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Customer LoginsA subject almost as important as new products
A staple of the U.S. new vehicle industry is discussion of upcoming new products. Currently the buzz is all about the Volt, Leaf, Cruze, Fiat 500, Explorer and others. Soon other products will get into the limelight. I would suggest that there is a related topic almost as important as new products, and that is how often the products will be replaced. This subject, also known as the product life cycle, is exceptionally important for several reasons. Products with a shorter life cycle (i.e., replaced more often) need fewer incentives, have higher residuals, can address inherent quality issues more frequently, and maintain steadier volumes. The latter aids suppliers in planning and scheduling, among other things. A purely subjective comment: products that have been on the market without any substantial change in many years just "look old" compared to the surrounding newer offerings.
Generally the Asian-based OEMs have replaced their products more frequently than the domestic OEMs. Honda and Toyota have tried to maintain five- or six-year product cycles for most of the products sold here in the U.S., while the domestics frequently have let their products linger longer, sometimes approaching ten years. Recently, several domestic brands have begun to catch up in this area.
The OEM with fewer makes and models obviously will find it easier, and less expensive, to achieve competitive product life cycles. Honda in particular, with just two brands and a relatively small number of products for each brand, is at an advantage in this area. Ford's downsizing to just two makes (from six) will put it in a better position on this subject.
In contrast, both GM and Chrysler will continue to operate at a disadvantage. Even though GM has shed half its brands, it still has twice as many as Ford, Honda or Nissan. Chrysler will be the "new GM" in this regard in that the company soon will have to market models from six makes. Replacing all those models as frequently as their competitors will be a challenge financially and logistically.
Posted by Tom Libby, PolkInsight Advisor, Polk (10.01.2010)