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The Race Is On
Competition In The Local Auto Market Will Be Fierce This Year As A Batch Of Exciting New Products Gets Here And Distributors Try Their Best To Grab A Bigger Piece Of The Auto-Sales Pie.
By JOSE L. CARMONA
February 5, 2004
The New Car Parade Is Coming: With Total Auto Sales Expected To Remain Relatively Stable, Local Auto Industry Execs Are Hoping A Mix Of Fresh New Products Will Generate Excitement Among Consumers.
For the Chinese, 2004 is the year of the monkey. For Puerto Ricos auto industry, it is the year of opportunities.
With a record number of refreshed and brand-new models set to appear at local auto dealerships this year, not to mention the arrival of an entirely new brand, the islands auto industry is looking forward to one of its most exciting and competitive years in recent history.
Sources in the local auto industry interviewed by CARIBBEAN BUSINESS said they expect sales in 2004 to be better than last years, when 122,794 new vehicles were sold, down slightly from 123,054 in 2002. In fact, 2003 was the fourth-consecutive year in which local auto sales remained in the range of 122,000 to 124,000 units since peaking at 128,813 units in 1998.
Industry insiders say this flatness, amid a soft economy and higher excise taxes on automobiles, means Puerto Ricos auto industry will remain strong and healthy this year.
Considering that the elections are coming up in Novemberand barring any significant events such as a rise in interest ratesmany in the industry are predicting sales in the second half of the year will be better than in the first.
Low interest rates, special financing deals, and manufacturer rebates played a key role in keeping local auto sales stable in 2003. These incentives are expected to continue in 2004, although not as aggressively as in past years since they cut into automakers revenue and profits.
Sales of sport utility vehicles (SUVs), which include light trucks and minivans, have been down since the excise tax hike in June 2002, despite the introduction of new models in the segment. In fact, local sales of SUVs dropped 6% last year from 2002. Passenger cars and SUVs represented 53.7% and 46.3%, respectively, of all new vehicles sold in 2003. Cars are projected to continue outselling SUVs this year.
Heres a brand-by-brand analysis of what local auto distributors expect in 2004.
Toyota after another banner year
Despite the highly competitive nature of the local market, local Toyota & Lexus distributor Toyota de Puerto Rico (TDPR) sees potential for growth and for retaining its market leadership. Currently, Toyota enjoys a whopping 24.6% share of Puerto Ricos auto market.
"For 2004, we predict an increase in sales for Toyota and about a 1% increase for the local auto industry in general," said TDPR President Mario Davila. "Based on 2000, the previous election year, when some 123,403 vehicles were sold, the industry can expect a good 2004."
TDPR had a banner year in 2003, selling a record 31,014 units, of which 30,173 were from Toyota and 841 from Lexus, the luxury division. Sales of Toyota and Lexus last year were up 10.4% and 16%, respectively.
In 2004, TDPR will continue to work on beefing up customer satisfaction through its local dealer network. Individual dealers will make significant investments to improve their facilities, including the service area, the showroom, and signage.
This summer, the distributor will launch the Japanese automakers third brand, Scion, to Puerto Rico with three models aimed at the Generation-Y segment (18 to 24-year-olds). Toyota hopes Scion will attract and retain younger first-time buyers. Davila is predicting combined local sales this year of 33,500 units for all three brandsToyota, Lexus, and Scion.
Later in 2004, Toyota will launch a hybrid version of the Highlander SUV as a 2005 model and the Lexus 400h, the worlds first luxury hybrid SUV. Both models, along with the FTX full-size truck concept vehicle and the three Scion models, were presented in January at the North American International Auto Show (NAIAS) in Detroit. Lexus also showcased there an all-wheel-drive version of the third-generation GS sports sedan, to be available in 2005 as a 2006 model.
The Japanese automaker successfully launched last year the redesigned Toyota Prius, considered the first hybrid vehicle to be mass-marketed in Puerto Rico. Toyota is betting big on the gas-electric vehicle technology and wants to remain a key player in the segment by expanding the number of hybrid models on its roster. The Prius was named
2004 North American Car of the Year at NAIAS.
Toyota has 24 authorized dealers in Puerto Rico and the U.S. Virgin Islands.
Ford expects a great year
John Swigard, vice president & regional manager of Ford and Lincoln Mercury operations for Puerto Rico and the U.S. Virgin Islands, said the U.S. mainlands economic recovery is under way and will extend to Puerto Rico. Although he said the elections would make things challenging, Swigard predicted local new-auto sales in the neighborhood of 123,000 units, up from 2003.
"We dont give specific projections for Ford sales, but we certainly expect to grow our business this year," said Swigard, who has been in charge of the local Ford operations since last year. "We have seven new products to launch for the 2004 model year. This is going to be a great year for us."
In 2003, the U.S. automaker unveiled to Puerto Rico the totally redesigned 2004 F-150 full-size pickup and the new 2004 Ford Freestar and Mercury Monterey minivans. The F-150 was selected 2004 North American Truck of the Year at NAIAS.
At the auto show, Ford also exhibited Lincolns next-generation Aviator SUV, which will move to a car-based platform; the Mark X, a two-door convertible concept with a retractable, power-folding, glass-roofed hardtop; and the Mark LT, a luxury pickup.
This year, Ford will launch the new Freestyle SUV and the Taurus replacement, the Ford 500 sedan; redesigned models of the legendary Mustang, the Focus, and the Escape SUV; the Ford GT supercar; and the Montego sedan and the Mariner SUV for its Mercury division.
Swigard said that every month or two, Ford will be launching a new product locally. Ford has eight authorized dealers throughout the island.
Ford and its Lincoln Mercury division finished second in overall sales in Puerto Rico last year, with 14,606 units sold, giving Ford an 11.9% market share. It was the undisputed truck leader on the island, selling 12,341 trucks and SUVs.
"We expect to continue the momentum of the recently launched vehicles, the F-series and the Freestar, and we look toward Escape and Focus to receive a lot more attention this year," said Swigard. "This is the year of the car for Ford, and we really expect these new products to help our business, particularly on the car side. We can never forget about the Explorer, though, because we expect it to have another successful year in Puerto Rico."
The Explorer was the best-selling SUV on the island, with 4,351 units sold in 2003.
Suzuki has positive outlook
John Bowen, general manager of local Suzuki distributor Suzuki de Puerto Rico, said he is optimistic about this year. In 2003, Suzuki finished third in overall sales and second among the Japanese-Korean brands in Puerto Rico, with 11,940 units sold, down 5.3% from the 12,603 units sold in 2002.
Bowen noted, however, that Suzuki had to compete with one less model and that the brand has been climbing the local-sales chart, moving up from 13th place to third in just seven years. Suzuki has 21 authorized dealers in Puerto Rico.
"Suzukis sales were down last year because we no longer carry the four-cylinder Vitara SUV, so we were down from five products to four," said Bowen. "This year, the economy is expected to pick up, although not as fast as everybody would wish; it eventually will, however, as 2004 is an election year."
For 2004, Bowen believes Suzukis local sales will exceed expectations because the automaker intends to introduce three new models: the 2004 Forenza and Verona sedans and the 2005 Reno four-door hatchback. The Suzuki Reno made its world debut at NAIAS.
The year of the sedan for Mitsubishi
Eduardo Mayoral, president of local Mitsubishi distributor Mitsubishi Motor Sales of the Caribbean, said he believes the local auto market in general will remain flat in 2004, but he predicts growth for Mitsubishi in the passenger-car segment.
"Thats because of the introduction of the Lancer lineup late last year and the arrival of the new Galant and Diamante models later this month," said Mayoral. "We see the SUV side flat for us, as we just finished an extraordinarily good year, with a 26% increase in SUV sales."
Mitsubishi launched the Outlander and the Endeavor SUVs in 2003, and all its efforts were concentrated on strengthening the brands SUV lineup, said Mayoral. "With the introduction of the Lancer lineup last year, we began the year of the sedan, which will continue this month with the arrival of the totally new Galant and the redesigned Diamante," he said.
Mayoral said he is surprised that although the islands population and gross national product have increased over the past few years, the local auto market seems to have leveled off after peaking in 1998. "What this means is that there is a high level of competitiveness in the local auto industry. Each year there are more brands and new products coming into the market, and everybody fights for a piece of the pie," he said.
Mitsubishi finished fourth in local auto sales last year, with 10,419 units sold, down 10.3% from 2002. The brand enjoys an 8.5% share of the Puerto Rico market.
Mayoral believes the elections augur a good year for the local auto industry. "What Ive seen in other countries is that election years are good for the industry because everybody gets their moneymaking machines running, people spend more, and there are more public works projects," he said. "We expect the second half of the year to be better than the first."
There are 27 authorized Mitsubishi dealers islandwide.
Nissan / Infiniti / Kia on a roll
Although Jose Ordeix, vice president & general manager of local Nissan, Infiniti, and Kia distributor Motorambar, expects the local auto market to remain flat in 2004, he sees growth opportunities for the three brands. "We feel optimistic about 2004 because of the renewed lineup we have in each of the brands," he said.
Ordeix said that in the case of Nissan, the Japanese automaker launched several important redesigned and new products last year, including the Maxima, the 350Z Roadster, the Quest minivan, and the Pathfinder Armada full-size SUV.
Nissan finished 2003 in sixth place, with 8,428 units sold in Puerto Rico, an 11.4% increase over the previous year. The brand enjoys a 6.9% market share. Infiniti was third among the Japanese luxury vehicles sold in Puerto Rico, with 454 units, 36.3% more than in 2002.
"We will soon launch the Titan, a full-size pickup, in Puerto Rico. Thats a segment in which we have never participated and which we feel will attract new customers to the brand," said Ordeix. "Later in the year, we will launch redesigned models of the Frontier pickup and the Pathfinder SUV."
As for Nissans luxury division, Infiniti, Ordeix is awaiting the arrival of the brands first full-size SUV, the QX56, and of an all-wheel-drive version of the popular GX35 sports sedan. Both models made their world debuts at NAIAS, along with the Nissan Actic and Infiniti Triant concept vehicles.
"In a market expected to remain flat, we feel the range of new products from Nissan and Infiniti will give both brands another year of sales growth," said Ordeix.
He added that Motorambar would be working with Nissan and Infiniti dealers this year to improve their appearance as well as their signage and visual identity. There are 22 Nissan dealers in Puerto Rico.
With regard to Korean automaker Kia, Ordeix said new products would make their local debuts in a few weeks. Kias local sales were up 8.7% in 2003, with 5,100 units sold.
"In the next few days, we will be launching the Amanti, a new luxury full-size sedan, and a redesigned Spectra," said Ordeix. "With the Amanti, Kia enters a segment in which it has never participated before, providing a level of luxury, features, and amenities not found on vehicles in the $30,000 price range.
"Korean brands have been perceived as being aimed at budget-minded consumers," added Ordeix. "In that sense, Kia has made significant gains in improving its product line and the consumers image of the brand."
Proof of that, he said, is the success of the Sedona minivan and the Sorento SUV. In a short time, both vehicles have positioned themselves well in their respective segments.
Kia has 21 authorized dealers islandwide.
Chrysler with nine new products
In tune with the general perception that the local auto industry is headed for another flat year, David Elmore, regional marketing manager of Chrysler International Services S.A., has conservative expectations. He is projecting a 1% increase in sales for the Chrysler Group (Chrysler, Dodge, Jeep) in Puerto Rico this year.
"Weve got nine new products for 2004, but nothing in the big-volume segments in Puerto Rico," said Elmore. "Well sell more in those specific segments, but not in high volumes. We do expect, however, a sales increase from the new Durango SUV, which is selling as fast as we can get them on the ground."
Some of the new products wont arrive until late in 2004, so these wont make a big difference to this years sales numbers, Elmore explained. In 2003, the Chrysler Group came in seventh place in local auto sales, with 7,951 units sold, commanding a 6.5% market share.
In addition to the new 2004 Chrysler Pacifica and Chrysler Crossfire and the completely redesigned 2004 Dodge Durango SUV, all launched in 2003, there are seven new Chrysler Group products to be introduced in Puerto Rico this year, some of which made their world debuts at NAIAS, said Elmore. These are the PT Cabrio, the Crossfire Cabrio, the refreshed Dodge Caravan and Chrysler Town & Country minivans with Stow n Go (second- and third-row seats that hide flat underneath the vehicles floor), the Chrysler 300 sedan, the Dodge Magnum, and the Jeep Unlimited.
This year also marks the return of the legendary HEMI engine to the brand, providing increased horsepower and performance without sacrificing fuel economy.
Elmore noted Puerto Ricos auto market has been shifting to cars, as sales of SUVs and minivans had begun to decline even before the excise tax increase of 2002. Luckily for the Chrysler Group, its new-car barrage will begin with the Chrysler 300 sedan and will develop over the next 18 months, he added.
"The SUV segment never recovered from the big increase in excise taxes," said Elmore. "The lower end of the car segment [subcompacts] seems to have increased substantially more."
To that end, Dodge is reintroducing the Stratus to the local market. "We havent had a well-equipped car in the $18,000 to $19,000 price range for quite some time, so were bringing it back," said Elmore. "Dealers are starting to take orders now. We havent played much in the subcompact segment, but we expect an increase in share this year."
Chrysler aims to prepare the dealer network to sell the new products coming down the road. "There are a lot of improvements going on at the dealerships to get ready," said Elmore.
The Chrysler Group has eight authorized dealerships on the island.
Mazda betting on Mazda3
Local Mazda executives are sanguine about 2004. Low interest rates and an array of new products will provide consumers with more and better purchasing alternatives, they say.
Mazda sold 5,436 units in 2003, up 2.1% from 2002. Of the 11 best-selling brands on the island in 2003, Mazda was one of six that experienced sales increases. The other five were Toyota, Nissan, Hyundai, Kia, and Honda.
"We are projecting 6,500 units for 2004, which would be a 19.6% increase. Thats our goal and our challenge for this year," said Jaime Pibernus, vice president of operations for local Mazda distributor Plaza Motors Corp. "A big part of that sales increase will come from the new Mazda3."
The 2004 Mazda3, which replaces the popular Protege series, comes in four-door and five-door versions with a 2.0-liter or 2.3-liter four-cylinder engine producing 148 or 160 horsepower, respectively. The subcompact vehicle is entirely built in Japan, and shares its platform with the Volvo S40. This, said Pibernus, gives the Mazda3 the driving, performance, and safety dynamics of a much more expensive European vehicle. The Mazda3 starts at $15,495.
The Mazda6, which made its local debut with the new RX-8 last year, will be available in hatchback and sport-wagon styles for 2004, noted Pibernus, who added that Mazda vehicles now carry a four-year / 50,000-mile warranty.
"Our dealers are excited about the new Mazda3 and the new versions of the Mazda6," said Pibernus.
Plaza Motors recently began intensively training its personnel and its dealers sales forces on the new Mazda vehicles. Last week, the Mazda distributor offered a seminar for its dealers at the Ponce International Raceway. There are 19 authorized Mazda dealers in Puerto Rico.
"Although we are projecting a sales increase for Mazda, we hope the other brands improve their sales as well. Everybody has a fair chance," said Pibernus. "I think this year is going to be spectacular for the local auto industry."
Hyundai expects sales gains
Ricardo Garcia, operations director of local Hyundai distributor Hyundai de Puerto Rico, said the Korean automaker had a good year in 2003 and expects local sales to increase 5% in 2004.
"We are happy and pleased because among the 10 best-selling brands in Puerto Rico, Hyundai had the largest sales increase last year, at 14.2%, surpassing Toyota and Nissan," said Garcia. "We also regained the No. 1 spot among Korean brands, with 5,157 units sold in 2003."
Garcia said the market has recognized that Hyundai has changed for the better and is helping the brand exceed expectations at all levels. He noted that the Hyundai Tiburon solidified its position as the best-selling sports car on the island, with 401 units sold in 2003.
"As part of our growth plans, we expect a sales increase of 5% this year. Part of that sales increase has to do with the introduction of a new small SUV to complement the Hyundai Santa Fe," said Garcia. "We will be concentrating our efforts on improving customer service and satisfaction through the development of our dealer network, improving the facilities improvements to take the brand to a higher level."
Garcia predicted local auto sales would pick up steam in the second half of the year as consumers get a clearer picture of what will happen in the November elections. "We will see a real rebound in the last quarter of 2004 and the first quarter of 2005," he said. "This year will be very competitive because of the numerous new-model introductions and financing options available to consumers."
The brand that offers the best value and service will benefit the most, and thats one of Hyundais core advantages, said Garcia.
2003 was a good year for Honda, and 2004 promises to be even better
Carlos Lopez-Lay, president & chief operating officer of local Honda & Acura distributor Bella International Corp., said that although 2003 was challenging, Honda experienced a modest 1.9% sales increase. "Last year was good, and this year promises to be even better," he said. "We are on our way to achieving our new goals, including the continuous growth of all the areas in which we do business."
Bella offers the full line of Honda and Acura products, such as automobiles, motorcycles, lawnmowers, and electric generators in Puerto Rico and the U.S. Virgin Islands. It is the worlds No. 1 distributor of Bombardier Sea-Doo personal watercraft & sport boats. Through the Bella Retail Group division, Bella also distributes Triumph and Tomos motorcycles and is an authorized dealer of ULB electric golf carts, Bertram and Regulator Marine boats, and Johnson and Evinrude outboard boat engines.
In 2003, the year Bella celebrated its 40th anniversary, Honda sold 4,279 units locally while Acura, Bellas luxury car division, sold 658.
Last year, Bella invested more than $1 million to remodel its company-owned dealerships Honda de San Juan and Acura de Puerto Rico on San Juans Kennedy Avenue and to open Honda de Bayamon on PR-2. There are six authorized independent Honda dealers on the island, for a total of nine Honda dealerships islandwide.
In 2004, Honda will introduce a V6 Accord that uses Hondas Integrated Motor Assist (IMA) gas-electric hybrid system in combination with Variable Cylinder Management (VCM) technology. VCM allows the deactivation of three of the engines six cylinders under certain conditions to deliver greater fuel efficiency with no reduction in performance. With the new Accord, Honda will have three models using the IMA hybrid system, the other two being the Civic and the Insight.
For the 2005 model year, Honda will introduce a version of its FCX fuel-cell vehicle with a Honda-developed fuel-cell stack with improved performance, higher fuel efficiency, and reduced cost. Hondas VCM technology will be applied to another new model to be introduced later this year. Additionally, the Japanese automaker will finally get a pickup when Honda launches its SUT (sport utility truck) concept in 2005.
Acura unveiled its HSC (High Performance Sports Concept) at NAIAS. The 300-plus horsepower HSC is slated to be the next-generation NSX. Rumor has it the next Acura RL flagship luxury sedan, due later this year as a 2005 model, will be an all-wheel-drive hybrid powered by a 300-horsepower V6 gas engine in the front and a 100-horsepower electric engine in the rear.
This Caribbean Business article appears courtesy of Casiano Communications.