Auto Industry Analysis

Transcription

1 Auto Industry Analysis AEM 4550 PRESENTATION JON CULLOM GEORGINA HUDJA JUNE LIU LUCIA VILLANI

2 Agenda INTRODUCTION INDUSTRY ANALYSIS ADVERTISING STRATEGIES CASE STUDY RECOMMENDATIONS

3 Why Automobile Industry? 2 nd largest industry in terms of ad expenditures after retail Recently invigorated by boost in economy - Low gas prices - Low interest rates - Shifting consumer preferences New technologies New players - Hybrid cars (Tesla, Prius) - Autonomous cars (Google Car)

4 Industry Analysis

5 Automobile History Late 1880s: Blueprint for modern automobile perfected in Germany & France In US, Henry Ford innovates mass production techniques 1908: Ford s Model T debuts Acceptance of the automobile by the average American 1920s: Ford, GM, Chrysler become the Big Three Industry plays critical role in producing military vehicles for WWI & WWII 1970s: Oil Crisis leads to rise of German & Japanese fuel-efficient compact vehicles 1980: Japan becomes leading automaker

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7 Industry Overview Major Products Industry Facts Luxury Cars 5% Revenue: $119.1 billion Profits: $3.9 billion Large Cars 16% Midsize Sedans 34% Compacts & Subcompacts 45% Exports: $52.1 million Imports: $184 million # of Companies: 175 Employment: 75,127 Wages: $6 million Domestic Demand: $251 million

8 Supply Chain Supplying Industries Steel and other metals Rubber Electronics Plastic Glass Textiles Manufacture & stamping of body panels Bodies Components Body assembling & paining Manufacture of mechanical & electrical components (wheels, tires, seats, breaking systems, windshields, exhausts, etc.) Engines & Transmissions Forging & casting of engine & transmission components Machining & assembly of engines & transmissions Final Assembly Consumer Market

9 Major Markets Key Economic Drivers Breakdown of Major Markets 50.0% Consumer Confidence Index Demand from new car dealers World price of crude oil World price of steel Currency exchange rates Share of Automobile Industry 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 43.7% 26.1% Exports Dealers Rental Companies 12.2% 11.5% 6.5% Wholesalers Government

10 Global Major Players Overview General Motors Corporation (13% global, 16.5% US): Brands: Chevrolet, Chevy, GMC, Buick, Cadillac Focusing on alternatively fueled vehicles (Chevy Volt) Narrowed brand portfolio to focus on marketing & design Ford Motor Company (12% global, 15.1% US): Brands: Ford and Lincoln One Ford Initiative: streamlined design & production (Ford Focus and Fiesta) Relied too heavily on trucks & SUVs Toyota (10% global, 13.8% US): Brands: Toyota, Lexus, Scion Toyota Prius: first mass-produced hybrid gasolineelectric car Other 51% Market Share Based on global revenue General Motors 13% Ford 12% Toyota 10% Honda 8% Fiat Chrysler 6%

11 Competitor Analysis Company Headquarters Market Cap Ad Expenditures Revenues Ad-to-Sales Detroit, MI $51.04B 3.50B B 2.30% Dearborn, MI $44.56B 2.68B B 1.79% 2.25B B 0.94% Aichi Prefecture, Japan $147.29B Minato, Tokyo, Japan $47.86B 1.80B B 1.48% Turin, Italy $15.16B 1.14B B 1.03%

12 Competitive Landscape Internal External Medium and increasing CR4: 42.4% HHI: ~650 HHI is less than 1,000! competitive market High foreign competition Japan Europe C4=w1+w2+w3+w4, where wi = Si/ST HHI = 10,000 x Swi^2, where wi = Si/ST Primary substitute is SUV & Light Trucks Alternative forms of transportation Walking Biking Motorcycles Railroad Bus Ride sharing

13 Industry Barriers Barriers to Entry Medium and steady High level of capital requirement Rapid technology change Sophisticated facilities Robust supply chains, distribution channels Regulations Strict regulatory standards National Traffic and Motor Vehicle Safety Act Federal Motor Vehicle Safety Standard EPA emission standards Corporate Average Fuel Economy High R&D costs Brand awareness

14 Global vs. United States Market Mexico [PERCENTA GE] Germany 13% China [PERCENTA GE] Exports To Other 36% Germany 14% Imports From Mexico 13% Canada 26% Canada 28% Japan 23% Other 24% Top US-based exporters: Ford, GM, Chrysler Top importers in US market: Toyota, Honda, Nissan, Volkswagen

15 Product Differentiation Characteristics Perceptual Map High Price Price Fuel economy Reliability Low Quality High Quality Styling Utility Brand Low Price

16 Brand Equity Top 5 Most Valuable Car Brands Findings $BN Most are also in top 5 largest brands Very well-known, established brands Represent both luxury and budget brands Toyota BMW Mercedes-Benz Honda Ford

17 Brand Equity Leaders in Brand Equity Growth Why? % Change in Growth Ford Audi Toyota Mercedes-Benz Hyundai Ford has 67% growth in China Audi releases the A4 and S4 with huge success Toyota Corolla becomes world s best selling vehicle Mercedes CLS December dominates Christmas season

18 Investor Lenses - Industry Value Auto industry transforming into the mobility industry Venture Capital Firms are investing in technologies including solar energy Huge valuations of companies like Tesla, Uber, and Mobileye More VC firms invested in automotive startups in 2014 than in the previous four years combined Meanwhile, startups are often wary - investor may become a competitor Google s venture investment in Uber Because self-driving cars need mapping Ford Motor Co. putting seed money into 3D mapping startup Civil Maps to push forward self-driving cars The $6.6 million seed round was led by Motus Ventures and others

19 Manufacturer vs. Dealer Commercials Manufacturers Dealers Greater focus on brand advertising Branding messages and product characteristics: Ford Tough or V-8 engine Tend to use price advertising Deals: $2,000 rebate or Labor Day sales event

20 Industry Future Trends Alternative fuels More environmentally friendly Improved safety Wireless device integration Vehicle cybersecurity Opportunities Fuel efficient vehicles Reducing material costs New ownership models Ride-sharing Autonomous vehicles

21 Advertising Strategies

22 Industry Ad Expenditure Industry Data $44B Advertising Exp. in 2015 Growing at 2.8% annually Volkswagen leading industry with $6.6B in 2017 Ad-Sales Ratio Trend %.36%.63%.43%.31% Low and decreasing overtime Average sales has been increasing while average ad expenditure has been decreasing Could be due to more efficient advertising Top 3 Competitors in Ad Spend Ad-Sales (2015): 0.56% 0.57% 1.79%

23 Advertising Mediums Television Remains biggest medium in the U.S Increased from $3.9 billion in 2014 to $4.84 billion in 2015 Digital Media $3.4 billion in mobile advertising in 2015 $1.1 billion in digital video advertising in 2015 Expected to grow to $5.3 billion by 2021 Auto Manufacturer Ad Spend Share, By Medium Directories Radio Telemarketing OutdoorCinema Direct mail Other print Newspapers Cable Broadcast TV Online 0% 10% 20% 30% 40% 50% 60%

24 C O M P L E M E N TA RY

25 COMPARATIVE

26 INFORMATIVE

27 CELEBRITY ENDORSEMENT

28 SPONSORSHIPS

29 PRODUCT PLACEMENT

30 Volkswagen Recall Sept 3, 2015: VW Admits to installing a defeat device to bypass emission controls Sept 18, 2015: EPA concludes that VW violated the Clean Air Act Sept 22, 2015: VW announces that roughly 600K domestic automobiles have defeat device; company sets aside $7.3BN to cover cost of cars June 26, 2016: VW announces a settlement of $14.7BN; plan to take 85% of affected vehicles off the road Sept 4, 2015: Oct 2, 2015: z

31 Interest Over Time Google Trends: Interest in Volkswagen Recall from August 15 to Sept 16

32 Aftershock and Rebound VW brand equity falls over $10B in September from $31B to $21B VW increases advertising to save failing brand End of 2015: $6.6B in ad spending Feb 2016: 60 second spot on keeping promises & detailing 40 years of VW vehicles Dec 2016: Release Golf Alltrak and Atlas Sport-Utility contributed to 20% increase in US sales In 2016, US sales fall 8%, but North America sales only fall 1.9% Today: VW shares stand only 15 points below pre-scandal shares Many attribute resurgence due to advertising spending and focus on brand s history

33 Top 5 Companies (2014 Primetime Data) Primetime Ads Ad Expenditure # of Ads $ Spent On Ads (millions) Ford Chevrolet Volkswagen Honda Toyota - Chevrolet Volkswagen Ford Toyota Cadillac *trend line=industry average for top 25

34 Category Analysis # of Advertisers by Category Prime Time Ads by Category Asian Advertisers 11 Domestic Advertisers 7 European Advertisers 7 Explanation ~57% more Asian companies # of Ads European brands tend to be luxury, which advertise less often 0 Asian Factory Domestic Factory European Factory

35 Network Analysis for Industry Primetime Ads $ Spent on Ads # of Ads $ Spent On Ads (millions) ABC NBC CBS FOX CW - NBC FOX CBS ABC CW

36 Network Analysis for Top Brands Primetime Ads $ Spent on Ads # of Ads Ford Chevrolet Toyota $ Spent on Ads (millions) Ford Chevrolet Toyota 0 ABC CBS FOX NBC CW - ABC CBS FOX NBC CW

37 Breakdown of Program Types for Industry Professional Football Games 5% Situation Comedy 15% Suspense & Mystery 9% Primetime Ads Drama & Adventure 31% Situation Comedy 12% Slice of Life 16% $ Spent on Ads Olympics 7% Professional Football Games 24% Slice of Life 19% Other 21% Drama & Adventure 20% Other 21%

38 Breakdown of Program Types for Top Brands Chevrolet Ford Toyota Police & Suspense 7% Police & Suspense 6% News Magazine 4% Other 11% Olmypics 8% Situation Comedy 11% Drama & Adventure 30% Other 7% Situation Comedy 20% Drama & Adventure 37% Police & Suspense 11% Professional Football Game 12% Drama & Adventure 29% Slice of Life 21% Other 23% Slice of Life 26% Situation Comedy 16% Slice of Life 21% *based on # of ads

39 Top 5 Programs for Industry Primetime Ads $ Spent on Ads # of Ads Sunday Night Football Voice Shark Tank Winter Olympics America's Got Talent $ Spent On Ads (millions) Sunday Night Football Winter Olympics Superbowl XLVIII Voice American Idol

40 Top 5 Programs for Top Brands # of Ads Hawaii FIve-0 (CBS) Winter Olympics (NBC) Chevrolet Bachelorette (ABC) American Ninja Warrior (NBC) Extreme Weight Loss (ABC) # of Ads American Idol (FOX) Amazing Race 25 (CBS) Ford Amazing Race All Stars (CBS) Simpsons (Fox) New Girl (Fox) 50 Toyota # of Ads Sunday Night Football (NBC) Shark Tank (ABC) Law & Order: SVU (NBC) NCIS (CBS) 60 MINUTES (CBS)

41 Month-by-Month Analysis for Industry Pulsing Media Strategy $ Spent on Ads Highest in spring & fall Ad spend peaks at premiere and finale of TV shows Exception is February for Superbowl $ Spent on Ads (millions) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

42 Month-by-Month Analysis for Top Brands # of Ads $ Spent on Ads (millions) # of Ads Jan Feb March April May June July Aug Sept Oct Nov Dec $ Spent Jan Feb March April May June July Aug Sept Oct Nov Dec Ford Chevrolet Toyota Ford Chevrolet Toyota Findings Ford has more ads & spends more during beginning of year Chevrolet has highest peak in ad spend in Feb, but highest peak in ad # in July Toyota advertises more frequent and spends more towards end of the year

43 Common Characteristics Of Ads Nature of Advertisements Focus of Advertisement # of Ads # of Ads Humor 12 Experience 11 Celebrity 8 Features 9 Serious 6 Handling 7 Adventerous 6 Safety 3 Luxurious 6 Fuel 3 Other 1 Comfort 3

44 Case Study

45 Budget vs. Luxury Budget Low Medium High Luxury Low Medium High Persuasive Complementary Informative Combative Comparative Memory Jamming Persuasive Complementary Informative Combative Comparative Memory Jamming

46 Brand Status Budget Luxury Search good Low social prestige Focus on Product Features Safety Warranty Discount MPG Experience good High social prestige Signaling efficiency effect Focus on driving experience and comfort

47 Budget vs. Luxury Ads Explanation Differences in Ad # 4 largest companies own luxury & budget brands All companies advertise their budget brands more frequently Smaller, more specific target market for luxury cars as fewer people can afford them TV may not be an effective means of advertising for luxury car brands, so it is used less often # of Primetime Ads

48 Mercedes vs. Mazda

49 Company Mission Mercedes Mazda Our main business objective is to be the best provider for technical accessories and collection. With innovative and high quality products, we ensure sustainable economic growth and a constant contribution to the group s success. We love cars and want people to enjoy fulfilling lives through cars. We envision cars existing sustainably with the earth and society, and we will continue to tackle challenges with creative ideas.

50 Advertising Strategies Mercedes Average Price: $60 80K Targets upper-class, middle aged drivers Uses complementary advertising & social prestige focusing on design and style Now, segments untapped Millennial and Generation X target audience Wants to target younger consumer segment without losing brand prestige Introduce new models & product lines Mazda Average Price: $17 30K Middle-class, family oriented drivers Generation Y & younger professionals Usually only car owned by consumer Uses mostly informative advertising focusing on durability and safety features Common features include built-in tailgate remote control, one-touch fast recline backseat, & adjustable trunk space partition

51 Ad Expenditure Expenditure Ad Creative 30 Mercedes Mazda # of Ads $ Spent $43,096,000 $56,228,100 $/Ad $214,408 $128,374 $/Second $7,147 $4,269 # of Unique Ad Creatives Mercedes Mazda

52 Networks and Programs Top 5 Programs for Mazda 1. Following (Fox) 2. Hell's Kitchen (Fox) 3. Shark Tank (ABC) 4. America's Got Talent (NBC) 5. Thursday Night Football (CBS) Top 5 Programs for Mercedes 1. Sunday Night Football (NBC) 2. NCIS (CBS) 3. Blacklist (NBC) 4. Dancing with the Stars (ABC) 5. Person of Interest (CBS) * Measured by ad # # of Primetime Ads Primetime Ads by Network ABC CBS FOX NBC Network Mazda Mercedes Benz

53 Program Types by Ad Number Mercedes Mazda Comedy 11% Slice of Life 12% Other 6% Drama 35% Police/ Suspense 6% Other 10% Sports Related 4% Drama 35% Police/ Suspense 12% Sports Related 24% Comedy 17% Slice of Life 28%

54 Month-by-Month Analysis # of Ads $ Spent (millions) Jan # of Ads Feb March April May June July Aug Sept Oct Nov Dec $ Spent Mercedes Mazda Mercedes Mazda Findings For most months, Mazda spends more and advertises more frequently Exception is end of summer Both show pulsing pattern 0 Jan Feb March April May June July Aug Sept Oct Nov Dec

55 Mercedes

56 Mazda

57 Recommendations

58 Recommendations For Case Study Mercedes Increase high tech features: Vehicle cybersecurity Advertise as fun, young, energetic for the Millennials and Gen X targets Position car as aspirational Mother, Father Mazda Develop Brand Equity reliability, loyalty Tap into alternative fuels Two fold strategy to target millennials Promote safety features for parents/guardians Position Mazda as reliable first car

59 Recommendations For Industry Advertising Mediums: Look to increase advertising on channels watched by demographics with rising purchasing power Univision/Telemundo over top 5 channels Suspense & Mystery Programs are underserved- increase adv. for luxury automobiles with new, exciting features Advertising Differentiation: Primetime is saturated; look to break through clutter with politically, socially, or economically relevant ads Audi, 84 Lumber Comfort is an underserved advertising focus; increase advertising targeted to families and luxury consumers Recovery: Widespread advertising can be used to combat scandals or product deficiencies Underscore brand history/product relevance to reposition product in consumers perceptual maps Sacrifice short term sales for long term strength of brand image/equity

60 Conclusion Mature market with several major players Strong need to differentiate to stay ahead of competition New trends and opportunities to tap into Target younger generations by utilizing digital advertising & by developing new technologies

61 Thank You, Questions?