Thursday, October 23, 2014

Escaping The Dead Zone

The dead zone between mainstream and entry level premium is the automotive equivalent of the friend zone, an area which no brand wants to occupy. You cars are generally nicer than those of regular mainstream brands and correspondingly priced a little higher than the popular competition. Your badge isn't worth much though and therefore your sales aren't that much better than some full price luxury brands. It isn't hard to see that this is not a great recipe for financial windfall for a brand as your profit per each car sold is on the low side and you aren't doing volume either. It's an area that most brands avoid and consequently there are only a few brands that find themselves trapped in this area. Over the past few years the three brands trapped in this area have all made efforts to escape and grow their sales, let's see how well they have done.

Volkswagen: Compact 62%, Midsize 22%, CUV 7% of Market Leader

Volkswagen is the world's best selling brand outside of America by a million or two (literally) and to jumpstart its US operations the brand recently went very mainstream with its core products, the Jetta and Passat. Closest to entry premium of the trio in their last generations there is no denying that both models were cheapened both figuratively and literally as Volkswagen moved down market, cut the price of admission at retail but also made obvious sacrifices to get there. The immediate payoff was fantastic for Volkswagen as the Jetta and Passat posted their best sales ever in a then still recovering marketplace. VW's progress has since stalled against fresh competition even with VW retreating back from most of the ruthless cost cutting. There is hope though as the USDM (and China) Passat is a better effort than the Jetta and its upcoming crossover looks promising to be an even better made for America product. Here's to hoping it arrives while crossovers are still a trend.

Mazda: Compact 35%, Midsize 13%, CUV 34% of Market Leader

Unlike the other two brands stuck in the dead zone, Mazda has made few if any concessions to the mainstream in the last few years (though it was closest to mainstream to start out) and has in fact upped its game significantly. The brand has done a tremendous job of improving its styling resulting in some of the best designs in their respective classes. Likewise Mazda is one of few brands delivering on its EPA fuel economy promise in the real world along with above average performance. It must be somewhat disappointing for Mazda to not see its sales dovetail with its vastly improved products and remain last in sales in this trio.

Subaru: Compact 49%, Midsize 53%, CUV 53% of Market Leader

Of the three brands, Subaru has done the best sales wise by staying true to its mantra of standard all wheel drive and all around quirkiness. The brand has made a few mainstream concessions mainly chasing higher EPA fuel economy ratings by relying on CVT transmissions and dropping horsepower on its models. Even with questionable styling, Subaru has topped the 40,000 monthly sales plateau recently giving it a decent cushion ahead of Mazda, Volkswagen and the luxury brands. More impressively it's done so selling an unreal amount of wagonoids!

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