NEW YORK ― It has been a long and bumpy road for the auto industry, but it appears automakers have finally regained traction after the recession.
The industry's rebirth was on display this week at the New York International Auto Show, where major automakers introduced close to 20 new cars to the marketplace.
These companies did so amid their best month of sales in half a decade. The New York Times reported that an estimated 1.5 million vehicles were sold this March in the United States, making it the single best sales month since 2007 ― right before the recession set in. Experts predict that automakers will sell a total of 15 million new vehicles this year.
However, that growth is due to more than just an improving economy. Car companies also are reaping the benefits of several hard lessons they learned during the recession, when the industry as a whole was one of the most distressed sectors in the country.
Chief among those lessons is that consumer preferences have changed as a result of the economic downturn. As a result, even though the S&P 500 has since beat levels seen before the recession, consumers continue to place a premium on getting value out of their vehicle purchases. To meet that demand, car makers have had to retool the way they think.
"What I think we have seen post-recession is, there has been a focus on really making sure you are getting value out of what you are purchasing," Jim Vurpillat, global marketing director at Cadillac, told BusinessNewsDaily at the New York International Auto Show. "Consumers are not so quick to judge the established brands. I think it has really opened people’s consideration set a little bit to look at other brands to ensure they are getting what they want, instead of doing what they always did."
Other companies agreed that the recession refocused customers on getting the biggest bang for their buck when buying a car.
"I think that the recession did a lot of things," said Bill Fay, Toyota Division group vice president and general manager. "Namely, it took a big part of the market out for everybody. So when the market started to recover, customers were ― and are ― looking for things like fuel efficiency, safety and technology."
Those features are even more important to consumers as they continue to look for the best ways to stretch their dollars. Consumers, like the automakers themselves, learned many lessons from the recession, and carmakers have taken notice.
"People are absolutely still looking for practical features in their cars," said Michael Sprague, executive vice president of marketing and communication for KIA Motors North America. "Over the last four years, we have seen a jump in car sales, and it has been because of what we were offering to the consumers in a time when they were looking for a value brand."
However, determining what consumers wanted was a challenge for most automakers early on in the recession. In fact, the Big Three U.S. automakers’ (General Motors, Ford and Chrysler) inability to quickly adapt to new consumer demands was one of a number of factors which brought the companies to near bankruptcy in 2008, before they were bailed out by the government.
While those struggles signaled the low point for the U.S. auto industry in general, the challenges also forced automakers to re-evaluate what consumers wanted. As a result, the recession allowed those companies to rethink their brands. Today, that reinvestment remains the core reason for the industry's turnaround.
"We were very fortunate because we have always been known as a value brand ― and when people think of our brand, they think of value," Sprague said. "We have always had great fuel economy and really good prices. In 2009, the height of the recession, we started a product design transformation of our brand."
Other companies echoed KIA’s observations. Bentley, which was hurt severely by the economic downturn, attributes its current success ― first-quarter sales are up 20 percent over sales from the first quarter of last year ― to the investments the company made during the recession.
"The most important thing is to keep investing in new products," said Kevin Rose, board member for sales and marketing at Bentley. "You have to keep doing that because if you don’t have new products, technologies and derivatives, then you can die quickly. The trick is, at the times when you are making profits, you need to keep investing in your products and continue to make sure that you can weather the storm when it comes.
Cadillac and Toyota also attribute their success in recent months to investments made during the recession.
"I think Toyota has built its success on having a very rational, dependable, reliable and safe brand reputation," Fay said. "Part of it is reinforcing the roots, but also trying to build on those roots ― so, as we go forward, trying to reinforce the dependable, reliable and safe reputation."
"When we came out of the recession, we had a lot of new cars to launch, so we really focused on those core attributes of the car," Vurpillat said.
After all, those attributes have been driving the industry’s rebirth.