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The Detroit 3 versus Europe and Asia: the race for North America

Douglas R. Gilman, Industry Analyst, Automotive & Transportation, at Frost & Sullivan, recaps the biggest trends of the 2014 Detroit Auto Show

At this year’s North American International Auto Show (NAIAS), guests were not disappointed with the multitude of announcements and vehicle reveals. The Detroit Three needed to defend their home turf with the growing presence of foreign OEMS – six of the top ten selling vehicles in the US are built by foreign OEMs – and defend it they did.

Welcome to the ‘D’

While news was plentiful, it was Ford and Chrysler that stole the show, with potential segment changing vehicles. Ford kicked off the NAIAS with an all-new F-150: the United States’ best-selling vehicle for over 30 years has had a 700lbs (314kg) reduction in overall vehicle weight. The OEM achieved this by  implementing a military grade aluminum alloy body, partnered with an all-new high strength steel frame.

2015 Ford F-150 Reveal
2015 Ford F-150

The Ford marketing team has used a trifold approach to the new F-150, calling it tougher, with its new frame; smarter; and more capable, with its incredible weight reduction. The ‘smarter’ description stems from 11 class-exclusive features; changes include new LED headlights, an all-new eight inch productivity screen, and new apps geared specifically to the F-150. The facelift, both interior and exterior, gives little doubt that the F-150 will continue its dominance in the North American light vehicle sales market. Ford has also included a 2.7 litre, 4 cylinder turbo engine in this vehicle – something consumers have never seen on a full-size truck before.

For Chrysler, the 2014 NAIAS had been a long time coming. But the show saw the debut of the all-new 2015 model of the Chrysler 200, a vehicle which has suffered with underperformance of late. The expected late spring release of the 200 will feature an optional 3.6-litre V6 Penastar, or the standard 2.4-litre I4 Tigershark engine. Chrysler fully expects the 2015 version of the 200 to regain lost market share in the competitive mid-size segment – whether or not that will happen, however, is another matter.

The power of German engineering

Mercedes-Benz made a splash with four new vehicles, the most of any new domestic OEM: the concept S-Coupe, the S600, the GLA45 AMG, and, most importantly, the new C-Class. Similar to its under US$30,000 cousin, the CLA, Mercedes-Benz anticipates the new C-Class to set the industry standard for mid-size luxury vehicles.

The ancillary vehicles Mercedes also debuted were more in the premium sector – even for the luxury segment. However, for driving enthusiasts the GLA45 AMG goes from 0-60 in 4.8 seconds. Furthermore, the S600 is powered by a 6.0-litre V12 engine, ensuring the S600 is no slouch for the performance driver.

Mercedes was not the only European OEM making headlines: Volkswagen continued with their goal of introducing the most fuel-efficient vehicles to their already mpg-saving lineup. Last year, Volkswagen unveiled the CrossBlue featuring a plug-in hybrid diesel powertrain and has now unveiled the BlueMotion Passat concept. The technology behind BlueMotion features cylinder deactivation, improving the car’s fuel economy while avoiding hybridisation.

Alongside the Passat BlueMotion was the 2015 Golf R, a performance version of one of the world’s bestselling vehicles, equipped with a 2.0-litre turbocharged I4, paired with either a six-speed manual or Volkswagen’s newer six-speed dual clutch gearbox, taking the driver from 0 to 60 in 4.9 seconds. The Golf’s introduction into the North American market works to further Volkswagen’s goal of being the number one OEM in the world.

New market players

US: Top 10 Vehicles SoldWhen comparing Asian companies Toyota, Nissan, Honda, Hyundai and Kia, and their respective luxury brands, it was the South Korean brands that turned most heads at the NAIAS. Hyundai, for example, unveiled their all-new 2015 Genesis. With the previous generation Genesis earning North American Car of the Year honours in 2009, the next-gen 2015 model has some big shoes to fill. The sleek redesign really emphasises Hyundai’s push to make an impression on the luxury vehicle market, while maintaining their competitive price point: the starting Manufacturer’s Suggested Retail Price (MSRP) of the 2015 Genesis will be less than US$40k.

Honda, similar to its competitor Volkswagen, introduced a geared hatchback to the US, the 2015 Fit. The affordable and more spacious compact hatch has never fared well in the States, but Honda hopes to remedy that.

US Sales: Detroit 3 vs. Foreign OEMsBoth Kia and Nissan, meanwhile, brought slick sporty concepts and hinted at what’s in store for the future at both manufacturers. Nissan’s attractively-named Resonance may be a sneak peak of the next-gen Maxima. For Kia’s GT4 Stinger, while production is not in the foreseeable future, the vehicle could be the company’s first sports car and, with its sharp edges and futuristic grille, the Stinger would certainly garner a few looks.

The implications

For all other OEMs who geared up for one of the most important shows in the automotive calendar, their lack of mention does not mean that their announcements were inconsequential – quite the contrary.

Ford’s new aluminum F-150 should do nothing but remain ‘Built Ford Tough’. The Dearborn-based OEM has a stranglehold on the truck market. In addition, with the housing market on the rise, truck sales, as they have done historically, will follow. Ford have made all the right choices to cement their position as the country’s leading pick-up manufacturer. Despite the other Detroit two doing everything they can to keep up – including GM recently unveiling their small pick-ups – the segment is trending negatively.

Chrysler 200
Chrysler 200

Chrysler’s introduction of the all-new 200 could create a shake-up in the already competitive mid-size segment. While the new flagship sedan will not generate an earth shattering impact, the much improved 200 should steal some market share. Last year, the mid-size segment was a true battlefield. It’s hard to deny the redesigned Fusion made the most progress, expecting to increase its sales by over 100,000 units from 2012 to 2014. The all-new 200 will not produce numbers quite that impressive, however, but the upgraded vehicle should see some marginal improvement in market share. Similar to Jeep’s Cherokee, the new 200 will have a class leading ZF 9-speed transmission. Additionally, it features Chrysler’s unique all-wheel drive disconnect system, keeping fuel economy up and skidding down. Looking at the big picture, it will be incredibly difficult to catch the Accord and Camry. In 2013, both vehicles were more than 50,000 units ahead of the next closest competitor. The brand loyalty seen in both Camry and Accord drivers will more than likely hold steady for the foreseeable future.

With sales in North America reaching new highs year after year, luxury manufacturers are trying to keep pace with the growing demand for premium vehicles. In 2012, the main luxury players – Acura, Audi, BMW, Cadillac, Infiniti, Lexus, Lincoln, and Mercedes – made up roughly 10% of total US sales. For German OEMs that figure is cut in half. While the market is small, it is the only market for some, thus making it incredibly important. Between the German luxury OEMs, Mercedes dominates the mid-size segment with its C-Class. Mercedes’ new mid-size sedan will remain the best-selling vehicle in the segment and, truthfully, the only real competition will be the Lexus E-Series. While both the 2014 Car of the Year Cadillac CTS and the newly designed Lincoln MKS look great, neither are close to C-Class sales figures.

Volkswagen has always been an industry innovator when it comes to powertrain options: they truly are the standard for diesel offerings. Volkswagen claims to be the first OEM to introduce deactivation on a four cylinder engine, a feature which can be a double-edged sword. However, Volkswagen’s continued success with powertrain options has propelled it to being the automotive leader it is today. New innovations like the cylinder deactivation or the dual-clutch gearbox will only keep Volkswagen among the fuel efficiency leaders.

With respect to Japanese OEMs, they may have attracted some press or revealed a slick new vehicle, but when it comes to meaningful releases the conversation was short. Production and sales at Toyota and Honda lead the way, followed closely by Nissan and Hyundai-Kia. And this pecking order will certainly not be affected by any announcements made at the motor show: Toyota will continue to remain the top Japanese OEM, and Honda will continue to try and overtake it, while implementing the overarching Asia-Pacific theme of building-selling, for example, by bringing Fit production to its Mexican plant.

However, this is a big risk, as hatchbacks have never been popular in the US, so one can only consider that exports of the Fit to South America, where it is already built, or keeping it local in Mexico is in Honda’s ultimate plan. Volkswagen is taking that same risk with its globally successful Golf. The capacity constrained Hyundai-Kia, the steadfast Honda, the reinvented Nissan, and the leader Toyota will all continue to increase production in North America, expanding vehicle offerings and, in some cases, making North America their largest market, an unheard of claim ten years ago.

This article was first published in the Q1 2014 issue of Automotive World Megatrends Magazine. Follow this link to download the full issue

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