Look for trends, but no big records, in a tough market

Stability: Topping last year seems unlikely, but sales should hold steady.


January 23, 2000|By Amanda J. Crawford | Amanda J. Crawford,Sun Staff

The automotive industry ended 1999 with record sales of almost 17 million vehicles. In Maryland, sales through November totaled 342,000 -- 13 percent above the same period a year earlier.

This year promises to provide a glimpse of new vehicle trends, but experts say topping last year's sales is unlikely.

Still, consumers will benefit from the most competitive auto market in history. Industry analysts say stable prices combined with good economic health should keep sales from falling significantly.

"I'm not saying that 2000 is gloom and doom. It's just 1999 was so strong it will be difficult to equal," said Jacob Cohen, managing director of American Express Tax and Business Services' Automotive Group in Towson.

Cohen predicts sales this year could be off by as much as 5 percent from last year.

Dealer optimism

Peter Kitzmiller, president of the Maryland New Car and Truck Dealers Association, said Maryland dealers are optimistic about another year of strong sales.

"Everybody thinks this year will be a good year," he said. "Whether it is a record year or not remains to be seen."

New vehicles and innovations could lure buyers, however.

Riding the success of sport utility vehicles, hybrid or crossover vehicles are expected to be major players this year. These vehicles combine some of the most appealing qualities of the SUV -- like a high driving position and four- or all-wheel drive -- with the more practical attributes of the minivan, the station wagon and the sedan.

These hybrid vehicles include the BMW X5, billed as a sport activity vehicle; the 2001 Pontiac Aztek, which the company calls a sport recreation vehicle; and the Lexus RX 300, introduced in 1998. Experts say the designs of these hybrids are more appropriate for families than are the designs of the SUVs and off-road vehicles.

'More livable'

"The hybrid is certainly a little more livable on a day-to-day basis as a family vehicle," said Gordon Wangers, managing partner of Automotive Marketing Consultants Inc. of Vista, Calif.

"They are quieter with a smoother ride and easier to climb in and out of, especially for children, because they are lower."

David E. Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan, said the introduction of more technologically advanced equipment may also prove a strong selling point this year. These include innovations like Cadillac's Night Vision, which projects infrared images of distant hazards onto the windshield, and Ford's Rear Detector System, which sounds a warning when the vehicle reverses toward an obstacle.

Bells and whistles

Cole said more manufacturers are also offering technology packages with vehicles, including global positioning systems and cellular phones.

"There is a lot of technology on the rise and the question is whether consumers will be interested in it," he said.

Also new this year is the hybrid fuel vehicle. Toyota's four-passenger Prius and Honda's two-passenger Insight combine a gasoline engine with an electric motor to provide optimum fuel efficiency. While minimal sales are expected initially, experts say that could change in the future.

"There is considerable optimism that these vehicles can expand and become major players over the long term in the industry," Cole said. "That's the exciting thing: these vehicles could really be the messengers of the future."

Changing habits

Besides adding futuristic features to cars, technology also is changing the way consumers are buying cars. American Express' Cohen estimates that 40 percent of buyers shopped for their vehicles over the Internet and more than 70 percent of dealers in Maryland have their own Web site or subscribe to an Internet service. He said dealers may have to change the way they do business to accommodate this new sales venue.

"Internet sales will increase significantly," Cohen said. "There is no question that e-tail is already affecting retail. Now the dealer is spending a lot of money on traditional advertising, telemarketing, mailings and coupons. In the year 2000, that cost will have to change and some of it will have to shift to an electronic commerce component."

Direct marketing

Kitzmiller, with the Maryland dealers' association, said his members are concerned about manufacturer attempts to sell cars directly to consumers either through the Internet or by operating dealerships. The practice is prohibited in Maryland, and Kitzmiller said the organization would oppose efforts to weaken the law.

But Cohen said the biggest issue for local dealers is the mass consolidation of dealerships by manufacturers and large corporations, such as AutoNation, CarMax and Sonic Automotive Inc.

He points to General Motors' Project 2000, in which the manufacturer is strongly encouraging dealers to offer different GM lines under one roof, lowering the number of franchises it must deal with and consequently reducing costs.

Lower prices, more ads

Martha Holmes, controller for Village Volvo in Bel Air , which was acquired by Sonic in November, points to the advantages of having corporate backing.

"There is a tremendous advantage because we can take our experience and talent and combine that with the resources Sonic Automotive has and the opportunities available with them," Holmes said.

With a greater pool of resources, dealers are able to offer lower prices and spend more on advertising. But this can make it difficult for smaller dealerships to compete.

Kitzmiller said his organization expects to see fewer single franchise owners as more owners in Maryland operate multiple dealerships.

"It's getting more and more expensive to buy and operate dealerships in a metro market," Kitzmiller said.

"I think there is going to be more consolidation, but I don't think we are going to see an end of family-owned dealerships."

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.