Evidence is everywhere that the car companies are cranking up their marketing programs in what will likely be a futile attempt to grow both their volumes and market share, but there is no more visible example of this than that new six-storey, $20 million BMW dealership in downtown Toronto.
While this doesn't bode well for the car companies, this is extremely good news for Canadian consumers, since they are soon to see huge deals on vast numbers of great new vehicles. That is the classic economic result when supply outpaces demand, as is the situation now, with more to come.
For example, the Whitby-based importer of German cars is indeed looking to double its volume and market share (to about 34,000 units and two per cent of the market) in the next few years, but then again so are a lot of other car companies. Targetted increases of 30 to 40 per cent are common around the industry, and there's even one firm - Suzuki Canada - that plans to triple its sales in the near future.
When you add up all the projected sales figures for the car companies doing business in Canada, by rough count they plan to sell in excess of 2.1 million units a year. This is particularly interesting in a market that probably won't do 1.7 million units this year, and that no one expects to go much higher for many years. Car company executives all know this, but they can't or won't back down from their own promised growth.
About the only firm not expecting to grow market share is Ford, since it has recently committed itself to the pursuit of profits instead of volumes.
The growth plans all involve the same key ingredients -- launch great new products, particularly in market segments where the company doesn't already compete. That way, the theory goes, there'll be more and better choices for the people who admire their brand.
Unfortunately for many of the companies, these plans are not exactly unfolding as they might hope.
Nissan Canada, for example, added a new pickup truck and two new SUVs to its Nissan and Infiniti lineups in the last year, but its sales still declined 297 units, or 1.4 per cent, in the first four months of 2004, versus 2003.
BMW Canada has launched the X3 sport-utility vehicle and the 6-Series coupe-convertible in the last few months, but in the first four months of 2004 sold only 105 more BMW-badged vehicles than in the same period in 2003. BMW car sales were actually down 39 units, with SUV sales up 144.
Big growth like they're all promising takes marketing money, of course, and that's on top of the cost of developing all that new product.
It's possible that sales for both companies will increase as the months progress, but they'll have to fight scads of other new products for the buyer's attention. According to John Casesa, a Merrill Lynch auto industry analyst, the auto companies doing business in the United States will introduce 57 new models a year on average over the next several years. Canada doesn't get all of those models, but we get some unique ones so we can expect pretty much the same flood of new sheet metal.
Rounding it out, that means over 200 new vehicles will arrive in Canada by the end of 2007, including maybe 50 nameplates that are not currently sold, from virtually every company now doing business here.
All of these new vehicles, remember, are chasing an annual sales volume that isn't expected to grow anywhere near that much.
This will create a singular problem for the car companies, since they will have budgeted based on the growth projections they probably won't reach. In some cases, the costs will be borne by dealers upgrading their facilities, but the companies will have their share to repay, too.
BMW Canada's downtown Toronto dealership is undoubtedly the greatest example on that point, since it was built as much to accommodate the growth in sales as it was to encourage it.
When this reality finally sets in among the car companies expecting growth (they still think recent results are anomalies) things should get even more interesting for the consumer.
It's easy to see the growing pressure on the car companies in their marketing efforts, since most of the institutional advertising that tells you what a great car it is has been replaced by advertising announcing monthly payment rates and various financing specials.
If this used to be the exclusive province of the domestic car companies, that's no longer true, as Toyota, Mercedes, BMW, Honda and virtually everyone else are using the same sales tactics.
Beyond traditional advertising methods, the car companies are looking for ways to jack up interest in their products:
Chrysler is running the Gold Medal Tour, which is essentially a corporate ride-and-drive for any licensed driver who's interested in visiting one of cross-Canada stops;
Ford (with Taurus) and GM (Cavalier and Sunfire) are offering specific models at rock bottom cash-and-carry prices;
Nearly everyone's got a discount for recent college grads;
Mazda's offering no payments for 90 days with zero per cent financing;
Audi's pushing 2.9 per cent financing over five years with A4;
Kia and Hyundai have increased their warranties in recent months;
GM of Canada overwhelmed parts of Canada with huge media buys so it was impossible to ignore their message;
Toyota is trying everything imaginable to convince people under 45 that it really is cool, dude.
Whatever marketing efforts we've seen so far from the car companies (with the exception of that BMW tower, which probably won't be surpassed) will pale in comparison to what we'll see in the next couple of years as they come to terms with the unfolding realities of the Canadian market.
More great vehicles from companies getting more and more desperate to sell them, but no more people willing to buy them can only mean one thing -- let the buyer rejoice.
