The Sales Volume Leaders are Not Always the Winners

Success or failure in the new-car business is often presented through the lens of monthly sales results. It’s a lot like baseball, or football, or any of the sports we love, where our favorite auto brands are ranked by their monthly sales “scores” and industry analysts – the fans! – pour over monthly volumes to measure winners and losers in the market.

Many automakers will report October sales later this week, but the volume numbers tallied offers a far too simplistic view of the auto business. In our world, it’s many of the other stats that matter most. Indeed, in this new age of tight inventory, sky-high transaction prices and record-low incentives, we should all be looking at the industry a bit differently. 

Consider September’s results for the Top 10 brands, measured by sales volume.

On that scoreboard, Honda beat Chevrolet – for only the 4^th time in history, all in 2021 – and Toyota handily outsold everyone but Ford. Hyundai and Kia both outpaced Nissan. But who is really winning here?  

When you take each automaker’s volume multiplied by their average transaction price (ATP) and consider incentive spending as well, the picture shifts drastically, and the conversation changes from delivering volume to making money. In this measure, we can see which brands are generating the most revenue – the lifeblood of any business.

Looking at September performance through this lens presents a very different “score,” a more valuable way to measure brand-level success. In this case, Honda drops below both Chevrolet and Jeep. And Ram jumps up above both Hyundai and Kia. And it’s not by just a few dollars.

Chevrolet generated $550,000,000 more in revenue than Honda in September, even though Honda sold 17,071 more vehicles. Chevrolet has been successful in building and delivering their most profitable models. They’ve pushed for higher ATPs and been able to drastically reduce incentive spending on lower sales volumes. The story is similar with Ram. The company’s sky-high ATPs of $55,384 helped them muscle past Hyundai, Kia and Nissan in terms of revenue generation – money-making – in September, despite far lower volume.

Taken one step further, by looking at revenue-per-vehicle sold (revenue minus incentive spend divided by sales volume), the rankings for September are mixed up even further. Here, we can see which brands are generating the most revenue per sale – the real measure of dealer success. (Note: By this measure, the luxury brands are well above the mainstream, although in September, Chevrolet, Ford and Ram, the full-size pickup leaders, all posted ATPs above $50,000.)

Here, we see Ram leap to the top of the class. A heavy mix of profitable pickups and commercial vehicles, transaction prices above $55,000, and incentives well under control helped the brand deliver more than $51,000 per vehicle sale. In this measure, the Detroit brands are stacked on top of the chart, and Subaru jumps to 6^th place.

Later this week, we will be reviewing October sales numbers. Our team is forecasting another slow month. Volumes will be down. But just remember that’s only a small portion of the success equation for automakers and dealers. Far more important is the revenue all those sales are generating. And the key to revenue is high transaction prices coupled with incentive-spend discipline. With today’s high prices and low incentives, it’s a seller’s market.

Brian Finkelmeyer is senior director of new vehicle solutions at Cox Automotive.