Issue: Jan 2003


Windecker



Is Share Erosion Inevitable?

by Ray Windecker

The upper mid-size car segment, home of Camry, Accord, Taurus and 23 other brands, is the automotive industry’s largest segment, car or truck, and consistently pushes out more than 2.5 million units a year. It is a vital segment for any fullline manufacturer.

Running against the truck-growth trend, the sedans and station wagons that inhabit the mid-size car segment remain a growth market. As shown in the memo line of the following graph, upper-mids moved up from 13.3 percent of all car/truck sales in 1990 to 15.6 percent today.

Much has been chronicled of the long-term encroachment of non-U.S. brands into this vital segment. The collective managements of the U.S. brands have correctly been chided for somewhat ignoring the lucrative midcar market to concentrate on the even more lucrative truck market.

There is a constant and reasonably correct cry by those in the media and analytic trades that the U.S.-brand people should “do something” about their share erosion. Products that are more appealing, better quality and have more frequent product turns are often suggested. It is reasonable to assume that a dose of attention to these basics would be well advised.





RULES OF THE GAME
1.Ultimately, even the best get squeezed.
2.U.S. brands are often criticized for transgressions ignored in others.
3.There is only 100 percent.

Yet there is the 100 percent problem. As more and more products are moved into a market, the original inhabitants lose share. The Wall Street Journal held a near monopoly, then experienced a mammoth loss in share of the national newspaper market when USA Today was introduced. The three major TV networks took a horrendous market share hit as UHF, independents, cable and wireless moved in on top of the originals.

It is well documented that the original U.S. brands are losing share of the upper mid-size car segment to overseas brands. However, the 100 percent rule applied to the segment affects Honda as well as the U.S. brands. Honda’s Accord, introduced in 1976 as the first high-volume mid-size Japanese vehicle, was by 1990 a well-established brand. It became the best selling car in the United States with 22.1 percent of the segment and eclipsed — by a wide margin — rival Toyota’s Cressida. Honda’s Accord was, in 1990, firmly positioned at the top of the segment and was ripe to be squeezed along with the midsize brands. Within the 1990-1995 years, coincident with the introduction of Toyota’s Camry, Honda lost a fourth of its segment share as import-oriented buyers then had another choice, and by 1997, Camry passed Accord in total sales. Also, as a point of considerable interest, since 1990, Honda has lost segment share at a greater rate than either General Motors or Ford.

As for the others, Chrysler has lost almost half of its 1990 share of segment, Nissan is back in the game with the larger Altima and the Koreans are creeping into the segment, thus leaving less share for the current members of the mid-size club.

It is a reality that the original or peak shareholders within any 100 percent confine, be that for the entire industry or a specific segment or a component, will over time without heroic and faultless management efforts invariably lose market share as second generation producers and products move into the market. That rule is a truism for every manufacturer and supplier.







 
Under the onslaught of Toyota’s Camry, Honda’s Accord has lost segment share faster than any domestically built vehicle.



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