Analyst Note May 2013

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JD Power Analyst Note for may 2013

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Analyst Note May 2013

  1. 1. 1J.D. Power and Associates does not guarantee the accuracy, adequacy, or completeness of any information contained in this pub lication and is not responsible for anyerrors or omissions or for the results obtained from use of such information. Advertising claims cannot be based on information published in this publication. Reproductionof any material contained in this publication, including photocopying in part or in whole, is prohibited without the express written permission of J.D. Power and Associates.Any material quoted from this publication must be attributed to J.D. Power and Associates.©2013 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.CanadaMay 1, 2013 The gap between the highest and lowest-performingnon-luxury brands on the Quality Index hasdiminished significantly between 2009 (113 indexpoint gap) and 2012 (66 index point gap)respectively, on a 1000 point scale. Moreover, the quality ceiling may also be in sight.With the highest-performing brand achieving a scoreof nearly 900 points, increasing customersatisfaction with product quality is becomingdifficult to achieve. So, while continuous productdevelopment is a mainstay, as a competitiveadvantage, vehicle quality is quickly becoming aprice of entry. While the index is a measure of perceived quality, thenumber of vehicle defects as reported by thecustomer is decreasing as well, reflecting aconcurrent improvement in actual quality asmeasured by PP100 (problems per 100 vehicles). In2010, the highest performing non-luxury brand had71 reported defects per 100 vehicles and the lowestperforming had 146. In 2012, the gap narrowed to54 PP100 (60 PP100 and 114 PP100, respectively). When leveraging the service environment as yourdifferentiator, there are two significant obstacles toearning a top service experience rating: a dealer’sinability to provide a service appointment on the daydesired, and customers who leave with theperception that they were not given helpful advice. Given the above, service differentiation is no longersimply about the quality of the repair either. Onaverage, 92% of non-luxury service work is doneright the first time. To truly excel, dealers musteducate their customers and demonstrate the valueof the work completed, not just that it was donecorrectly. A service experience rating of 10 out of 10 also hasthe potential to retain that customer, with more thanhalf (52%) indicating they “definitely will”repurchase the same make, with only 14% of thosewho rate their experience an 8 saying the same. Infact, service experience is equally impactful indriving re-purchase intent as vehicle quality, wherea 10 out of 10 score yields 51% who say they willdefinitely repurchase the same make.virginia_connell@jdpa.com(416) 507-3247A remarkable shift has occurred in the automotive marketthat squarely hands the advantage to consumers, withdealers that either can’t or won’t acknowledge the newenvironment, left standing offside.Particularly looking at the non-luxury space, increasedfocus on product quality is having a homogenizing effectacross the marketplace.While product quality is becoming increasingly uniformacross the board, dealers still have the opportunity to putdistance between themselves and their competitors in thequality of the service experience they provide. Given thatthe average service index score on a 1000 point scale iscomparable to the lowest quality index score, it’s clear theservice environment holds the most significant upside.Source: J.D. Power and Associates 2012 Canadian Vehicle Ownership Satisfaction StudyVehicle quality is an increasingly weak differentiatorin the non-luxury market805 824 822 828908888 887 885795 803 8028197007508008509009502009 2010 2011 2012IndexScoreoutof1000Service Index Highest Quality Index ScoreLowest Quality Index Score
  2. 2. 2J.D. Power and Associates does not guarantee the accuracy, adequacy, or completeness of any information contained in this publication and is not responsible for anyerrors or omissions or for the results obtained from use of such information. Advertising claims cannot be based on informati on published in this publication. Reproductionof any material contained in this publication, including photocopying in part or in whole, is prohibited without the express written permission of J.D. Power and Associates.Any material quoted from this publication must be attributed to J.D. Power and Associates.©2013 J.D. Power and Associates, The McGraw-Hill Companies, Inc. All Rights Reserved.Brian Murphy416-507-3253 ▪ brian_murphy1@jdpa.comMay 1, 201361211848502New Vehicles Used VehiclesCash Lease Loan45495357616569Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13New Used$480$500$520$540$560Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13New Lease New LoanPercent of Total Transactions (Past 12 Months)Average per Customer72 Months and Greater63%0%10%20%30%40%50%60%70%200820092010201120122013Data from JDPA PIN Incentive Spending Report (ISR)20%30%40%50%Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13% Negative Equity Trade-In %Percentage of negative equity vehicles at trade-in$27,000$28,000$29,000$30,000$31,000$32,000Mar-12Apr-12May-12Jun-12Jul-12Aug-12Sep-12Oct-12Nov-12Dec-12Jan-13Feb-13Mar-13Vehicle Price Transaction Price

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