B Y

STRADAO C T O B E R 2 0 1 0

Canadian Sales Three Quarter Point 2010

TrendJuly – Up 6.3% MTM and 8.6% YTD

August – Up 0.5% MTM and 7.5% YTDSeptember – Up 4.3% MTM and 7.2% YTD

Sales continued at an acceptable rate, during

the 3rd quarter. Although August probably created

some concern.

While maintaining the anticipated downward trend which started in

the 2nd quarter.

Not surprising the trend follows a lack of economic vitality

spreading across North America.

LeasingA Canadian phenomenon, with dramatic impact on sales

results. The strong leasing penetration from previous years is enabling current sales.

The leasing landscape in the Canadian market.

2005 – 45%

2006 – 41%

2007 – 42%

2008 – 24%

2009 – 7%

On a 36 month cycle, some manufacturers are taking advantage of the 42% lease penetration

from 2007.

Advantage of LeasingSeveral manufacturers have greatly benefited from the

high lease penetration of previous years.

Ever wonder why some manufacturers are soaring in 2010?

They are capturing lease customers from

2007 with leases coming to term in 2010.

The strong lease penetration from

previous years facilitates capturing a lease customer (for the

manufacturers still offering leasing) when leases come to term.

Leasing PuzzleCrashing from 40% penetration to 7% in the space of 2 years. Its creating a chasm, and driving change in the

Canadian market.

Manufacturers /dealers/customers are

still enjoying the benefits of 40% lease penetration.

Starting next year, dealers will take an

increased number of trade ins, while dealing

with an empowered, and informed customer.

A new game, where the transaction process will

be increasingly challenging.

Is the industry ready?

Trends are on the Increase 2009 – Trade-in 28.2% Deficiency 16.9%2010 – Trade-in 29.1% Deficiency 18.9%

2011 /2012 – What do you think?

The trade-in pattern YTD August is increasing.

Accompanied by an increase in negative

equity (deficiency) in the values of vehicles being

traded.

The volume, and the deficiency is increasing.

The used vehicle value “risk” is inexorably

migrating towards the dealer.

Figures from J.D.Power PIN

Product Life CyclesEvery manufacturer is at a different stage in its product life

cycle for its various models. Applying corresponding tactics and strategies.

Current auto business is not more complex than it

was years ago.

Although technology enables a clearer vision of numerous variables.

From the diagram you can interpret 5

manufacturers at different stages of the

product life cycle. Within the same market

segment.

As the product ages, its easier to falter in the

market.

Musical Chairs of CompetitionIn a fiercely competitive, compressed market.

At the end of the month when the music stops! Whoever is left standing loses!

In a market that is increasingly compressed

downward from the previous month / quarter.

When one manufacturer gets aggressive, another

is left standing.

The last quarter will be a defining period for GM, Honda, Toyota to name

a few.

Compact Mid Size Sedans

Honda Civic……..42,796 Mazda 3………….39,503 Toyota Corolla…..29,929

Honda finally got competitive in the 3rd quarter, and decided that they were not

going to relinquish their lead in this segment.

Fascinating to see how the last quarter will develop.

Sales results from: Automotive News

Ford Fusion………..15,786 Hyundai Sonata…...11,250 Toyota Camry………10,538 Honda Accord………10,506 Nissan Altima……….10,411 Chevy Malibu……….10,399 Mazda 6………….…..4,661

The most popular is still the Fusion. The Sonata pulled into 2nd, is it competitive enough with everyone breathing down

on everyone else. While squeezing Mazda out of the action.

Some Numbers YTD September 2010

CUV/SUV Pick Ups

Ford Escape…………33,461 Hyundai Santa Fe…...21,350 Honda CR-V…………20,670 Toyota RAV4…………17,990 Chrysler Journey…….17,260 Chevy Equinox……….14,004

Hyundai passed Honda in the 3rd quarter. These vehicles “transcend winter” at a

reasonable price. They are very popular.

There are other offerings and competitors in this segment.

Ford F Series……………77,171 Ram………………………42,110 GMC Sierra………………34,065 Chevy Silverado…………31,321

Pick up sales continue their torrid pace. Ford, and Ram have gained the most in

this segment. Hopefully the majority of the sales are businesses that postponed purchases.

Do you really think so?

Some Numbers – 1YTD September 2010

Mercedes-Benz GLK Cadillac SRX

Customer Age…..56 Female Customer…..48.1%

Trade In ……48.4% % Negative Equity…..9.2%

Trade In Same Make….21.7% Cash………32.8% Finance….30.3% Lease……..36.8%

Vehicle Price….$48,637 Turn Rate………35 days

Figures from J.D.Power PIN

Customer Age…..56 Female Customer…..35.2%

Trade In ……27.1% % Negative Equity…..2.9%

Trade In Same Make….18.1% Cash………45.3% Finance….52.2% Lease……..2.5%

Vehicle Price….$50,764 Turn Rate………28 days

The Same Customer?Surprisingly similar profiles.

Entry Luxury Luxury CUV/SUV

BMW 3 Series………...10,268 M-B C Class………...…6,125 Audi A4…………………4,127 Infiniti G…………………3,366 Buick LaCrosse………...2,870 Cadillac CTS……………2,299 Acura TL…………………2,095 Lexus IS………………...1,728

Infiniti is the closest contender to the Germans, substantially ahead of the

other Japanese offerings.

Lexus RX………………..5,773 Acura MDX…………...…4,569 M-B GLK…………………4,482 Buick Enclave……….…..3,171 BMW X5……………….…2,952 M-B M Class………….….2,585 Audi Q5……………..……2,473 Acura RDX……….…..….2,407 BMW X3…………….……2,322 Cadillac SRX………..…...2,170

The vehicles are popular, with robust competition. Acura got aggressive!

Some Numbers – 2YTD September 2010

Pony Cars Did You Know?

Mustang…………….4,464 Camaro……………..3,708 Challenger………….2,782

Parnelli Jones is ahead of Mark Donahue, with Sam Posey trailing to continue the

Trans Am race analogy of 40 years ago.

SLS AMG……………….89 Lamborghini……………..55 Maserati………..……….117 Ferrari…………..………..78 Panamera……….….…..295 GT-R…………….…….…56 R8……………………….117 Bentley………….….…….52

Some Numbers – 3YTD September 2010

Fuel EconomyDoes the average Canadian care about fuel economy?

What do you think?

A massive oil spill in the Gulf of Mexico.

Ongoing Alberta oil sands environmental

controversy.

YTD September: passenger car sales are down 3.2% while truck sales (CUV/SUV/Pick

Up) are up 18.6%.

Transcending winter takes precedence over

fuel economy.

Agreed…at $1.50 a liter everyone will care!

Our Thoughts

We expected an active third quarter, with a slight downward trend especially after Labour Day and the return to “reality” after the “Dog Days of Summer”.

For the past 2 quarters the overriding strategy of most manufacturers has been to start strong, take a break in the middle month, and finish strong for the last month of the

quarter. Interesting to see Honda finally get a little aggressive to protect some of its market

positions. The sub compact segment will be “to watch” during the last quarter, with the Fiesta, and

Mazda 2 gaining momentum. Historical (rear view mirror) perspectives are diluted in relevance, a few years ago the

Koreans were not competing at the same level they are this year, and the future. The manufacturers that have not taken advantage of the “low hanging fruits” from lease

renewals will experience increased challenges. We anticipate the last quarter to show a more pronounced downward trend.

Thank You