AD #1144 – Upcoming Price War? Proportions Drive Utility Sales, BMW’s 3rd Generation X5

May 30th, 2013 at 11:56am

Runtime: 9:10

Automakers and suppliers in the U.S. market worry about a price war breaking out this summer that could hurt profit margins across the industry. According to one major automaker, “utility vehicles” are the hottest segment in the passenger car market. BMW pulls the wraps off its 3rd generation X5. All that and more, plus we take a look at the all-new Kia Cadenza.

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Hello and welcome to Autoline Daily. We’ve got a great show for you today, including another chapter in the Design Handbook with Jim Hall. And now, the news.

THIS MEANS WAR
Automakers and suppliers in the U.S. market are starting to worry about a price war breaking out this summer that could hurt profit margins across the industry. Yesterday, we ran into Mike Accavitti, the vice president of marketing at Honda of America at the launch for the MDX and asked him how he sees the situation.

(Clip with Mike Accavitti can only be viewed in the video version of today’s show.)

Price wars are usually started by car companies that are losing market share. So far this year Mitsubishi, Mazda, Volvo, Nissan, Toyota and Volkswagen have lost share in the American market.

HONDA CUTS FIT EV PRICE
And speaking of Honda, the company just cut the price of the Fit EV in the U.S. Customers can lease the car for $259 a month, down from $389. That’s still more expensive than the Nissan LEAF or Chevy Spark EV at $199 a month. But the Fit three year lease involves no down payment, unlimited mileage, routine maintenance, collision coverage and a 240 volt home charging station, though customers must pay for installation. The Fit EV is only available in California, Oregon and most of the Northeastern states.

DESIGN PROPORTION DRIVES UTILITY SALES
Traditionally, the term “utility vehicles” referred to commercial trucks and vans. But now it’s the hottest part of the passenger car market, according to Ford. Most industry analysts would probably define today’s utility vehicle as a tall, two-box design with a higher seating position and a big lift gate. But Ford’s head of marketing, Jim Farley, says it’s more than that. He says their market research shows that consumers are responding to the proportions of the design, the proportion of vehicle height to ground clearance. I sure would like to know more about the specifics of those proportions, but Farley isn’t sharing those details. He says Ford is either in first, second or third place in every utility segment and that the segment is booming in every market in the world.

BEIJING ENACTS AUTO POLLUTION TAX
Pollution In China is so bad that the city of Beijing is taking matters into its own hands. It’s imposing a pollution tax on cars, the first city in China to do so. It’s another tax on gasoline, which brings the total to $1.62 in taxes for one liter of gas.

THE NEW BMW X5
BMW pulled the wraps back on its 3rd generation of X5. It can be equipped with 3 different engines: a gasoline V8, a diesel in-line 6 and a performance diesel in-line 6 that uses 3 turbochargers. All 3 engine types are mated to an 8-speed automatic transmission. BMW refers to this X5’s styling as an evolutionary development of body design. Although it appears that only a few changes have been made to the front and rear facia. In fact, when compared to the previous model in side profile, they look nearly identical. This X5 will hit showrooms later this year.

BOTCHING THE FOLLOW THROUGH
You know, sometimes car companies get a really good idea for a new vehicle and then stumble on the follow through. Jim Hall has one such case study from 2006 as we get into the “What Were They Thinking?” section of the Design Handbook. Here’s Jim.

(Design Handbook – 02 – Chrysler Imperial Concept can only be viewed in the video version of today’s show.)

Yep. Coulda been a cool car. Stay tuned to Daily for future editions of Design Handbook, and if you have any topics you think we should cover, be sure to e-mail your ideas to viewermail@autoline.tv.

Coming up next, a look at the all-new Kia Cadenza.

Kia continues to be one of the fastest growing brands in America. The little brother to South Korean giant Hyundai has increased market share each year, thanks to a smart strategy of popular commercials starring its dancing hamsters, effective marketing partnerships like the one with the NBA, and of course, a stable of good looking small cars. But that stable may have to expand a bit as Kia goes big with its next new entry.

(Video and interviews for the Kia Cadenza can only be viewed in the video version of today’s show.)

The Cadenza comes in three trim levels which are priced between $35,000 up to just over $41,000. Kia believes it’ll sell around 12,000 cars by year’s end and is hoping to ramp that number up next year when it has a full 12-months of sales under its belt. Even though its been sold as the Kia K7 in Korea for a couple of years, as the Cadenza it’s just now available in U.S. dealerships.

Before we go we want to remind you that Jeff Owens, the chief technology officer at Delphi is joining us on Autoline After Hours tonight and Delphi is a supplier that’s always been at the bleeding edge of technology. So join me and the Autoextremist, Peter De Lorenzo to get an insider’s view of what’s going to be in your car in the future.

And that wraps up today’s report. thanks for watching, we’ll see you tomorrow.

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50 Comments to “AD #1144 – Upcoming Price War? Proportions Drive Utility Sales, BMW’s 3rd Generation X5”

  1. Brett Says:

    I recall Peter D. ripping the 2006 Imperial concept car in his weekly column back then. It was quite a piece of writing. :)

  2. Kit Gerhart Says:

    Chrysler should try the Imperial nameplate again, using the good parts of the ’06 concept, but doing a better job with the styling. They need to stretch it a few inches, though. That would make a good, semi-modern replacement for the Lincoln Town Car, if Ford people would consider a Chrysler.

  3. Philip Says:

    RE: the Honda Fit EV. I don’t get the sales restrictions on this model. Sure, California, a sunny state makes sense. But focusing most of the remaining sales to the ‘Northeastern states’ where winters are long and severe?

    Electric/hybrid vehicles don’t perform nearly as well in cold climates. I would expect sales restrictions, if any, would focus on selling these cars in the sunshine states. What am I missing here John?

  4. Lex Says:

    IMO the all-new Kia Cadenzda is simply a rebadged Hyundai Azera. It has very similar portions and powertrain.

  5. ColoradoKid Says:

    Price Wars ;

    WSJ , TTAC etc have been predicting this for over a week now with CNBC etc having this was coming well over a month ago . Its inevitable …. let the Battles begin … may the best man/company win … or not ….. Though my best guess is …. He with the Deepest Pockets and cash reserves … will be the winner in the end . Better look out ….. Angie’s got VW’s accounts in the ready …. and they’re looking towards that #2 slot …. right below Toyota … this’ll get interesting to say the least .

    Fact is though …. if you’re in the market for a new anything … mid summer’s gonna be the time to make the move

  6. HtG Says:

    Great show, John.
    —-
    Is it me or does that Cadenza look like a BMW when you squint?
    —-
    Questions for Jim Hall? Open up your in-box, John. My assistants are putting on the final touches.
    —-
    Imperial
    My joke explanation for it is that Mercedes was trying to rattle BMW’s cage.

  7. Jon M Says:

    Funny, I thought “utility vehicle” was the naming convention to new segments in the automotive industry, a la sport utility vehicles and crossover utility vehicles. Once upon a time, vehicles such as the Bronco II and AMC Eagle were called what they basically were. Today such not-so-typical vehicles seem to be ascribed a (fill in the blank) utility vehicle designation. Ah, semantics!

  8. W L Simpson Says:

    tech leads , not bleeds

  9. ColoradoKid Says:

    BMW’s about to get ugly ….. very ugly indeed …. with an …. urp … Rolls Royce SUV…. based on the upcoming X7 ;

    http://rumors.automobilemag.com/deep-dive-rolls-royces-suv-226775.html#axzz2UnhwS7cS

    Ahhh the more we try and be like them ( EU/UK ) … the more they really want to be just like us ( US ) .. with more and more SUV’s coming out of the EU/UK by the minute ..

    ——————

    As far as Utility vehicles … if the term is including SUV’s small and large P/U’s CUV’s etc … which I assume it does …. yeah … I can agree with what Farley’s trying to say … fact is with the overwhelming majority of passenger cars now having more blind spots than a full face helmet …. taking a contortionist to exit and enter .. and once in wondering where the ___ all that exterior footprint disappeared to ( because the interior is so cluttered ) … Farley’s right … when it comes to day to day driving , function vs fashion , comfort and all around usability . visibility ( excepting the SRX of course ) …. Utility’s proportions are better …

    And yes …. SUV’s and CUV’s especially those of the premium kind are now the Number One selling automotive segment …. in the World

    So … perhaps a total rethink is needed when it comes to the design of the modern passenger car ….. ya think !!!! ;-)

  10. HtG Says:

    Around here, it’s like the 1930′s as far as the cars I see. So many people are driving those small SUVs. I’ve been saying for years that as people age and pick up weight and injuries, that a higher seat position would become attractive. Maybe Pete Farley mentions the low floor because that also aids ingress/egress. (the GLK is in the sweet spot)

  11. pedro fernandez Says:

    It’s no coincidence that the housing market that is doing the best is the higher priced homes as well, A-Rod just made a tidy profit selling his S Fla home, it cost him about $15 mil to build (incl land) and he sold it for $30 mil the rich keep getting richer, folks.

  12. Kit Gerhart Says:

    These days, the term “utility vehicle” means “tall wagon.”. At one time, it referred a truck that transported long wooden poles and transformers.

  13. ColoradoKid Says:

    HtG – 10 – So there we have it . The perfect question for the good Mr Hall . What about a complete and total rethink on the design of modern passenger cars in light of the current domination of SUV/CUV’s ?

    Your idea HtG … my only completing it … so send it on in ( methinks a question from you rather than me has a much better chance of being addressed anyway )

  14. Kit Gerhart Says:

    9, CK says:

    “And yes …. SUV’s and CUV’s especially those of the premium kind are now the Number One selling automotive segment …. in the World”

    Again, lets see some data. According to this WSJ chart, all sizes of crossover combined don’t sell as many units as mid-size cars alone.

    http://online.wsj.com/mdc/public/page/2_3022-autosales.html

    If you combine all sizes of cars, the way all sizes of crossovers are combined in the chart, there is no comparison in the number sold. Also, In the rest of the world, there are a lot fewer “utility vehicles” of all types sold, than in the U.S.

    Yes, they are selling more crossovers in Europe than they once did, but the number is still small compared to the number sold in North America.

  15. pedro fernandez Says:

    HtG so true, no one I know around my age even dares to try to get into my son’s FR-S, they could not get out w/o calling a tow truck or the jaws of life, even I long for a little higher vehicle than my Vibrolla some times.

  16. Kit Gerhart Says:

    Ford tried a “tall sedan” a few years ago, with the 500/Montego, but it didn’t do very well. It started out with too little motor, a mediocre interior, etc., but I liked the concept. Over the years, the packaging went downhill, big time, as it morphed into the current Taurus.

  17. HtG Says:

    15 One reason we have the Versa is the high seat point. It was easier to get in and out of than other cars. Now, getting in/out of the Miata? That was gymnastics, and a modesty challenger for the ladies.

  18. HtG Says:

    (not Britney. I don’t know Britney)

  19. Kit Gerhart Says:

    I normally don’t pay much attention to such things, but I just checked my first generation Chrysler minivan for “ease of entry.” The seat seems a little higher than ideal for someone my height (5’10″), but is probably close to ideal. If the whole thing, seats and floor, were lowered an inch or two, it would probably be in the “sweet spot” for most people.

  20. pedro fernandez Says:

    My son’s old xB had a good height to get in and out easily, BTW I spent some time with my tech today (gonna need new bearings for the Vibrolla) and he dislikes all these new things like electric steering and other electronic crap which is gonna cost a lot to repair and replace and he has already had 3 and 4 yr old cars whose electric motor had to be replaced, so whatever minute amount of gas you may save, you will spend it many times over when the motor fails.

  21. Kit Gerhart Says:

    Hydraulic power steering has been amazingly reliable over the years. I’ve never had a problem with it, and my parents had a problem only once, with the rack unit in a 1991 Dodge Spirit.

    I now have two electric PS units, in a Prius and a MINI. The electric PS is a must with the Prius, since the gas engine isn’t running all the time, but I’d just as soon have hydraulic in the MINI. So far, so good, though, with the MINI’s electric PS unit. I hope it doesn’t break, because the car is now off warranty.

  22. HtG Says:

    I read somewhere about one of the Porsche engineers talking about switching to electric powersteering. It seems that aside from the energy savings, using a motor upfront was simpler than hooking up a hydraulic system for mid/rear engine cars. Plus, once you’ve designed a unit, you can keep reusing it.

  23. pedro fernandez Says:

    In the 70′s when they started to use electric fans to cool transversely mounted engines some companies (VW GM) come to mind had issues with relays and such which meant overheating and lots of engine damage, imagine in a VW which were always air cooled and never had any heating issues, suddenly their cars overheating?

  24. ColoradoKid Says:

    Kit – 14 ;

    First oh great data king … take notice …. I said … in the world … not just the US

    Second …. dig a little deeper Kit … including here as even ALD did a bit on Sedans etc sales waning while in fact the SUV/CUV market is the ONLY growth segment in the auto industry . Look even deeper and you’ll find the links I placed in and around here to verify that .

    Tell you what Kit . Hows about spending a little more time contributing something interesting and/or relevant to the site rather than joining in with your GM compatriot in a feeble and futile attempt to discredit me

    And while you’re at it … hows about learning how to say ” I’m wrong ” or ” I’m sorry ” and even the occasional ” I don’t know ” or ” Here’s my best guess ”

    You see Kit …. in most.. if not all intelligent circles one is taken much more seriously when one is willing to admit one is wrong on occasion .” It seems a contradiction but most often is true ” *

    Methinks we’d all be a lot better off : and happier if you ( and T Bejma ) did …. ;-)

    ( * ten points if anyone knows who that quote is from )

  25. Kit Gerhart Says:

    Electric power steering should simplify engine compartment packaging in most cars, eliminating the need for the crankshaft driven pump. There have been, and probably currently are some cars using hydraulic PS, but with an electric pump.

  26. ColoradoKid Says:

    HtG – From yesterday … re “Mad Men ”

    My favorite Don Draper quote;

    When asked why he would no longer work on the GM * account his answer was ( a paraphrase as I don’t remember it exactly )

    ” Every time we work with a car company this place turns into a whore house ”

    Having a few friends in advertising ( one of which was on the team of the original MINI ads ) and asking them about that little diddie they all to a number said its a case of Fiction Mirroring Reality to the tee

    ( * to be fair previously the agency had worked with Jaguar )

  27. HtG Says:

    One of Ben Franklin’s rules for the discussion society he held in Philadelphia was that one couldn’t argue a position from certainty. One had to allow room for other’s contrary views. It made it easier for people to get along and to be willing to be heard. (he also had funny ideas about conflicts of interest, but that’s another thing)

    My best guess is Socrates is your source, CK, but I cheated.

  28. Kit Gerhart Says:

    24,
    As I said in my post, the discrepancy would be EVEN BIGGER world-wide, where crossovers sell as a much lower rate than they do in North America.

    I’ll say it again, dumb a$$. HOW ABOUT SOME DATA, like FOR WORLD WIDE SALES, SIMILAR TO WHAT I POSTED FOR THE US. If you come up with a legitimate source of data that CUV’s outsell cars in Europe, yes, I will admit that you are right. As long as all we have to go on is that you said so, no, I am not going to say I’m sorry.

  29. Kit Gerhart Says:

    And yes, CK, I clearly said in my earlier post that sales of CUV’s in increasing in Europe, but they remain very low, compared to the sales of cars.

  30. pedro fernandez Says:

    but the fact remains that an electric motor costs a lot more to replace than a hydraulic hose.

  31. Kit Gerhart Says:

    Yep, and the hoses rarely fail, except when you keep turning the steering wheel when the car’s steering is locked to the right or left.

  32. pedro fernandez Says:

    Incredible how some people do that, specially in areas where most parking is curb side parking and tight spaces to boot. In my Vibrolla, only replaced the hose twice and if I got genuine Toyota hose, it would have lasted longer.

  33. Jesse W. Henry Says:

    It seems to me that Kia’s core customer is the little girl from the AT&T commercial

    http://www.youtube.com/watch?v=OnA3C9Af_oc&feature=player_embedded

  34. stas peterson Says:

    Chrysler has no need to reprise the Imperial. Unbeknownst to all apparently, Chrysler-Fiat dealers have every car and market niche now addressed in their product lines.

    A, B, C, D, E, F segment cars and CUVS/SUVS, Mini trucks and minivans, Vans and Trucks as well as Exotica are all produced by the company fornow its dealers to sell.

    Why produce a redundant Imperial when you have the Maserati Quadroporte and Ghibli already available? Ferrari and Viper address the sports car enviornment too.

  35. Jesse W. Henry Says:

    #3 Philip – My best guess would be that even though EV’s are more impractical in cold climates that there are more customers there with deep pockets and a love for anything “green” right now.

  36. Kit Gerhart Says:

    34,
    An Imperial, if a stretch version of the 300, would be a very “American” luxury car. Unless they could sell reasonable numers, though, it wouldn’t make sense to do it.

  37. Kit Gerhart Says:

    35,
    A problem with EV’s where I am in Florida, is that a majority of people live in condos and apartments, where you would have no place to plug one in.

  38. T. Bejma Says:

    #24

    “You see Kit …. in most.. if not all intelligent circles one is taken much more seriously when one is willing to admit one is wrong on occasion .” It seems a contradiction but most often is true ” ”

    I tried looking back on all of CK/tj’s posts to try and find one where he admitted he was wrong, but after spending several hours (and hundreds of supposed taxpayer dollars) instead of supposedly not doing my job, I could not find a single one. I guess that means we can’t take him seriously then…

  39. T. Bejma Says:

    More of CK’s BS from yesterday…

    “I BUILT my first car at age 16 …. a GM in fact .. 65 Olds F85 w/69 442 455 in the snout”

    That was pretty much impossible because in 1969 the ONLY 455 was in the very limited edition Hurst Olds not the 442. The 442 had a 400 c.i. motor (4.25 stroke, 3.87 bore). I happen to have a 1969 Olds Cutlass Convertible in my garage that I have been restoring for the last 10 years so trust me on this one…

  40. Earl Says:

    Jim Farley is telling everyone without out and out sayinging it that Ford is watching GM’s sales of the Trax & Encore. I suspect we’ll see the Eco Sport here in the fall f 2014 or sooner. The version we see won’t have that spare tire on the back,maybe an aerosol can instead.
    And then we’re anxiously waiting to see that MKC or MKE that Lincoln is coming out with. Ford is doing great on these SUV’s and. cross overs. That Explorer is really outselling the Traverse/Acadia big time.Sharp looking vehicle too.

  41. Jesse W. Henry Says:

    #37 Kit Gerhart – Agreed it is an issue for now but I can see plug ins being offered in paid parking spots if demand warrants. They do it here at apartments in MN for plugging cars in in the wintertime.

  42. Kit Gerhart Says:

    #47,
    There has been some discussion of having a few paid plug ins at my condo complex, if there is interest. I suspect that will happen eventually. Even with their limited range, current EV’s would probably work for 90+ percent of the driving done by most people in my complex, and many, or most have two cars, so they could still have a car that would work for road trips.

  43. T. Bejma Says:

    Sorry guys, especially CK. Got to stop posting after Golf League and a few micro brews… ;-)

  44. ColoradoKid Says:

    T Bejma – 39

    Now you’ve managed to enter the realm of the truly Pathetic .

    Pretty much impossible ehh….. never heard of a junk yard find ? Didn’t know that any 69 442 came with the 455 …. if you ticked the right boxes ?

    http://en.wikipedia.org/wiki/Oldsmobile_442

    Seeing as back in 69 you could just about order any engine a brand had available assuming of course it would fit

    Which you’d know … IF you were old enough or at least had done a little reading up on Olds history might be in order there junior ?

    BTW … like to verify my Midnight Olds ? Hows about asking my good buddy Neal East ( look him up – then read it and weep ) about it who’s not only seen the photos and the time slips …. but know where some of the bits an pieces lie after the next owner crashed it . Oh yeah …. it seems even BangShift knows about the car … amazing … aint it ?

    Nice job there T Bejma … in your pathetic and ever so futile attempts to discredit me …. you’ve managed to prove to one and all how absolutely FOS and pitiful you really are …. not to mention being completely unaware of the company’s history you ‘Supposedly’ work for

    So trust you ? On anything ? Only a fool would take that route little man .

    BTW T …. I wonder how your minders would take it if they knew how much of their time you’ve been wasting insulting a member of the buying public on an online forum ?

    Hmmmmn…. Maybe we should ask them . Whatcha think there T … I mean … Troll Bejma ?

    Gotcha ! ;-)

  45. HtG Says:

    43 I’ve done it too, TB. Let’s all try to tread softly. I’ll try to do a little less evening posting after my 1 part Vodka, 2 parts soda water, and a squeeze of lemon ‘refreshers.’

  46. ColoradoKid Says:

    43- Yeah T … after today you might wanna down a few cases of that micro brew … maybe a bottle or two of something harder while you’re at it ;-)

  47. Brett Says:

    As fond as I am of our 1990 Eclipse, I’m starting to have a deuce of a time climbing in and out of it, particularly if I’m trying to hold anything in my hands while doing it.

  48. ColoradoKid Says:

    HtG – If # 43 is supposed to be Bejma’s idea of an apology I’m afraid the lads gonna have to do a whole lot better than that to assuage my anger ….

    Cause brother ….. PO’d doesn’t even come close right now !

  49. HtG Says:

    Yes, I can tell, CK. We all need to pull it down a few notches.

  50. Dave Forslund Says:

    Re: #1144 2006 Imperial

    To: Jim Hall,

    Sorry for being late in responding to this May 30 broadcast, but I just have to comment.

    While the Imperial Concept had it quirks, it could have very well served a needy purpose. The Lincoln Town Car has not been impressive in many areas, but it served the big city limo service business well. The Imperial could have filled the void left by Lincoln’s departure. Chrysler could use the publicity of its quirky cars cruising the streets of NYC, LA, SF, Miami and celebrity weddings and every mentional awards ceremonies. And they only need 3 colors, black, midnight blue and white. Everyone recognizes the Town Car and everone would have recognized the Imperial.