Did These Two Cars Compete Against Each Other? Don’t They All?

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I compared the 1976 Honda Accord with the 1976 Chevelle Malibu the other day, but folks just weren’t buying it. And the conversation morphed to the Civic, with numerous comments stating that these cars, Civic or Accord, in no way competed against the bigger Malibu. Well, yes they did. How else to explain how the Accord and Civic came to be best sellers, while the Malibu dwindled away? Honda sales rose at the expense of others. Almost every car and truck is ultimately competing against every other for the consumer’s money, and it’s been so for a very long time. And the winners have a few key ingredients to explain their success.

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If folks bought cars strictly for their utility, we’d all be driving a modern day Model T (a 2016 version of the GM FWD A-Body?). The T was the perfect car to put America on wheels, but Alfred Sloan of GM soon realized that once car buyers had made that transition, a very large percentage wanted something more than pure utility. Style, image, comfort, distinction, exceptional performance in various ways, and other attributes that couldn’t be adequately be addressed by one single car.

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There’s a common misconception that the VW, and other imports, experienced such explosive sales growth during the mid-late 50s because they were seen only as cheap, basic transportation; a modern-day Model T. Not so, except perhaps a minority. Yes, a 1955 VW sedan cost somewhat less ($1495) than a basic Chevy sedan ($1685), but the reality is that from the very get-go, VW and other import buyers had higher average income (and educational levels) than buyers of domestics. They could afford a more expensive car, but they wanted something different, whether it was higher perceived quality, unique/timeless style, sporty handling, greater economy, better resale value, or to just stand out from the crowd as well as to self-identify with the other growing legion of import/VW buyers.

The Volkswagen, along with other socio-economic changes, was a prime reason the Sloanian ladder imploded so rapidly starting almost exactly at this time. It was no mere coincidence.

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And it wasn’t just singles or couples that bought VWs; many families did too. Stephanie’s family numbered six when their dad bought a VW. And he was far from the only one. I remember a number of my classmates at grade school having VWs. It may not have been the most logical choice in every case (it wasn’t in the case of Stephanie’s family), but that’s beside the point. College professors weren’t exactly forced to buy Saabs, Volvos and VWs because they couldn’t afford a nice American car.

So yes, the Volkswagen most definitely competed against the full-size Chevrolet as well as every other domestic, low-price and not-so low price.  If imports hadn’t been available, or the specific unique qualities of the VW hadn’t existed, its buyers would have been buying…Chevrolets, or Ramblers, or…

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If the VW example isn’t convincing enough, here’s example B: the 1965 Mustang. Contrary to popular belief/myth, the overwhelming majority of Mustangs weren’t bought because of their genuine performance or sportiness. It was all about image and perception, and the Mustang tapped into that like no car before, except of course the VW (and to a smaller extent, the Corvair Monza). Once again, there were plenty of kids who were forced to ride in its cramped rear seat because Mommy or Daddy just had to have one. Like the VW, it was a mammoth fad; its popularity completely out of proportion to its objective/utilitarian qualities, which were frankly pretty iffy. And it had little or no “direct competition” to speak of.

The difference with the Mustang compared to the VW and other imports is that now this critical split in the market was happening within the domestic industry. Mustangs were equally hot in Waterloo, Iowa as they were in Malibu, CA. Buying a Mustang in 1965 made as much sense as buying a double cab pickup does today to 90+% of their buyers. And they weren’t trading in sporty cars to buy them. People largely buy with their emotions, not their calculators (or slide rules, as the case may be).

There was a reason pony car sales went into such a swoon after a few years; no, it wasn’t the high insurance on the few hi-po versions. It was because Mommy and Daddy got sick of getting kicked in the lower back by their kids’ feet. Or something like that. So they moved on to the next hot fad, moderate-priced personal “luxury” coupes like the Monte Carlo, Cutlass Supreme, and their many imitators.

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Or not. A lot of Honda Civic buyers in the early-mid 70s were trading in domestic cars of all stripes and sizes, including Mustangs and Chevelles, A certain segment of the market is always on the hunt for the next big (little) thing, due to some unique qualities inherent to it. They wanted something different, small, economical, well-built, sporty and with some flair and style to go with it. The experience of slipping into a Civic compared to a Malibu was day and night, yet where were the buyers coming from? Yes, some came from VWs, but the Civic (and the Accord) were hot fads all of their own, because they brought a whole new driving and ownership experience. And there’s no doubt if Honda had never existed, the domestics would have seen their sales drop just a wee bit less. or a whole lot less, after a few years. Just like would have been the case in the 50s and 60s without a VW.

When something really new and different comes along, it creates excitement among the early adopters. And when that is sustained due to objective qualities that do make the car stand out and economically viable, demand can grow dramatically and for quite some time.

Given the range of financing/lease options available today, a huge range of buying options is available to almost anyone except at the lowest end of the income scale. That means the bulk of the market is all competing for the bulk of the buyer. This was not once commonly the case, but it has certainly become so.

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I could list other examples (Mazda Miata, for one), but one of the best in more recent years is the Toyota Prius. Again, its following started small, by the same kind of early adopters that embraced the VW and Hondas. Derided by many as just a greenwashing fad, its growth accelerated as gas prices once again rose in 2005 along with growing concern about greenhouse emissions. And again, Prius buyers had similar buyer profiles, and many/most could well have afforded something more expensive. And just like the VW and Honda, the Prius increasingly became mainstream and a top seller. And those sales came out of all sorts of cars’ hides. And just like the others, it arrived with a unique set of qualities that made it more attractive then the existing range of vehicle in the marketplace.

Prius enthusiasm has been flagging of late (along with gas prices), and Toyota made a colossal mistake of never coming up with the next step in its obvious evolution (a long-range EV).

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Right now, midsize trucks are one of the hottest segments of the market, yet it languished just a few years back. My son and his GF just bought a Tacoma double cab, to replace their Subaru Impreza.  And it sure wasn’t going to be one from GM! Midsize trucks aren’t competing against each other so much as all the other choices out there. And for the time being, they’re winning.

 

 

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So what’s the next hot thing to steal market share from all the other cars? Did you have to ask? Well, we’ll see if Elon Musk can fully fulfill his ever more expansive vision, the latest one being to produce over 500k Teslas per year by 2018. And a million per year a few years later. But one thing is for certain: the close to 400k prospective Tesla Model 3 buyers who put down a $1000 deposit are in essence already not buying other cars. And exactly what car does the Tesla compete against? Since there’s no direct competition, your guess is as good as mine. But it’s coming out of the market, no matter how you look at it. And undoubtedly, those 400k Model 3 buyers-to-be own a wide variety of cars currently, which will not see repeat buyers.

It’s just like it was with VW in 1955, Honda Civic in 1975, and the Prius in 2005. And quite a few others in between. None of these cars had any “direct competition” in terms of specific metrics of size, weight, power or such; every other car in the market was potentially ripe for the taking.  As it always has been. “Direct competition” is actually overrated and a bit of an oxymoron. People mostly already know what they want, and if they like certain brands, good look showing them something else. Unless of course it’s the next hot new thing.