15 March 2007

The Double Edged Fleet Sword.

As GM and Ford gradually phase out a lot of their fleet sales, there have been many who have wondered just where rental companies/taxis/etc. would find suitable vehicles to run their business. And while the domestic makers will probably never completely abandon the fleet market, the question is a valid one- for example, how will the fleet industry replace 100,000 Tauruses a year? How will they replace the wackload of Malibus and Impalas that will be disappearing from their fleet selector lists soon?

The most willing company to fill the void in this regard thus far has been Hyundai. Hyundai has disguised milquetoast sales by stuffing Sonatas and Accents into every nook and cranny they can possibly find, with little regard for market saturation. However, I think this business practice is fraught with danger for a company like Hyundai for one simple reason- their image is actually on a lower plane than GM/Ford to many consumers.

The next company in line would logically be Toyota. In their quest for #1 in sales, fleet vehicles could prove to be the straw that broke the camels back. And fans of domestics will no doubt have an easy scapegoat to point at if fleet sales are what put Toyota over the hump.

The question is though- would fleet sales hurt Toyota as a brand?

The easy answer is yes. The easy answer says that GM has rendered many of their nameplates irrelevant by offering them as bluelight specials on a year over year basis, thus destroying the value of their vehicles in the marketplace.

A more complex answer would be no. And it might just be the right answer. Follow me for a second. On their own, the fleet sale is not a bad thing. The problem with a fleet sale is when the fleet sale is of an inferior vehicle. In essence, GM and Ford hit the magic jackpot with their fleet strategies of the 90's to present day- the Japanese competition was making better quality vehicles, the Japanese competition was making better performing vehicles, the domestic makers were making crap boxes, and they were stuffing these crap boxes into fleets. So the consumer was seeing the worst side of the domestic makers on a regular basis, while migrating to the import nameplates.

Present day is a different story- the Camry has traditionally never been a fleet special. Same with the Accord. Same with the Altima. Same with most of the Japanese competition. But as they slowly DO become fleet fodder as demands begin to be imposed on them, the stigma of a 'rental car' does not seem to be sticking to them. Instead, people are OPTING for these vehicles if given a choice- they're seen a 'premium' choices. Heck, offer me a Malibu and a Camry, and I'm taking the Toyota 10 times out of 10, and I'd wager that most average people would too. The stigma isn't sticking because these brands invested heavily in their perceptions, quality and performance over the years BEFORE having to dip their toes into the fleet pool.

Conversely, many of the domestic makers have done the exact opposite. Improved models are offered immediately to the rental fleets (Impala, Sebring) further cementing their status as crappy fleet vehicles before the consumer will even give them a chance. All new models are offered immediately to the rental fleets (G6, Fusion) basically killing the value quotient they offer to the consumer on entry.

What would be the correct way for the domestics to pull out?


Make a 'fleet brand'. Do it like the 'Chevy Classic' but make it a good car. Make it a car that is reliable. Make it a car that oozes quality. Do not sell it in your retail outlets. Immediately pull back all your retail models from fleet sales. Develop your brands. Build that relationship back again. If you so choose 10 years from now, kill your fleet brand and re-enter the fleet market with nameplates that mean something to the consumer again. In essence, reset your model lineup. It probably won't be easy. But it's the only way. Because the way things are going, unless Toyota really messes up (anything is possible), they'll end up taking the retail market AND the fleet market from under the noses of the domestic makers, without losing anything.

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