pqs 2011 spring

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Mainstream and Luxury ModelsPerceived Quality Study

Spring 2011

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ALG, A DealerTrack Company

3760 State Street, Suite 200Santa Barbara, CA 93105

805.898.8400 voice

805.435.3775 faxwww.alg.com

© 2011 ALG, A DealerTrack Company. All Rights Reser

ALG Perceived Quality Score (PQS) - Spring 2011 AutomotiveConsumer Attitudes SurveyPerception is a powerful force in consumer buying behavior. Consumers often base beliefs about quality on the emotional

connection they have made with a brand, regardless of the actual quality associated with its products. Alternatively, a brand

that experiences an instance of bad publicity may take years to shake off the negative effects, even if the actual quality is

good. Automobile brands are no different. A negative belief about a brand based on the opinion of friends or family, or a high-

profile incident, can sour a consumer on that brand’s complete model lineup. Alternatively, a positive belief about a brand can

sometimes trump poor quality.

ALG conducts a semiannual consumer survey of perceived automobile brand quality. The results of our Spring 2011 survey

can be found in this report. We partner with Zogby International, a well-known survey firm, to survey approximately 3,000-

4,000 U.S. consumers to gauge perceptions of mainstream and luxury brands. This data is powerful intelligence for automotive

manufacturers and is one of the factors ALG uses to determine residual and resale vehicle values.

Detailed analysis of the results, including distribution by age, region and respondent demographics is one of the many services

provided by ALG Consulting Services to gain insight into brand value, image and trends among consumers. Please contact

[email protected] for more information.

Perceived Quality Scores (PQS) - Mainstream Brands

Toyota Rebound Continues, Kia MostImproved, Fiat Enters at the Bottom

The table on the right shows the latest ALG PQS results for

mainstream brands. In parenthesis is the change in percent

versus the previous survey in Fall 2010.

Prior to their massive product recall in early 2010, Toyota held

the perennial top spot in PQS since the survey’s inception. In the

Spring 2010 survey, conducted at the height of the media firestorm

surrounding Toyota, the brand plummeted from 1st to 6th place.

ALG predicted that given Toyota’s solid reputation for quality

and ownership loyalty, the dip in PQS would be temporary and

long term residuals and brand values would not be significantly

impacted (pending no further recalls). The rebound of Toyota’s

PQS scores in the Fall 2010 survey, and the continued growth

in the Spring 2011 survey have validated ALG’s prediction

of recovery. Toyota has climbed back into 2nd place among

mainstream brands. However Toyota is not out of the woods yet.

Following the consumer survey portion for Spring 2011 PQS, but

prior to publication of this report, Toyota issued yet another recall

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for over 2 million vehicles. ALG will continue to monitor this issue closely as it pertains to current market value, brand perception

and future values of Toyota products.

Kia continues to make huge strides in PQS and for Spring 2011 is showing the greatest percent increase vs. the Fall 2010 survey

(5.6%). The consumer recognition is the payoff for a recent revolution in product quality and design supported by aggressive

marketing campaigns. The Sorento just brought home Kia’s first ever Top Pick from Consumer Reports and the recently

launched Optima has been a slam dunk among industry journalists and critics.

New for the Spring 2011 survey is the Fiat brand, which is reentering the U.S. market with the sub-compact 500, which has been

highly successful in the European market. Fiat fled from the American market in 1984 but the brand’s poor reputation for quality

has remained strong, leading to the lowest PQS score in the industry. Fiat is banking on strong Italian heritage and a unique

design to rebuild the brand’s image in the U.S. and drive demand for the new product which will be sold through an exclusive

network of Chrysler stores.

Perceived Quality Scores (PQS) - Mainstream Trends

Quality Gap Continues to Close

Overall, the mainstream sector showed substantial improvement in PQS scores. All brands showed improvement vs. the Fall

2010 survey, with the exception of Smart, Mini and Honda (the declines for these brands was minimal; well within the expected

volatility between surveys). This improvement further supports ALG’s long held position that second and third tier automobile

manufacturers have been closing the gap with industry leaders Honda and Toyota.

With the exception of Toyota (given recent issues), the most improved 10 brands year over year are all domestic and Korean

nameplates. Ford Cars and Trucks have gained a staggering 16.0 and 19.6 points respectively since the Spring 2008 survey.

The only other brand with double digit increases is Hyundai at 11.1 points.

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Perceived Quality Scores (PQS) - Luxury Brands

Lexus Back on Top, Land Rover &Domestics Gain

Lexus brand image also suffered due to the recalls of

early 2010, albeit much less so than the parent company

Toyota. The brand did, however, drop from the top spot to

3rd among luxury brands in the Spring 2010 survey during

the peak of the media recall coverage. For the Spring 2011

survey, Lexus has regained the #1 spot in the industry. The

brand posted a modest improvement vs. Fall 2010, but the

lead was secured by drops from top rival brands Mercedes

and BMW.

The biggest gains among luxury brands were found among

Land Rover and the two American luxury brands: Cadillac

and Lincoln. Land Rover has long suffered near the bottom

of ALG’s PQS ranking due to poor fuel economy and truck

like ride quality. These are key areas of focus for the brand

as they continue to find success in the more driver oriented

Range Rover Sport and launch new products like the

Evoque.

Cadillac and Lincoln gains are being driven by all new

product and sales strategies that focus less on price and

more on product. Cadillac has expanded the CTS lineup to include coupe and wagon variants, with high performance V models

available on all body styles. The recently launched SRX has finally given the brand a viable contender in the highly competitive

Premium CUV segment. While the departure of the Mercury brand has frustrated many previously dual dealerships, the overallbrand image of Lincoln may benefit due to less confusion of product differentiation and more marketing dollars available to Ford’s

luxury nameplate. Both Cadillac and Lincoln PQS scores have been quite volatile over the past few years. While their scores

are high relative to the most recent Fall 2010 survey, on a year over year basis they are showing just a slight improvement. This

volatility reflects the fickle and varying opinion of the domestic brands among consumers that only long term consistent sales and

product strategies can tame.

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