Minivan Competitors Gaining on Chrysler
DaimlerChrysler’s dominant share of the profitable U.S. minivan market has eroded significantly this year as buyers turn from its aging products and flock instead to Ford, Honda and Toyota showrooms, an analysis of sales figures shows.
The slip holds promise for consumers, who will see big rebates and price discounts on Chrysler, Dodge and Plymouth minivans for the next 18 months--until DaimlerChrysler’s next remodeling, which is not expected before spring 2001.
But it could be bad for the company’s image and for investor confidence. DaimlerChrysler shares have fallen about 22% this year, and news that its minivan sales have slowed won’t help. After all, the old Chrysler Corp. invented the contemporary minivan 16 years ago and has owned the market ever since.
The company underestimated the competition, analysts say, particularly the strong showing of Honda’s redesigned Odyssey, a minivan most critics rate as the best of the breed.
“It’s typical of the Big Three. Detroit has misread the opposition in almost every segment in which it has been the leader,” said Wes Brown, an industry analyst with Nextrend in Thousand Oaks.
Still, the minivan sales decline doesn’t signal a fatal misstep by DaimlerChrysler’s usually savvy market planners, said David Healy, an analyst with Burnham Securities Inc.
The company last redesigned its minivans in 1996, and for almost two years afterward it stayed ahead of the pack, he said. And at a cost of about $1 billion for a major redesign, no auto maker can afford to redo high-volume vehicles like minivans every two or three years.
DaimlerChrysler spokespersons say the firm knew it would take a hit when competitors started unveiling their redesigned vans last year. Indeed, competitors have released 10 new or redesigned minivans since the DaimlerChrysler redesign three years ago.
If there was an error it was in not anticipating that Honda’s Odyssey would be as hot as it is. Odyssey sales this year are up almost 300%, and the van’s market share has more than tripled. DaimlerChrysler will be redesigning its vans, but the best guess--company spokespersons won’t provide a date--is that the new versions won’t be ready until May 2001.
Until then, the company plans to pump up its market share by offering deals on its vans that the competition can’t match.
On the other hand, the Odyssey is in such demand that most Honda dealers have lengthy waiting lists and in some cases can charge a premium well above the manufacturer’s suggested retail price of $23,400 for the base LX model. And many dealers are selling only the fully loaded EX models.
Minivans are so profitable--manufacturers net $3,000 to $6,000 on each, depending on trim levels--that DaimlerChrysler can afford to “do some re-pricing and incentives to keep the business going” until it has new designs to offer, said Ralph Sarotte, general manager for DaimlerChrysler minivan operations.
“We had anticipated that some of this [market share reduction] would happen,” Sarotte said. “Not only did Honda come out with a new product--which is a good product, probably the closest to what we offer--but the competition is increasing. So the fact that we’d slip in market penetration was anticipated. But do we like it? Hell, no.”
DaimlerChrysler remains firmly in the lead in the minivan race with a 38.2% market share, but that’s down from 43.3% a year ago.
In addition to Honda’s gains, Ford picked up almost 1 percentage point from strong sales of its year-old Windstar and Mercury Villager to bring its market share through September to 20.4%. Nissan Motor, whose Quest minivan is a twin of the Villager, rose to a 3.3% share, and Toyota, with its 2-year-old Sienna van, increased to 7.1%. General Motors dropped slightly to a 25.6% share as its minivan sales, though up almost 20,000 units from the first nine months of 1998, failed to keep up with the pack.
But in a year when minivan sales so far are up almost 100,000 units and are heading for a record 1.4 million units, combined sales of Chrysler, Dodge and Plymouth minivans were down by 9,500 units at the end of the third quarter.
“We used to go to bed every night scared that we’d wake up and find that someone had finally copied us, and now the nightmare has come true,” said Jim Hossack, former general product manager for Chrysler’s minivan unit.
Competition is heating up as other auto makers finally master the intricacies of a market segment that caters to buyers who demand roominess, style, comfort, performance and economy in vehicles derived from the clunky delivery van.
Hossack, now an industry analyst with AutoPacific Inc. in Tustin, spotted DaimlerChrysler’s slip when he noted that Honda’s share of the minivan market jumped to 4.7% for the first nine months of the year--up from 1.3% a year earlier.
He said Honda “seems to have the right product for the market right now--they’ve clearly got the minivan consumers want.”
Among other features, the Odyssey handles like a passenger car, has more cargo room than the Chrysler family of vans and offers power doors and a flexible seating system that enables owners to easily configure it for all sorts of cargo and passenger combinations.
Sarotte wouldn’t discuss specifics of DaimlerChrysler’s plans for its redesigned vans, but the company recently displayed a concept Dodge minivan with a 3.5-liter, 225-horsepower V-6 engine that bests the Odyssey’s segment-leading 210-horsepower V-6.
“You do a minivan from the inside out,” he said, “and when our time comes we’ll reestablish the respect we’ve had for the last 16 years.”
DaimlerChrysler shares rose 94 cents to close at $75.31 on the New York Stock Exchange.
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Gaining on the Leader
Minivan sales in the U.S. have kept pace with the rest of the auto market as it heads for a record year, but DaimlerChrysler has lost ground to its domestic rivals and fast-charging Japanese makers.
Sources: Automotive News Data Center, AutoPacific Inc.
