Like any Big Lie, this one's based on fact. Automotive News [sub] reports "Through April, Chrysler reduced fleet sales by about 45,000 units, or 17 percent, from a year earlier. GM cut fleet sales by nearly 40,000 units, or 14 percent. And Ford Motor's fleet sales fell 25,000 units, or 9 percent." Both AN and our good friends at Autoblog are happy to parrot the "admirable restraint" explanation. In other words, Detroit could dump sales into fleets, but chooses not to to protect vehicle residuals. AN: "GM is not going to reconsider its decision to reduce fleet sales, said Brian McVeigh, GM's general manager of fleet and commercial operations. Residual values have been rising since GM started cutting daily rental fleet sales three years ago." Autoblog: "Showing great discipline amid declining sales, the Detroit 3 have held back on the temptation to dump vehicles on fleet customers in order to boost numbers." Bullshit. First, the rental car business is in the crapper; they're buying less cars. Second, ALL fleets are holding onto their vehicles longer. Third, they're not buying Detroit gas hogs (or even their relatively thirsty cars). Fourth, reflecting U.S. sales trends, fleet buyers are switching to more fuel-miserly transplant products (ToMoCo sold 100k units into the fleets in the first four months of '08). Fifth, if you think WE'RE nervous about Detroit's prospects, how would YOU like to be a finance company that gets stiffed with a hundred thousand cars made by a bankrupt automaker? And sixth, how gullible IS the U.S. automotive press anyway?
Find Reviews by Make:
And reason seven: they still are selling to fleets. They are just doing it via dealers, which means it is recorded as a private sale.
The rental companies are finding bargains from Hyundai/Kia and high resale value vehicles from Toyota. Perhaps the real headline should be: Detroit Loses Share in Yet Another High Volume Business Sector. Here in California you see more and more Camrys in the rental fleets, yet Toyota resale values are holding up fine.
John Horner :
… Here in California you see more and more Camrys in the rental fleets, yet Toyota resale values are holding up fine.
For now, perhaps … but what happens when thousands of late-model Camrys start appearing on the used market at prices that undercut private-owner trades? This won’t be good news for lease residuals, as many customers of the Big 2.8 could testify.
Justin Berkowitz:
Pretty sure, for legal reasons, they’ve ALL got to go through a dealer for the Pre-Delivery Inspection.
I work at a GM dealer, we’ve handled new cars for one of the more Enterprising outfits for years.
Sometimes the Green One orders 2 cars, sometimes they order 34.
y2kdcar: They might not undercut private-owner trades, except insofar as they’re in worse condition
Just got to ask, but aren’t there any stories about stupid management at any of the foreign nameplates? Or are all the bozos in Detroit?
As I’ve always asked to these “fleet” numbers include the dealer fleet sales departments (I’d bet another 6%-10% of that reduction in fleet sales when that avenue). Can anyone confirm this as my local GM dealer built a fleet sales building to accomodate growing fleet sales via the dealer (in other words they carry fleet inventory at the dealer now instead of factory direct orders).
“Just got to ask, but aren’t there any stories about stupid management at any of the foreign nameplates? Or are all the bozos in Detroit?”
Didn’t Hyundai have some mishaps in its US office? Management and PR and stuff?
“GM is not going to reconsider its decision to reduce fleet sales” said Brian McVeigh, GM’s general manager of fleet and commercial operations.
In other “But Who’s Askin’?” news, former NFL star Michael Vick said he would not consider signing any product endorsement contracts; comedian Chevy Chase said he would refuse any offer to host another talk show; actor Ben Affleck said he would not make Gigli II; and White House correspondent Helen Thomas said she would never, ever consider leaving her AP job to become a high-priced call girl.
Let’s take your points one by one:
First, the rental car business is in the crapper; they’re buying less cars.
I’d say fewer cars, but OK.
Second, ALL fleets are holding onto their vehicles longer.
Prove it. Every single fleet. Not just Avis, Hertz, and Budget, but Billy-Bob’s Rentals too. I realize the big boys generally are – my last rental had 30K miles, but saying “ALL” invites a claim for proof, and any single fleet that’s not proves you wrong.
Third, they’re not buying Detroit gas hogs (or even thirsty cars).
So all Detroit cars are thirsty and Japan’s are gas sippers? This old stereotype is what got me to write. CAFE averages, sure, but car by car, it just doesn’t hold up.
Fourth, reflecting U.S. sales trends, fleet buyers are switching to more fuel-miserly transplant products (ToMoCo sold 100k units into the fleets in the first four months of ’08).
Maybe they want Toyotas in the fleet, and maybe they’re buying from ToMoCo, et. al., because Detroit isn’t selling them enough discounted metal.
Sixth, how gullible IS the U.S. automotive press anyway?
What happened to five? But I won’t argue this point.
Here I go again, making sure that everyone is being truthful. Note: I only have complete numbers for Ford because they have the most open explanation of their retail/comm-gov/rental break-downs. I dare someone to ask Toyota how many of their Corollas were fleet last month.
First, fleet sales at the domestic brands are down. Fleet sales at Toyota and Honda are up so far this year. Most of Honda’s growth has been fleet. And Toyota’s decline would have been worse if not for fleet. The rental market may be shrinking, but that means Toyota and Honda are just taking a larger portion of a smaller pie.
Second, dealers who sell to rental companies almost NEVER declare them retail. The frequency of such an occurence does not vary much between manufacturer. Where fleet versus retail gets hard to figure out is commercial/business buyers who buy a single vehicle or maybe two. Not the contracts with Avis/Hertz/Enterprise/etc. Let’s not over-inflate something to support our contentions.
So, let’s break out some numbers. Ford’s rental sales are off about 30% this year. Their corporate and government sales are just about flat so far (these tend to be more profitable, and in fact, several of Ford’s vehicles are designed for this market). Ford is currently headed for about 10% rental mix, 25% corporate/gov, 65% retail (or so). Don’t use this for individual models, though, as the Focus is above 90% retail right now, for example. The F-series and E-series tend to be heavily fleet because of business/gov buyers, not because of rental.
Toyota is up to about 11% fleet. Last year, their fleet break-down was about 15% comm-gov/85% rental. Even if they’ve improved that ratio slightly (and let’s give them the benefit of the doubt), they are headed for 8-9% rental mix. Sounds pretty close to another auto company generally bashed for fleet “dumping.”
Nissan fleet was up something like 100% last year to around 10% of their sales – about 90% of them rental. I have seen no data for this year.
Honda upped their fleet exposure 200% last year. Granted, it was still only 3% of sales, but it too was heavily rental fleet. Half of Honda’s growth last year was fleet, and that trend has continued into this year. It’s not high enough to really hurt them, but it is in stark contrast to just two years ago when fleets were maybe 1%.
And some of the cuts/increases are honest cuts/increases driven by the manufacturers. Rental companies aren’t just waltzing to Honda dealers because of resale value, just as the domestic companies aren’t losing rental sales just because they market is down about 10% this year.
I just want this to be a real, honest and truthful debate about fleet sales.
J_slez: Doh! The fifth reason (finance co. nervousness) hit the cutting room floor. It's back now, after checking with my contacts. Also I did not mean to impugn Detroit's ability to build reliable, affordable, fuel-efficient automobiles. Perish the thought. RobertSD: It's certainly true that Toyondissan are upping their fleets sales. This fact has not gone unremarked on this site. In other words, we've pointed this out before. And will do again. BUT And some of the cuts/increases are honest cuts/increases driven by the manufacturers. I was with you right until that point. Where's the evidence for this assertion? I know it's hard to prove a negative proposition, but common sense tells us Detroit would demonstrate about as much "restraint" re: their promise to curtail fleet sales as they have with their promise not to up incentives (i.e. not).
Prove it. Every single fleet. Not just Avis, Hertz, and Budget, but Billy-Bob’s Rentals too. I realize the big boys generally are – my last rental had 30K miles, but saying “ALL” invites a claim for proof, and any single fleet that’s not proves you wrong.
Wow. Just…wow.
RobertSD – Thanks for providing some Truth about the Fleet markets. I wonder how long it’ll be until automakers have full transparency of sales mix reporting for Rental / Govt / and Retail sales to customers.
The Fleet-Game is impossible to figure out from the outside looking in. So the consequence is that people piece together odd conclusions with the fragments of information they’re presented.
You’re only fooling yourself if you believe the Japanese nameplates somehow resist the temptation to “dump” Fleet units. Instincts tell you it’s safe to accuse the Detroit 2.8 of massive fleet dumping because most people can quickly visualize Sebrings, Fusions, and G6s forming a glut in a fleet lot. But you should not dismiss are the Jettas, Corollas, Civics, Sonatas, and others that are on those lots as well.
As it stands, the 2.8 dug themselves a perception-gap and are in their hole because of their own poor decisions. But if there is any value in communicating the Truth; then there should be awareness drawn to the fact that the Japanese Transplants are making the same mistakes.
Until the OEMs openly report their sales numbers by category the Big 2.8 have an uphill climb.
One Japanese car that has been ‘dumped’ into rental fleets more than most competitors is the Mazda6. Resale values have suffered as well as their value as a new car.
Walking into a Mazda dealership right now, $17,500 will buy either a similarly-equipped 2008 Mazda3 i Touring Value 4-door or a 2008 Mazda6 i Sport VE (Value Edition) 4-door, despite size/class difference. The Mazda3 has an MSRP of $18,145 while the Mazda6 is $21,550 on the window sticker.
I almost bought a Mazda6 two years ago, but went with the Mazda3 5-door instead. Dodged that bullet!
Beelzebubba : One Japanese car that has been ‘dumped’ into rental fleets more than most competitors is the Mazda6. Resale values have suffered as well as their value as a new car. Right again! We tried to draw attention to this fact a LONG time ago. We've had numerous reports of airport rental lots stuffed with Zoom Zoom models. Clearly, Ford is using fleet sales to move Mazdas. But FoMoCo doesn't break out fleet sales for the brand.
A fun link for ya’ll who are more interested about this topic. RL Polk publishes their fleet mix statistics and Automotive Fleet (I’ll let you guess what this company specializes in) has published some older Polk Data.
Here’s some older detail on fleet registrations. The validation on Mazda6 fleet mix is very evident if you view the 2006 MY data.
http://www.automotive-fleet.com/Statistics/
And here’s some summary data on 2005 MY registrations:
http://www.automotive-fleet.com/Statistics/StatsViewer.aspx?file=http%3a%2f%2fwww.automotive-fleet.com%2ffc_resources%2fstats%2fAFFB06-i.pdf
Import brands were 14.0% of passenger car fleet sales for 2005 model year registrations. For 2006 Model year Polk reported 14.4%. (Edit: Man these .pdf files are a pain to sort out). Anybody want to hypothesize whether or not their mix % has increased further for 2007 and 2008 Model Year?
As with all things, you need to pay them big bucks for up-to-date information. But hey, everybody wants to make money.
Just got to ask, but aren’t there any stories about stupid management at any of the foreign nameplates? Or are all the bozos in Detroit?
Bite your tongue, good sir! It’s nigh impossible for executive who live outside of Detroit to do anything remotely foolish!
RF –
Ford does not have control over Mazda’s sales channels. Ford cannot somehow use Mazda to fill fleets in order to spare its other brands. Ford cannot count Mazda’s sales as its own (and doesn’t) and so cannot break out the fleet percentages on the 6 or others. Ford and Mazda are, more or less, two independent companies whose product planning and development resources work closely together and share proprietary information because of Ford’s stake in Mazda. It ends as soon as the cars’ platforms are developed – Ford doesn’t even design bodies, interiors or some drivetrain components for Mazda. Financials are completely separate.
What irks me the most is that Toyotas and Hondas almost always rent way above class. That is, a Camry is priced as a premium car, several classes above the midsize american cars that it allegedly competes with. That Toyota and Honda are filling this premium rental car segment will probably help limit their exposure to fleet value depletion.
I rent a lot of cars for my travels, and I never see Camry’s or Accord’s classified as luxury vehicles. If anything, the Accord is sometimes classified as “premium” class (ie – boat), often filled by notable companions such as the Grand Marquis and the Buick Lucerne. The Camry is never anything but standard or full-size, same as the Fusion, Altima and Malibu. Neither car is categorized as several classes above their American (and Asian) counterparts.
I’m due to pick up a Hertz vey-hickle from SFO in a couple of weeks. When booking the Camry/Accord/Mazda 6 option it was much more expensive than a generic “woolly mammoth”-mobile from GM. Mrs T&C wanted a Volvo S80 but thats far too much.
I have no klew what some auto makers do, but Ford dealers handle all the fleet sales, and have for decades. Even when Ford owned Hertz, the cars went thru the dealers.
National has a fleet of Toyota Avalons, rented one in Charlotte last month. The other cars available in this class were a Prius (too small inside for us), and the Buick Lucerne…a bloated pile of miseries that offers no power adjustable pedals or a telescopic wheel…two necessities when one driver is 6-5, the other 5-3.
When the Lucerne was introduced, I asked the Buick rep at the LA Auto Show why these two features were not available. She told me…”Our customers didn’t ask for them.”
If the competition offers them, why doesn’t Buick I asked her. With this outlook, you won’t get too many new customers.
The sales figures prove it…the POS hasn’t sold worth a damn.
btw: Shop around for rental car rates, don’t believe what AAA says about saving with Hertz’s plan. I’ve found Hertz to be higher across the board than anyone else.
In Charlotte, the National rate for the Avalon for 11 days was $323.00 LESS than Hertz wanted for a Fusion!
RobertSD – Could this be due to the NGV sales of the Civic (it’s major sales outlet) which has been increase sales to gov’t and municipal customers or the major push by municipal fleets that are adopting practical hybrid cars such as the Prius and Hybrid Civic.
I also don’t believe that Honda’s gain in sales this past year have only been due to fleet sales. It is b/c of their focus on efficiency and at time of gas approaching $5 a gallon – people look towards those companies that did not swear off small efficient cars in their rabid quest for big vehicle profits.
I can confirm that the Toyota Sienna is a “premium” van at Alamo, while the Chevy Uplander is a “standard” van.
I will also confirm that the Toyota Sienna was worth every penny of the extra $400 we paid for the week. We didn’t pay $400 more to drive a Sienna….I paid $400 more to AVOID an UPLANDER. After all, we wanted to enjoy our vacation.
Fair riddence, Mr. Uplander. See ya in hell.
It used to be that the rental car agencies could get vehicles for basically free from the Detroit 3. What would happen is it would be sort of a lend/lease sort of deal where the rental agency would pay almost nothing for use of the vehicle for a year or two, and then the automaker would get the used vehicle back after that time, forcing them to dump them on the used market (lowering resale values for everybody else). They quit doing this, and they also cut back on straight selling extremely discounted vehicles. One of the main sources of these cheap vehicles was the old Taurus, which was discontinued and the plant was closed in late 2006.
This is a real reduction. However, pretending that fleet sales for Honda are significant is a lie. They basically don’t do straight fleet, other than for those powered by alternate fuels (natural gas, hybrids, fuel cells). Of course, individual Honda dealers can sell their cars to whoever they want to, including fleets of all kinds.
Toyota does fleet, but they keep it limited to about 10% of sales and always have.
Chrysler had previously picked up some of the sales that Ford and GM had quit doing, although I guess they are cutting back too. Hyundai/Kia and Mitsubishi are also becoming players here. But a lot of it is simply that the rental agencies are keeping cars longer now that they are no longer free or nearly so.
Geotpf:
I guess they are cutting back too.
The whole point of this piece: they ain’t cutting back nothing. The fleet market is disappearing underneath their feet and they’re taking credit for cutting back. Hence “the big lie.”
Toyota is up to about 11% fleet. Last year, their fleet break-down was about 15% comm-gov/85% rental. Even if they’ve improved that ratio slightly (and let’s give them the benefit of the doubt), they are headed for 8-9% rental mix. Sounds pretty close to another auto company generally bashed for fleet “dumping.”
You had me until the last sentence, which is inaccurate. If the Big 2.8 had fleet sales of only 8-10%, that would be a substantial improvement from where they are now.
The domestics have traditionally had fleet sales above 20%, with certain models going to fleet at rates of 50% or more. This is nothing at all similar what Toyota is doing, and certainly nothing resembling Honda, which has close to no vehicles going to rental at all.
The rental situation can be summarized as follows:
-The domestics dump many cars into rental fleets. Their market share of rentals is much higher than their retail market share, and I’m guessing that it’s probably going to stay that way. They are attempting to cut fleet sales, but if they keep building stuff that retail customers don’t want to buy, those cars will end up in fleets because selling to Hertz is better than letting them rot.
-The loss of domestic product is being offset largely by the Koreans, who built their factories before they created the demand for the cars themselves. Their goal is to sell what they can to whom they can, putting volume onto the streets and building retail market share over time as their reputation grows. If they succeed, they will eventually have a declining presence in the rental market, but for now, much of their inventory ends up there.
-The Germans and Honda send almost nothing to rental. They aren’t even a factor in the rental market.
-Toyota fleets a few cars in modest numbers, to manage their factory capacity. Nothing close to the domestics at all, and Toyota would likely cut production before ever hitting the Big 2.8’s fleet ratios.
-The Mazda 6 has had quite a few cars go to fleet, because the car was unpopular. If they succeed with the next model with retail customers, they’ll try to get out of the fleet market.
Don’t get me wrong, it’s not all of Honda’s growth, but it is a significant portion. And I guarantee you that it is not just Honda’s upping the CNG fleet. The increase was for 38,000 units last year (19k in 2006 to 57k in 2007). They don’t even produce that many CNGs. Honda dealers have been selling to the regular old rental companies as well as city rental fleets like city carshare programs. But why don’t you try to get some transparency from Honda. At least Ford typically breaks out their increases/decreases in fleet numbers even if they don’t give actual numbers. More than I can say for Honda or especially Toyota.
But I’m done with this topic. Clearly, if Detroit sells a car to a fleet it is necessarily bad, no matter whether it’s gov/comm/rental. But if Toyota and Honda fleet numbers start climbing, even if it’s mostly to rental fleets, it’s because they are making good business decisions. Got it. I’ve learned my lesson.
Got it. I’ve learned my lesson.
Actually, I don’t think that you have.
Fleet sales are like chocolate cake. It’s fine to have a little bit, but if you base your diet on it, you’re going to have a problem.
10% of sales going is not a big deal, particularly if the rental agencies are paying pretty high prices for the car. The residuals will be retained, and the reputation of the cars will remain intact.
This is apples and oranges to GM dumping a quarter of its entire inventory, including 80% of some models and 50% of others to rental, all at steep discounts, and putting cars on the road that are going to ultimately convince renters that they’d never want to own one.
The best comparable to the domestics here is Hyundai, with their very high fleet numbers. But the difference is that Hyundai is attempting to convert renters into buyers by providing a generally decent product that might generate some conquest sales.
They don’t intend it to be a permanent condition. In the short run, it won’t be great for residuals, but if they can bring more retail buyers into their showrooms, it may pay off. It’s a risky strategy, though.
Robert Farago :
June 17th, 2008 at 11:48 am
Geotpf:
I guess they are cutting back too.
The whole point of this piece: they ain’t cutting back nothing. The fleet market is disappearing underneath their feet and they’re taking credit for cutting back. Hence “the big lie.”
I think it’s a little of both. That is, it used to be that the Detroit 3 basically gave cars they couldn’t sell at retail to the rental agencies for free or nearly free. They’ve stopped doing this (or greatly reduced doing so at least), and that’s a good thing. Of course, this means that now that the rental car agencies have to actually pay for their cars, they are buying less of them. Now, there may be additional decreases in sales from the rental car agencies, beyond the whole “well, we aren’t getting them for free any more” bit, but it’s hard to break that down precisely.
There needs to be a distinction between fleet sales to rental car companies, and fleet sales to governments or corporate fleets.
Dumping the most of a vehicle’s production (for example, the old Taurus) on rental car companies is considerably different than, say, selling F-150s to utilities or Crown Victorias to police departments and taxi cab companies. The former destroys resale value and brand identity. The latter doesn’t – the vehicles are used until they are worthless, and often their use is a testament to their durability (Crown Victorias as taxi cabs, for example).
It’s also entirely plausible that a company can be cutting sales to rental car companies while aggressively maintaining sales to government and corporate fleet customers, because the latter are profitable and don’t destroy brand image (at least, not as much).
As for Honda – I’ve noticed that most car-sharing companies buy Civic sedans. That would count as a sale to a rental car company, but somehow it garners a more upscale, “green” patina to the rented vehicle.
Pch101 –
Sorry, had to jump back in here because so many of your “stats” are off. GM is no longer 25% of sales to rental fleets. Ford and GM both have total fleets around 35% but most of that for both companies is to commerical buyers buying trucks for work or cutaway and vans for work – not cars for rental companies. Those sales are TARGETED. Ford designs and builds the E-series so that 150,000 fleet buyers come and buy one every year for work. Ford will be about 10% rental this year. GM may be about 12-15% (it’s not exactly clear). Toyota will be 8-10% rental (11-12% or so overall, likely). Nissan will be 8-10% and slightly more overall. How are they out of whack? GM maybe a little, but Ford? Just answer that question. Their *total* fleet, yes, is high, but Hertz isn’t taking delivery of 400,000 F-150s, Super Duty’s and E-series every year.
This is the point I want to clarify. Ford and GM sell a lot of “fleet,” but they have vehicles that are designed with fleet operators (contractors, construction, delivery, ambulance, etc) in mind. Their rental car break-down is drastically smaller than just 2 years ago. Neither is anywhere near 20% right now. And they have accomplished this new mix not by hiding fleet sales or failing to dump vehicles in a shrinking rental market but by raising the price of cars sold to rental fleets to levels that keep demand in check.
I can’t speak for Chrysler as I have not seen good stats on them, but for Ford and GM, all of your contentions that somehow they are still dumping in great quantities (I’m sure they do controlled sales to stablize production from time to time) are just off.
GM is no longer 25% of sales to rental fleets.
Well, that would explain why they are losing market share like it’s going out of style. If they won’t sell them to Hertz, then they end up without customers at all.
A desire to cut fleet sales does not make the product any more compelling than it used to be. The problem with the domestics is that they have largely failed to replace their rental car designs (G6, anyone?) with desirable vehicles that the public would like to buy using their own hard earned money.
It isn’t enough to make bold proclamations about what they intend not to sell. To stay in business, they actually need to also sell something.
In any case, I have no doubt that as the data becomes available, you’re going to find that those fleet numbers will end up being much higher than you think.
Detroit still builds an abundance of dead weight. If they don’t sell that dead weight to fleets, then they’re going to be collecting rust in parking lots in the Midwest. They will have no choice but to send them to fleet.
Ford and GM in particular will try to hide the figures because they know that the stock analysts are watching them. But selling to fleets is preferable to selling nothing at all.
I recently rented a car from Avis while I was in Arizona on a business trip. I had my pick of a Cobalt, G6 or Grand Prix. My initial thought was, “Skip the blindfold and cigarette and just shoot me now!”
I ended up with the G6 for a week and would do anything possible to avoid driving it. It’s really sad that anyone would choose to buy that car and saddle themselves to payments for five years. I had the same feelings about Tauruses (or Tauri) back when I used to travel more and get stuck with those.
Drive a few of the gems that make it into fleets from Detroit and it’s blatantly clear why they’re in such deep sh*t!