By Mike Antich

In the "good old days," the overwhelming majority of new models would be "officially" introduced Oct. 1 of the preceding calendar-year. Little by little, this practice has migrated to the realm of nostalgia as OEMs introduce new models throughout the calendar-year. This trend first started with mid-model year introductions in the January to March timeframe, but slowly proliferated to introductions throughout the calendar-year.

Year-round new-model introductions have complicated fleet planning and purchasing. Some fleet managers wonder aloud, perhaps wistfully, as to why the U.S. doesn't convert to a calendar-year format when classifying new models. "Should OEMs change to the same format as the rest of the world - a calendar-year for the vehicle model-year?" asked Gayle Pratt, director, global fleet for Ecolab. This sentiment was echoed by Keri Moran, fleet administrator for J.R. Simplot Company. "I'm tired of the staggered model-year production schedules. I used to be able to place all orders at the same time, now I seem to be placing orders throughout the calendar-year because of production schedules."

Model-Year is Not a Universal Practice

The practice of identifying automobiles by "model-year" started in the U.S. Alfred Sloan, the long-time president and chairman of GM, extended the idea of yearly fashion change from clothing to automobiles in the 1920s. The Great Depression prompted other U.S. OEMs to also start selling "next" year's vehicles in October of the preceding year. But this isn't a universal  practice. Vehicles sold in Japan are classified on a calendar-year basis. Similarly, the U.S. model-year concept was never universally adopted in Europe. One exception is VW, which switched in 1966, but chose Aug. 1 to start selling next model-year's vehicles.

In later decades, the model-year (October-September) became entrenched in the U.S. as new-model advertising was coordinated to the launch of the new television season in September. "This allowed for a stronger marketing program by placing more resources in a concentrated timeframe," said Brenda Perez, manager, national fleet operations for Mazda.

However, some say there are advantages to switching to a calendar-year cycle (January-December), which would facilitate fleet funding. "Many corporations operate on a calendar-year basis, so when it comes to capital budgeting and approval processes, companies who own vehicles, as opposed to lease, find themselves wanting to make their capital purchases early in the year, or run the risk of losing those capital dollars when budgets get tight," said Greg Corrigan, VP of strategic consulting for PHH Arval. "For businesses that lease, the time of year they acquire the vehicle is largely irrelevant from a budget cycle perspective."

A calendar-year cycle might also benefit government fleets since their budgets are typically on an annual basis, said Rick Shick, VP of purchasing for Donlen Corp. "This could make their budget process easier to manage. However, many commercial fleets have fiscal years that don't line up with calendar year."

Other business considerations also impact introduction dates. The term "new-model introduction" has almost become a misnomer in today's sales climate. "When a new model is 'introduced' has little to do with the calendar. A calendar-year timetable, or the notion of an autumn new-model introduction, seems irrelevant when determining when a new model should be introduced," said Charles Reed, fleet sales operations manager for Subaru of America. "What does seem relevant to new-model-year introduction is identifying: 1. Where does a vehicle reside in its lifecycle?; 2. Is a vehicle primarily a carryover version?;  and 3. How much unsold inventory of the vehicle is sitting at dealerships?" 

In addition, there would be major behind-the-scene ramifications to phase out the model-year concept. "A changeover to a calendar-year would require modification of countless systems and business practices if this were to occur," said Shick of Donlen.

Year-round new-model introductions are facilitated by the U.S. government (NHTSA), which allows vehicles to be designated the next model-year if manufactured by Jan. 1 of the preceding calendar-year. For instance, a vehicle produced Jan. 1, 2011 could be designated by the OEM as a 2012 model-year vehicle. "The advantage of mid-year vehicles for fleet is the benefit of 16-18 months of use, but the vehicle is depreciated for only 12 months," said Jan Freund, director of manufacturer relations for Wheels Inc. 

Sometimes there can be a detrimental impact to early introductions. "For instance, the residual benefit from an early intro can be dramatically diminished midstream as the production cycle for that model-year is longer than normal," said Perez. "Also, specific to commercial fleet, an early MY launch (Jan. 1, 2011 for 2012-MY) is not timed for the segment, and there is limited to no interest in the vehicle until the standard order cycle rolls around."

Although fleet is important to automakers, the retail market dictates new-model introductions. "Secretly, I think the manufacturers love staggered introductions. It gives them a window of time when they're the kid on the block with the newest toy," said Rick Nicoletti, general manager for the Napleton Fleet Group.

 Other reasons for early intros include CAFE averages, competitive leapfrogging, keeping the lineup fresh, maintaining year-round floor traffic at dealerships, and parts availability. "I don't think we'll see all the manufacturers line up and introduce new models at one specific time each year ever again," said Freund.

Let me know what you think.

mike.antich@bobit.com

 

Originally posted on Automotive Fleet

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Mike Antich
Mike Antich

Mike Antich

Mike Antich has covered fleet management and remarketing for more than 20 years and was inducted in the Fleet Hall of Fame in 2010.

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Mike Antich has covered fleet management and remarketing for more than 20 years and was inducted in the Fleet Hall of Fame in 2010.

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