2006 Detroit News Domestic Vehicle Avoider Study

2006 Detroit NewsDomestic Vehicle Avoider Study

Conducted for The Detroit News by J.D. Power and Associates

December 11, 2006

2Source: 2006 Detroit News Domestic Vehicle Avoider Study

Background

• Detroit News commissioned J.D. Power and Associates to conduct aproprietary research survey to gather consumer opinions regarding likelihood to consider purchasing an American vehicle.


Objectives

• Understand the reasons why consumers will not consider purchasing American vehicles

• Determine the overall perception—among avoiders—of American, Asian, and European vehicles

• Identify key areas of needed improvement for American vehicles to gain shopper consideration

• Examine demographic characteristics as they relate to above objectives


Methodology

• Internet survey – An online survey was developed to gather consumer opinions for avoidance of

American, Asian, and European vehicles– Average survey completion time was 9:37 (min:sec)

• Sample supplied by a research panel company– Survey fielded to Opinion Outpost panel members and balanced to U.S.

census characteristics

• Target returns – 500 new vehicle shoppers that plan to purchase/lease in the next 24 months

• Fielding period– Open: Monday, Nov 27, 2006– Close: Thursday, Nov 30, 2006


Origin of Brands Considered

83%79%

41%

0%

25%

50%

75%

100%

American Asian European

% C

onsi

dere

dAmerican vehicles lead in purchase consideration

Base: Total Industry (n = 500)

Origin of BrandMost Likely to Purchase

49%

40%

11%



Origin of BrandMost Likely to Purchase

49%

40%

11%


2006 U.S. Light Vehicle Sales*YTD through Nov. 2006

56.6%

39.4%

4.0%


Actual new-vehicle sales in 2006 compared to the origin of the “most likely” brand consumers intend to purchase in the next two years

Base: Total Industry (n = 500)

* Source: Power Information Network U.S. Sales Report, November 2006


European vehicles are avoided most frequently, primarily due to purchase and ownership costs

Avoidance By Brand Origin

4% 4%16%14% 12%

30%18% 17%

46%

0%

25%

50%

75%

100%


% A

void

ing

Probably Would NOT ConsiderDefinitely Would NOT Consider

n = 88 n = 83 n = 231


American vehicle avoiders select twice as many avoidance reasons as import avoiders.

n = 88 n = 83 n = 231

Average Number of Avoidance Reasons Mentioned By Origin

7.0

3.5 3.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0


Avg.

# o

f Avo

idan

ce R

easo

ns


3%14%15%15%16%17%18%

20%22%22%23%

26%27%

32%33%33%

36%40%

42%42%

63%70%70%

0% 20% 40% 60% 80% 100%

Vehicles cost too much to insureNegative information from the Internet

Warranty is not good enoughDealerships are poorly managed

Negative newspaper/magazine articlesLacks certain options and features

Costs too much money (price, payment, etc.)Not environmentally friendly enough

I don't like the image the vehicles portrayConcerned about safety

Current financial problems of the 'Big 3'I don't want an American brand vehicle

Vehicle technology is not advancedI previously had a bad ownership experience

Lacks performance (power, handling, etc.)I don't like the exterior styling/design

Someone I know had a bad ownership experienceDoesn't get enough gas mileage

Vehicles are bland or boringMaintenance/upkeep too expensive (tune-ups, etc.)

Vehicle would depreciate too fast (poor resale value)Poor quality (workmanship, materials, etc.)

Concerned about reliability (breakdowns, etc.)

% of American Avoiders Mentioning ReasonBase: American Avoiders (n=88)

American vehicles are avoided by 18% of respondents. Avoidance is chiefly due to perceived quality concerns.

Avoidance Reasons – American Vehicles


32%

33%

33%

36%

40%

42%

42%

63%

70%

70%

9%

3%

5%

0%

13%

3%

5%

8%

18%

26%

0% 20% 40% 60% 80% 100%

I previously had a bad ownership experience

Lacks performance (power, handling, etc.)

I don't like the exterior styling/design

Someone I know had a bad ownership experience

Doesn't get enough gas mileage

Vehicles are bland or boring

Maintenance/upkeep too expensive (tune-ups, etc.)

Vehicle would depreciate too fast (poor resale value)

Poor quality (workmanship, materials, etc.)


% of American Avoiders Mentioning Reason

Most Influential ReasonTotal Avoidance

Base: American Avoiders (n=88)

Reliability, Quality, and Fuel Efficiency are the most influential reasons that respondents avoid American vehicles

Top 10 Avoidance Reasons – American Vehicles


208

270

234

0 50 100 150 200 250 300

Asian Vehicles

European Vehicles

American Vehicles

Problems Per 100 Vehicles After 3 Years of Ownership

20%

19%

70%

0% 20% 40% 60% 80% 100%

Asian Avoiders

European Avoiders

American Avoiders

% of Avoiders Due to Concerns About Reliability

Avoidance Due To Perceived Reliability, By Origin

Vehicle Dependability* By Origin

* Source: J.D. Power and Associates 2006 Vehicle Dependability Study (VDS)

American vehicles are avoided due to perceived reliability concerns much more frequently than imported vehicles. Actual reliability of American vehicles shows a more competitive outlook.

Better Worse


114

147

128

0 20 40 60 80 100 120 140 160

Asian Vehicles

European Vehicles

American Vehicles

Problems Per 100 Vehicles After 3 Months of Ownership

14%

3%

70%

0% 20% 40% 60% 80% 100%

Asian Avoiders

European Avoiders

American Avoiders

% of Avoiders Due to Concerns About Quality

Avoidance Due To Perceived Quality, By Origin

Vehicle Quality* By Origin

American vehicles are avoided due to perceived quality concerns much more frequently than imported vehicles. Actual quality of American vehicles shows a more competitive outlook.

* Source: J.D. Power and Associates 2006 Initial Quality Study (IQS)

Better Worse


$168

$120

$114

$41

$85

$49

$209

$205

$163

$0 $50 $100 $150 $200 $250

Asian Vehicles

European Vehicles

American Vehicles

Avg Annual Maintenance Costs (1 - 3 Years of Ownership)

Routine Maint. & Oil Changes Unscheduled Repairs

39%

60%

42%

0% 20% 40% 60% 80% 100%

Asian Avoiders

European Avoiders

American Avoiders

% of Avoiders Due to Concerns About Quality

Avoidance Due To Perceived Maintenance Costs, By Origin

Average Annual Maintenance Costs At Dealership* By Origin

* Source: J.D. Power and Associates 2006 Customer Satisfaction Index Study (CSI)

Maintenance costs are the fourth-most common reason that American vehicles are avoided, and that is likely due to the expectation of higher unscheduled repairs. Based on CSI, American vehicle owners spend slightly more on unscheduled repairs, but spend much less overall on maintenance in the first 3 years.


704

722

629

300 400 500 600 700 800 900 1000

Asian Vehicles

European Vehicles

American Vehicles

Mean Index Score

4%

14%

40%

0% 20% 40% 60% 80% 100%

Asian Avoiders

European Avoiders

American Avoiders

% of Avoiders Due To Gas Mileage

Avoidance Due To Fuel Economy, By Origin

Rating of Fuel Economy* By Origin

American vehicles are avoided due to fuel economy much more frequently. This is in line with the low fuel economy score thatAmerican vehicle owners rate in the 2006 APEAL study.

* Source: J.D. Power and Associates 2006 Automotive Performance, Execution, and Layout Study (APEAL)

BetterWorse


Top 2 Most Influential Avoidance Reasons:

Financial Problems of the Big 3

57%

43%

Finances of Big 3 Other

While 23% of American vehicle avoiders are discouraged by the Big 3’s financial problems, 9% of respondents plan to avoid imports seemingly in support of the Big 3 American brands

n = 88 n = 256

Avoidance Due to Financial Problems of the Big 3

23%

9%

0%

25%

50%

75%

100%

American Import

% o

f Avo

ider

s


Verbatim Comments

• “1. Cost 2. Reliability 3. Resale value 4. fuel efficiency”

• “better quality so that cars will last beyond 100000 - also better warranties”

• “stop killing the resale value… redesign the cars give them a "new look””

• “one thing I would like to see is different looking vehicles, they all look the same”

• “Put the Costumer FIRST, and not the share holder!!!”

• “American vehicles need to have extremely better gas mileage, cost effective for maintenance & better pricing.”

What can American brands do that would encourage more people to consider buying American?


Base: Asian Avoiders (n=83)

17% of all respondents avoid Asian branded vehicles. Most of these (61%) avoid simply because the brand is Asian (or not American).

Avoidance Reasons – Asian Vehicles

1%1%2%2%

4%5%

7%10%11%12%13%14%14%

16%16%17%18%

20%20%

23%27%

39%61%

0% 20% 40% 60% 80% 100%

Not environmentally friendly enoughNegative newspaper/magazine articles

Warranty is not good enoughNegative information from the Internet

Doesn't get enough gas mileageVehicle technology is not advanced

Dealerships are poorly managedVehicle would depreciate too fast (poor resaleI previously had a bad ownership experience

Vehicles cost too much to insureCurrent financial problems of the 'Big 3'

Poor quality (workmanship, materials, etc.)Lacks certain options and features

Someone I know had a bad ownershipI don't like the image the vehicles portray

Vehicles are bland or boringLacks performance (power, handling, etc.)

Concerned about safetyConcerned about reliability (breakdowns, etc.)

I don't like the exterior styling/designCosts too much money (price, payment, etc.)

Maintenance/upkeep too expensive (tune-ups,I don't want an Asian brand vehicle

% of Avoiders



Not wanting an Asian brand, for the sake of its origin, is the most influential reason that Asian vehicles are avoided

Top 10 Avoidance Reasons – Asian Vehicles

16%

16%

17%

18%

20%

20%

23%

27%

39%

61%

4%

1%

2%

5%

6%

0%

4%

8%

8%

45%

0% 20% 40% 60% 80% 100%


I don't like the image the vehicles portray


Lacks performance (power, handling, etc.)

Concerned about safety



Costs too much money (price, payment, etc.)


I don't want an Asian brand vehicle

% of Avoiders

Most Influential ReasonTotal Avoiders


1%1%

3%3%3%3%4%5%6%6%7%7%7%8%9%10%

14%17%

19%35%

39%60%

80%

0% 20% 40% 60% 80% 100%

Vehicle technology is not advancedNegative information from the Internet

Poor quality (workmanship, materials, etc.)Negative newspaper/magazine articles

I previously had a bad ownership experienceWarranty is not good enough

Lacks performance (power, handling, etc.)Vehicles are bland or boring

Lacks certain options and featuresDealerships are poorly managed

Vehicle would depreciate too fast (poor resale value)Not environmentally friendly enough

Current financial problems of the 'Big 3'Concerned about safety

I don't like the exterior styling/designI don't like the image the vehicles portray

Doesn't get enough gas mileageSomeone I know had a bad ownership experience

Concerned about reliability (breakdowns, etc.)I don't want a European brand vehicle

Vehicles cost too much to insureMaintenance/upkeep too expensive (tune-ups, etc.)


% of AvoidersBase: European Avoiders (n=231)

European vehicles are avoided by 46% of respondents. Purchase and ownership costs keep consumers away.

Avoidance Reasons – European Vehicles


8%

9%

10%

14%

17%

19%

35%

39%

60%

80%

2%

1%

1%

1%

2%

2%

11%

1%

7%

64%

0% 20% 40% 60% 80% 100%

Concerned about safety


I don't like the image the vehicles portray




I don't want a European brand vehicle

Vehicles cost too much to insure



% of Avoiders

Most Influential Reason

Total Avoidance

Base: European Avoiders (n=231)

Cost is the most influential reason that European vehicles are avoided

Top 10 Avoidance Reasons – European Vehicles


Top 10 American Avoidance Reasons vs. Asian Vehicles

11%

18%

23%

16%

4%

17%

39%

10%

14%

20%

32%

33%

33%

36%

40%

42%

42%

63%

70%

70%

0% 20% 40% 60% 80% 100%

I previously had a bad ownershipexperience

Lacks performance (power, handling,etc.)


Someone I know had a bad ownershipexperience



Maintenance/upkeep too expensive(tune-ups, etc.)

Vehicle would depreciate too fast(poor resale value)

Poor quality (workmanship, materials,etc.)

Concerned about reliability(breakdowns, etc.)

% of Avoiders

American Avoiders (n=88)Asian Avoiders (n=83)


Top 10 American Avoidance Reasons vs. European Vehicles

3%

4%

9%

17%

14%

5%

60%

7%

3%

19%

32%

33%

33%

36%

40%

42%

42%

63%

70%

70%

0% 20% 40% 60% 80% 100%

I previously had a bad ownershipexperience

Lacks performance (power, handling,etc.)


Someone I know had a bad ownershipexperience



Maintenance/upkeep too expensive(tune-ups, etc.)

Vehicle would depreciate too fast(poor resale value)

Poor quality (workmanship, materials,etc.)

Concerned about reliability(breakdowns, etc.)

% of Avoiders

American Avoiders (n=88)European Avoiders (n=231)


than Asian than AsianPercentage Points (Worse)Percentage Points Better / (Worse)

Top 5 American Strengths

35%

9%

8%

Don't want American/Asian vehicle

High Insurance Cost

Expensive Price/Payment

Safety Concerns

Lacks certain options/features

(1%)

(3%)

(10%) 10% 30% 50%

Top 5 American WeaknessesVehicles are bland/boring

Not enough gas mileage

Concerned about reliability

Vehicles depreciate too fast

Poor quality

(25%)

(36%)

(50%)

(53%)

(56%)

(60%) (40%) (20%) 0%

American vs. Asian Vehicles

Performance Gap for Vehicle Avoidance Reasons

= American Top 5 Strength/Weakness vs. European


American vs. European Vehicles

Percentage Points (Worse)Percentage Points Better / (Worse)than European than European

Top 5 American Strengths

62%

35%

18%

9%

Expensive Price/Payment

High Insurance Cost

Maintenance too expensive

Don't want American/European

vehicle

Dealerships are poorly managed (9%)

(10%) 10% 30% 50% 70%

Top 5 American Weaknesses

My previous bad ownership experience

Vehicles are bland/boring

Concerned about reliability

Vehicles depreciate too fast

Poor quality

(29%)

(37%)

(52%)

(56%)

(67%)

(80%) (60%) (40%) (20%) 0%

Performance Gap for Vehicle Avoidance Reasons

= American Top 5 Strength/Weakness vs. Asian


Avoidance Reasons Summary

American(n=88)

Asian(n=83)

European(n=231)

Avoidance Reasons

Concerned about reliability (breakdowns, etc.) 70% 20% 19% Top 1

Poor quality (workmanship, materials, etc.) 70% 14% 3% Top 3

Vehicle would depreciate too fast (poor resale value) 63% 10% 7% Top 5

Maintenance/upkeep too expensive (tune-ups, etc.) 42% 39% 60%Vehicles are bland or boring 42% 17% 5%Doesn't get enough gas mileage 40% 4% 14%Someone I know had a bad ownership experience 36% 16% 17%I don't like the exterior styling/design 33% 23% 9%Lacks performance (power, handling, etc.) 33% 18% 4%I previously had a bad ownership experience 32% 11% 3%Vehicle technology is not advanced 27% 5% 1%I don't want an American/Asian/European brand vehicle 26% 61% 35%Current financial problems of the 'Big 3' 23% 13% 7%Concerned about safety 22% 20% 8%I don't like the image the vehicles portray 22% 16% 10%Not environmentally friendly enough 20% 1% 7%Costs too much money (price, payment, etc.) 18% 27% 80%Lacks certain options and features 17% 14% 6%Negative newspaper/magazine articles 16% 1% 3%Dealerships are poorly managed 15% 7% 6%Warranty is not good enough 15% 2% 3%Negative information from the Internet 14% 2% 1%Vehicles cost too much to insure 3% 12% 39%

Avoiders


3%6%7%8%9%

18%20%

23%24%

26%28%

30%31%

35%36%36%

43%49%

65%69%

77%

0% 20% 40% 60% 80% 100%

Ability to obtain financingCargo capacity

Diesel engine availabilityAvailability of aftermarket accessories

Availability of partsInterior comfort

Engine performance / accelerationWarranty

Hybrid engine availabilityPricingSafety

Environmental impactImage the vehicle portrays

Maintenance costsExterior styling

Driving performanceTechnology of the vehicle

Fuel economyResale value

Quality of workmanshipReliability/Durability

% of Avoiders

American Avoiders

Base: American Avoiders (n=88)

Consumers want American vehicles that are more reliable, fuel efficient, and stylish

Needed Improvements – American Vehicles


Verbatim Comments

What can American Brands do to earn your consideration?• “more exciting and updated body styles and engine performance/handling”

• “…re-establish the status of quality, reliability, technology and performance.”

• “quality”

• “sell for less, better gas and better style, come up with something new”


6%7%7%7%8%

10%11%12%13%13%14%14%14%14%

16%17%18%

20%23%

29%33%

35%43%

0% 20% 40% 60% 80% 100%

Ability to obtain financingInterior comfort

Environmental impactDiesel engine availability

Fuel economyDriving performance

WarrantyTechnology of the vehicleHybrid engine availability

Engine performance / accelerationSafety

Resale valueQuality of workmanship

Image the vehicle portraysUnionize assembly plants

Reliability/DurabilityAvailability of aftermarket accessories

Exterior stylingCargo capacity

Availability of partsPricing

Maintenance costsPercent of vehicles built in U.S.A.

% of Avoiders

Asian Avoiders


Asian vehicle avoiders want vehicles built in the USA. Asian vehicles are perceived as too expensive to buy and maintain.

Needed Improvements – Asian Vehicles


2%3%

5%5%6%7%7%8%8%8%9%10%

12%12%13%13%13%

16%17%

24%42%

60%77%

0% 20% 40% 60% 80% 100%

Diesel engine availabilityDriving performance

Technology of the vehicleInterior comfort

Engine performance / accelerationUnionize assembly plants

Image the vehicle portraysSafety

Quality of workmanshipExterior styling

Environmental impactCargo capacity

Resale valueHybrid engine availability

WarrantyAvailability of aftermarket

Ability to obtain financingReliability/Durability

Fuel economyPercent of vehicles built in U.S.A.

Availability of partsMaintenance costs

Pricing

% of Avoiders

European Avoiders

Base: European Avoiders (n=231)

European vehicle avoiders want lower ownership costs to consider purchasing

Needed Improvements – European Vehicles


Needed Improvements Summary

American(n=88)

Asian(n=83)

European(n=231)

Most Improvement

Needed

Reliability/Durability 77% 17% 16% Top 1

Quality of workmanship 69% 14% 8% Top 3

Resale value 65% 14% 12% Top 5

Fuel economy 49% 8% 17%Technology of the vehicle 43% 12% 5%Exterior styling 36% 20% 8%Driving performance 36% 10% 3%Maintenance costs 35% 35% 60%Image the vehicle portrays 31% 14% 7%Environmental impact 30% 7% 9%Safety 28% 14% 8%Pricing 26% 33% 77%Hybrid engine availability 24% 13% 12%Warranty 23% 11% 13%Engine performance / acceleration 20% 13% 6%Interior comfort 18% 7% 5%Availability of parts 9% 29% 42%Availability of aftermarket accessories 8% 18% 13%Diesel engine availability 7% 7% 2%Cargo capacity 6% 23% 10%Ability to obtain financing 3% 6% 13%Percent of vehicles built in U.S.A. N/A 43% 24%Unionize assembly plants N/A 16% 7%

Avoiders


American-brand avoiders comprise a younger, more educated, and more affluent demographic

AmericanAvoiders

AsianAvoiders

EuropeanAvoiders

% Male 52% 51% 52%

42

65%

41%

$ 52.2

Age (median) 37 42

% Married 56% 67%

% College Grad 56% 37%

Income (median, 000’s) $ 66.4 $ 52.1

Demographic Profile


Key Findings

• American vehicle avoiders select twice as many avoidance reasons as import avoiders (7 vs. 3.5 reasons).

• Surveying owners of vehicle brands from the U.S., Asia and Europe, JDPA’ssyndicated 2006 Vehicle Dependability Study shows that similar vehicle-problem levels occur after three years of ownership for domestics and imports. But respondents to this study are more than three times more likely to avoid domestic brand vehicles due to reliability concerns than they are to avoid imports. This shows that consumer perception is not in line with experience.

• Avoidance due to gas mileage concerns is cited 10 times more often for American vehicles than Asian vehicles (40% vs. 4%). JDPA’s syndicated 2006 Automotive Performance, Execution and Layout study supports that American vehicle owners are less satisfied with fuel economy than import owners.

• While gas mileage ranks 6th among the reasons mentioned to avoid American vehicles, it is the 3rd Most Influential reason.

• 23% of American-brand avoiders mention the Big 3’s financial problems. Interestingly, 9% of those avoiding import vehicles do so in support of the Big 3’s financial problems.

• 16% of Asian avoiders and 7% of European avoiders indicate that unionizing assembly plants is a needed improvement.

• American-brand avoiders comprise a younger, more educated, and more affluent demographic than Asian or European avoiders.

2006 Detroit News Domestic Vehicle Avoider Study

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