Truck and Barter

fter being told by a Hyundai car salesman that he had switched over from selling Volkswagens to selling Hyundais because the former were going downhill, I emailed Will Christie, a GMU Econ Ph.D. student who has an incredible knowledge of things automotive. He has given me permission to reprint his email:

[T]he dealer was (gasp!) probably on the level with you. If he's looking for hot sales on a commission, he made a smart move. Hyundai is in the process of repositioning themselves in the market, moving upscale. They are soon to bring out a new Sonata that makes the current model look positively ugly. The new Sonata will be larger with better features and will for the first time be aimed at the Camry and Accord. The XG350 is being replaced with a model called the Azera, which will compete with the Toyota Avalon and possibly the Lexus ES330. Both new models look considerably less Korean/Chinese and more Japanese (more "sophisticated," as Car and Driver put it). There is a new Accent on the way, and the Elantra will probably be redesigned next year (Hyundai's model life cycles are considerably shorter than industry average). The next Elantra will probably be poised to compete with the Corolla and the redesigned 2006 Civic. At any rate, Hyundai is a company on the move. Right now, in terms of reputation and position in the US market, they are probably where Toyota and Honda were in the mid 1980's, which isn't bad.

VW is a sinking ship. Years of bottom-rung reliability have caught up, and the reputation effect is beginning to impact business. Sales are down sharply over the past couple years, and the new products VW has brought to market have bombed, to put it mildly. Millions upon millions were wasted on the Phaeton luxury sedan, sales of which underperformed company expectations by about 80%. An entirely new (and expensive) plant was built for the Phaeton. Sales are so low that a Bentley sedan is being created on the same platform in order to utilize more of the plant's capacity. VW is trying desperately to refocus. A new Golf has been released, as has a new Jetta. A new Passat is on the way for next year. This is all probably too little to late. The GTI, the performance Golf, will probably continue to be a niche car, but VW owners are increasingly jumping ship, tiring of poor reliability. The fun factor of the cars simply isn't worth the hassle anymore.

Economists like numbers, however, and it is numbers you seek. There is no place where you can readily get the information... The auto industry does not use quarterly measurements for sales; data is kept monthly and summarized annually. An additional metric that is worth exploring is inventory time, the focus of my dissertation. Manufacturers collect sales data, but there is a lag of about three to five months between vehicle production and collection of the data. When you count the lead time for production scheduling, it can take eight or nine months for sales data to affect production. In the meantime inventory buildup is an additional sign that things are going wrong at the retail end.