The US automotive market set a sales record with over 17 million units sold in 2015 and expects to eclipse 17 million units again for 2016 in a market spurred by low gas prices and interest rates. Not only are sales numbers favorable in the US, but Mintel research also indicates that consumer preference has shifted toward SUVs and crossover vehicles. This has been a boon for auto manufacturers since they often have much greater profit margins on larger vehicles than the typical sedan.

This record breaking activity at an average transaction price of over $30K has piqued the interest of many auto manufacturers globally who are looking to carve their own slice in the American pie. Peugeot, a popular French brand, was in the US market as recently as 1991, but poor performance for the brand led to its withdrawal. The robust activity in the US automotive market has the French manufacturer planning a return. Peugeot announced plans to enter the US market as a mobility service and will provide a car sharing service in Los Angeles as its initial step before retailing their vehicles to US consumers.

Geely, a Chinese conglomerate which owns the Swedish Volvo brand, announced the launch of a new brand, Lynk. Geely plans to have the first Lynk vehicle for sale in the US by 2018, and to have four cars in the Lynk offering by 2021. Aiming to stand out by being at the forefront of connectivity and technology, the company plans to sell their vehicles through an online interface and storefronts a la Tesla, which may be appealing for certain consumers. The brand hopes to keep prices low by avoiding the franchise dealership model and will leverage current Volvo dealerships as service centers for Lynk vehicles.

Not to be left out, SsangYong Motor Co. announced at the Paris auto show that the company plans to enter the US by 2020 with two small SUV models, and Europe’s Skoda said they will make a decision on whether to enter the US market soon.

What we think

The US automotive market is extremely competitive, with 42 brands offering a variety of models and configurations for consumers. Brands like Fiat and Alfa Romeo are currently on their second attempt for a foothold in the market. The list of brands that have failed is exhaustive and includes names like Daihatsu, Isuzu, Daewoo, Renault and Saab.

The key for success as a new brand in the US is to offer something new for consumers to choose from. Given the choice, if the product of a new brand does not differentiate from the incumbent competitors, consumers will opt for the familiar brand. Tesla is a good example of this as it stands out because it was the first manufacturer to offer a fully electric luxury vehicle with a factory direct sales model. Tesla found success since it offered a unique product superior than its competitors in a sales process that appealed to many consumers.

 

Buddy Lo is an Automotive Analyst for the Mintel US Reports team. With experience in automotive marketing, Buddy has developed an intimate knowledge of the automotive landscape, as well as the dealership business model.

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