Does being one really give an advantage to a vehicle like the Ford Focus -- the ST-R shown here?
Barring a sudden setback, Ford’s Focus will end the year as the world’s best-selling automobile, toppling perennial sales leader Toyota Corolla. However, Toyota is now on track to take back the global sales crown from General Motors to become the world’s top-selling automotive manufacturer. And, in the U.S., BMW and Mercedes-Benz are in a costly battle to see who will land on top in the world’s largest luxury market.
As anyone who has gone to a sporting event knows, people like winners. And just like sports teams, most companies like to win – which is why it’s not unusual to see a maker like Mercedes, BMW, Ford or Toyota pull out all the stops when it comes to landing on top of the sales heap.
But does that really matter? For all the crowing in the executive suites – as well as the TV spots that tout a brand’s or a nameplate’s victory, does being number one have any real impact on the bottom line?
“It’s definitely an attention grabber,” says Joe Phillippi, senior automotive analyst with AutoTrends Consulting, referring to the headlines generated by the news the Ford Focus had outsold the Toyota Corolla worldwide by about 5.5% during the first half of the year.
“But I don’t think it matters, long-term, beyond the bragging rights for some marketing executives,” adds Phillippi, suggesting that the headlines “may get your attention but I don’t think people buy a vehicle because it’s a best-seller.”
From their perspective, those industry marketers have a very mixed take on the value of being number one – often reflecting their own position in the pecking order.
Mercedes-Benz is definitely in the hunt this year, and clearly hungry to topple German rival BMW, which grabbed the lead in 2011, and Lexus, which had led the U.S. luxury market for a number of years before that.
Being number one “does” matter, contends Steve Cannon, CEO of Mercedes-Benz’ U.S. sales subsidiary, and the maker has been aggressive in going after the lead. A year ago, Cannon’s predecessor approved a plan that allowed the maker to count perhaps 1,000 or more vehicles in dealer inventory as sales – though Mercedes still lost the battle to BMW.
Two decades ago, once-dominant Cadillac tried to maintain its number-one lead over Detroit rival Lincoln with some markedly more questionable manipulation of the numbers – and eventually had to apologize for the sleight-of-hand.
Manufacturers routinely pile on extra cash if they think a little more incentive money will nudge a product over the top in a tight race. But, as Phillippi noted, it’s ultimately great product that will win the day.
Nissan believes it has one in the form of the new Altima sedan, the maker’s global CEO Carlos Ghosn unabashedly announcing his goal of toppling Toyota’s Camry as the sales leader in the crucial midsize market this year.
“Nissan is going toe-to-toe with Toyota,” notes Nick Matarazzo, CEO of the automotive advertising network Jumpstart. “Altima is making great strides this year with online car shoppers in our network,” and could give the Camry a tough fight. But it’s not a two-car race, he cautions, adding that, “We’ve been keeping our eye on other contenders that are closing the ranks, like Ford Fusion, Hyundai…Sonata, and Kia Optima.”
For its part, Toyota traditionally downplays the goal of being number one – at least publicly. But inside the company is a different story. And the possibility of getting back to number one – a good possibility based on the Japanese maker’s first-half 2012 results – is clearly something Toyota management is aware of. That would be a particularly significant turnaround from 2011, when the maker lost the global lead due to the disastrous earthquake and tsunami that struck Japan in March.
On the other hand, Phillippi and other analysts believe that Toyota may have become too focused on victory, a few years back, allowing mistakes that led to the company’s disastrous safety and quality problems of 2009 and 2010.
Volkswagen has thrown down the gauntlet, meanwhile, promising to push global sales above the 10 million mark in the next few years. CEO Martin Winterkorn has promised to make the German manufacturer a “leading” car company – which many have interpreted as a goal of being the global number one seller.
U.S. communications chief Tony Cervone stresses that there are actually four corporate goals, to lead in terms of not only sales, but also profits, customer satisfaction – and its reputation as an employer.
Indeed, while being a sales leader may help, the numbers alone aren’t the goal, contends Mercedes’ Cannon.
Echoing analyst Phillippi, the executive believes that “Not a single customer will buy another Mercedes because they’re told we’re number one.” But “volume matters,” he adds, “in a world were (product development) costs are enormous. It’s a critical way of gaining economies of scale” that can provide a maker an advantage over its competition.