dodge Caravan, they didn't put much thought into deciding which new model they wanted. The suburban Cleveland couple went right out and leased another Caravan at $289 a month on a five-year lease. They hardly bothered to look at competing models, such as Ford Motor Co.'s sleek new Windstar. "We figured, why change when we're happy with what we've got?" says Gary.
Talk about driving into a headwind. Ford's Windstar, which critics praised as the quietest, most carlike van yet when it was launched last spring, is having a tough time picking up speed against minivan pioneer Chrysler Corp. Neither it nor a new model being brought out next January by Honda Motor Co. seems likely to make much of a dent in the No.3 U.S. carmaker's 44% share of the $20 billion minivan market. Indeed, Japanese companies have grabbed only a tiny 7% of the market so far. And as Chrysler readies a new minivan for rollout next spring, Japan and General Motors Corp., the weakest of the Big Three in minivans, could find the battle for share a bruising one.
How feisty a competitor is Chrysler? It carefully wooed millions of its own satisfied minivan owners with direct- mail advertising and special deals so they wouldn't defect. And it offered discounts of up to $1,600 on the vans, making it tough for the Ford Windstar to gain momentum in the months since it came out.
The result: While shoppers seem to like the Windstar's aerodynamic styling and slick interior, they often blanch at its sticker price. The entry-level GL model starts at $19,455, and the more luxurious LX, loaded with options, can run $27,000. Dealers had hoped to charge full sticker, but several now report knocking off as much as $1,000 to clinch a deal. "We cannot compete," laments James A. Hoffer, general manager of Jordan Auto Mall in Mishawaka, Ind. Adds John B.T. Campbell III, a California superdealer who owns a Ford franchise in Garden Grove: "We all expected [the Windstar] to do better."
To be sure, the Windstar is far from a flop. In five months, Ford has sold 50,000 of the vans. Demand could pick up a bit, too, now that Ford is finally offering captain's chairs in the rear--a popular option with parents who are intent on keeping children separated during long trips. Already, Ford has picked up 3.6 points of minivan market share since January, though that's in large part because the company has continued to produce its aging rear-wheel-drive Aerostar minivan as well.
A KNOCKOUT. Chrysler, meanwhile, can't keep up with demand. At the end of July, it had a scant 30-day inventory of Caravans, vs. 54 for the Windstar (chart) and an average of 55 for all cars and trucks. Supplies are so tight that as of Aug. 1, the company canceled a sale on options such as air conditioning and power windows, worth up to $1,100 per van. Moreover, when the 1995 model year begins on Oct. 1, Chrysler will raise prices: An entry-level Caravan and a Plymouth Voyager will jump $600, to $16,160; the long-wheelbase Grand Voyager will rise $400, to start at $18,605.
But Chrysler won't really start playing hardball until next year. That's when its first all-new minivan since the initial model came out in 1983 is due. The few outsiders who have seen the van say its styling is a knockout. The first public showing will be in January at Detroit's annual auto show, and sales will kick off in April.
By mid-1995, once Chrysler's factories begin operating at full speed, the minivan market could become a real slugfest. Together, Ford and Chrysler will be able to build nearly 1 million minivans a year in North America--almost the total 1993 sales of all brands in the U.S. And Honda's new minivan could have some cachet: It's based on the Accord sedan. Honda expects to sell about 30,000 of the vans a year, at a starting price of about $22,000. The tussle for market share will likely result in "some fairly serious incentives to move the metal," says William Pochiluk, president of Autofacts Inc. in West Chester, Pa.
The company most likely to get squeezed is General Motors Corp. Its plastic-bodied, long-nosed minivans continue to sell poorly despite a modest restyling for the 1994 model year. Such models as Chevrolet's Lumina APV are already suffering. After lackluster sales in July, inventory of APVs jumped 20%, to 91 days. More's the pity for GM and other weak competitors. America's minivan wars are just getting under way.