I
undertook my first vehicle scrappage analysis back in 1989. One of the notable
factors, at the time, was that light truck scrappage was significantly lower
than passenger car scrappage This was somewhat surprising in that light trucks
(primarily pickups and full size vans a decade ago) are typically driven in harsher
environments than passenger cars since their primary use is for commercial purposes.
One would assume, therefore, that they wouldn’t last as long. The opposite was
true.
A careful analysis revealed
that light trucks are built tougher, have larger engines that can withstand
rugged use and are kept as a second, third and even fourth vehicles. There are
many pickup trucks still in use on farms and used on back roads. These vehicles
would otherwise be scrapped. Their utility gives them a life far beyond a passenger
car.
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One of the questions I’ve
always had in the back of my mind relates to this issue. Now that we buy more
light trucks than we used to (close to 45 percent of the market today compared
to only 25 percent a decade ago) will these vehicles also have a lower scrappage rate? If they do, then there could be a negative impact on the new vehicle
market.
The longer vehicles are
on the road, the fewer new vehicles are required to replenish the fleet. Exploring
this scenario, the vehicles I would like to key in on are minivans. Most minivans
are purchased for personal use so it is more relevant to compare their longevity
to passenger cars than to other light trucks that have a high ‘commercial use’
application. Now that minivans have been sold in volume for more than 15 years
we also have a full `lifecycle’ on which to compare trends.
What I did was go back and
look at how many cars, light trucks and minivans were originally purchased 10
to 15 years ago in the 1984 to 1989 model years. I then compared this to how
many are still on the road as of July 1998 from the latest census of vehicles
on the road data. As expected, there is a significant difference between passenger
car and light truck survival rates.
For the 1989 model year
vehicles, about 90 percent are still on the road regardless of vehicle type.
But for 1984 model year vehicles (15 years old) only 35.3 percent of the passenger
cars are still on the road compared to 60.7 percent of the light trucks for
the same model year. A similar trend was evident for the vehicles 11 to 14 years
old. Obviously light trucks last a lot longer than passenger cars. If all consumers
had purchased pick-up trucks instead of passenger cars then the Canadian market
for new vehicles would have been significantly lower over the long term.
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By GlobalDataComing back to my minivan
hypothesis, it is noteworthy that minivans have scrappage rates which are similar
to other light trucks rather than to passenger cars. This is very good news
for consumers since they are getting more lifetime usage from these vehicles
compared with a typical passenger car. Not only did they buy these products
at a low price, (they were originally priced lower than mid-size passenger cars)
but also the consumer is able to drive these vehicles longer than a passenger
car. In addition consumers get the extra utility offered by a minivan compared
with a passenger car. What is truly remarkable is that older minivans are driven
more than passenger cars which would normally mean that they would wear out
faster.
This also helps to explain
some of the problems in the Canadian new vehicle market over the last decade.
During the 1990s Canadian consumers bought about three percent fewer vehicles
than during the 1980s. Why? Perhaps the reason lies in this longevity analysis.
The simple answer is they didn’t need a new vehicle because the older ones were
still on the road. If minivans are not being scrapped then they also don’t need
to be replaced. This dampens the market in the long term especially since so
many minivans and now sport utility vehicles have been purchased as a substitute
for a passenger car.
It is even more interesting
to extend this analysis to all makes in the marketplace. I did the identical
analysis for all passenger cars and light trucks by brand name. I summed the
data for all vehicles bought 11 to 15 years ago rather than examine the trending
by model year.
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The results of this analysis
are quite surprising. Mercedes-Benz and Cadillac and most other luxury marquees
are the clear winners when it comes to long lasting passenger cars. Over 90
percent of Mercedes -Benz and Cadillacs sold 11 to 15 years ago are still on
the road today. Incredible!
In the light truck sector,
Volkswagen and Plymouth top the list for the longest lasting light trucks. Part
of the reason is that they only make minivans which, as we showed earlier, last
longer than other light trucks. There also may be a novelty to owning an older
Vanagon. All the Japanese light trucks are below the average. However, the majority
of Japanese light trucks were compact pickups which wear out faster than larger
pickups. Moreover, older Japanese light trucks were clearly not as well-built
as older “Big Three” light trucks. Even Toyota, which has the best
quality reputation in the market, sold trucks that have not lasted as long as
the “Big Three” products.
Now before the industry
executives whose vehicles perform well call their advertising agencies (Note:
DesRosiers Automotive Consultants does not allow our company name to be used
in an advertisement although we have done a lot of market research to support
advertising claims) and/or the ones whose vehicles under-perform get their knickers
in a knot, let me try to explain some of these trends, because some of this
performance has nothing to due with the quality of the vehicle itself.
First, it is very
clear that luxury and high priced vehicles are kept around a lot longer than
lower priced vehicles. This is partially because they are built better but I
suspect a lot of it is because they are driven less, looked after better and
are owned by older consumers who have no reason to get rid of them. They also
cost a lot more so their owners want to take better care of them and because
of their wealth they can afford to take better care of them. Perhaps the message
here is that “if you take care of your vehicle it will last longer!”
Many older luxury vehicles are also collectable whereas I’m not sure many smaller
vehicles are collectable.
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Second, larger more
substantive vehicles generally last longer than smaller vehicles. The small
car divisions of DaimlerChrysler, Ford and GM all rank much lower than their
luxury car divisions. And as noted earlier, light trucks, last a lot longer
than passenger cars. I also suspect that vehicles with body-on-frame construction
last longer than those with uni-body construction since they are easier and
cheaper to repair if in an accident or if there is a rust problem, but I did
not look specifically at this variable. In addition smaller vehicles may have
thinner sheet metal than larger vehicles and are more likely to be scrapped
because of rust problems. A case can also be made that a smaller vehicle in
a collision is more likely to be written off than a larger vehicle because they
sustain more damage. Finally, smaller cars have to be priced lower which means
they also have to be built at lower cost and are therefore likely more liable
to failure. “Consumers get what they pay for”.
Third, Japanese quality
is clearly evident in the passenger car market with all the major brands ranking
above average. Toyota has the best longevity of the highest volume brands at
73 percent. Subaru’s and Suzuki’s less strong showing is just as likely because
they sold smaller cars, as it is a reflection of the quality of their vehicles.
Fourth, used vehicle
imports and exports clearly play a role in survival ratings. There is an important
anomaly in the data that needs to be noted. We cannot track individual vehicles.
We know how many vehicles were originally registered and we know how many vehicles
are still on the road, but the ones on the road today may not be the ones originally
registered. An imported used vehicle would show up in our data today even though
it was purchased in the United States. Brands with high used exports appear
to have a lower survival rate and brands with high imports appear to have a
better survival rate. There was, for example, a substantial wholesale market
for Ladas exported to Eastern Europe in the early 1990’s. Lada didn’t rank low
just because of quality issues but many were also exported which made them appear
to have been scrapped. Some of these Ladas may still be on the road but in Russia
instead of Canada.
Similarly, luxury vehicles
are a prime snowbird vehicle and I suspect some of the luxury vehicles currently
in Canada were imported used from the United States over the last ten years.
Moreover, luxury vehicles were historically much more expensive in Canada than
in the United States. Because there was an embargo on used vehicle imports consumers
could not import vehicles and this allowed higher prices in Canada to be maintained.
This embargo was lifted with the signing of the Free Trade Agreement (FTA) in
1989 and some consumers started importing these lower priced used luxury vehicles
from the U.S. This creates the perception that luxury vehicles last longer.
Yes they do, but not to the level indicated by this analysis. We have no way
of knowing how many luxury vehicles currently on the road in Canada were actually
purchased in Canada and/or in the US
Fifth, Volvo’s reputation
for long lasting vehicles is clearly justified. Volvo performs strongly in the
mid-market segment area (i.e. 240 and 740 series) along with Toyota, Volkswagen
and Honda. Although some of Volvo’s high ranking may be due to the fact that
some of their vehicles (i.e. the 740 series) are more appropriately in the luxury
segment of the market than in the mid-size or compact segments of the market.
Toyota is the clear winner in the very high volume segment and Honda ranked
very high. Oldsmobile placed high, but they are more in the luxury end of the
market. Pontiac and Chevrolet were only slightly above average.
Sixth, some of the
under-performance by certain makes is likely due to poor quality. I can’t think
of any other reason that would explain the huge gap between some brands and
the industry average.
The lesson here is that
survival rates depend on a long list of factors not just vehicle quality. Quality
is certainly the most important variable, but it is not the only variable. Indeed,
small car owners may just be more prone to accidents than luxury car owners
(if you think about this it makes sense) and thus these vehicles disappear at
a faster rate. Consumers may be more willing to drive a banged up pick-up truck
than a banged up sub-compact car. We don’t know how to weight the various factors
and thus advertising claims would be risky.
Finally, all the
vehicle companies have made major improvements in quality over the last decade,
so it is not fair to rate the vehicles they sold 11 to 15 years ago against
the vehicles they sell today.
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DennisFor further
information please contact:
DesRosiers Automotive Consultants Inc.
100 Mural Street, Suite 102
Richmond Hill, Ontario
Canada, L4B 1J3
p: 905.881.0400
f: 905.881.7456
e: desrosiers@desrosiers.on.ca
w: www.desrosiers.on.ca
