Sport Compact Comes Into Its Own

Dec 2, 2009

As moviegoers prepare for the fourth installment of The Fast and The Furious film franchise due out in April, it’s worth taking a look at how far this so-called youth market has come since its heyday earlier this decade.

For certain it has matured, and it’s not necessary to blow out the candles on Vin Diesel’s 42nd birthday cake as evidence of that. While older Hondas, Nissans and Jettas are still modified by enthusiasts in their teens and early twenties, the market has been infused with purchases of vehicles whose price tags are associated with slightly older and more established buyers.

Defining the Market

Among the many other aspects of this market that have changed is its name, which always seems to be a misnomer despite valiant marketing efforts to keep the label politically and technically correct. Among other names, it was once called the “import market,” evidenced by its premier event for a time, Battle of the Imports.

When domestic manufacturers showed up to the party late, as they are apt to do, it was repackaged as the “sport compact market,” and that has stuck for awhile. However, now some wonder whether this term has outlived it accuracy.

George Ciordas of KW Automotive in Sanger, Calif., says, “I’m not sure that ‘sport compact’ is really a valid term any longer. It’s kind of coming away from that. Times are changing, and when you say ‘sport compact,’ I still stereotype it with the Honda Integra market, and we’ve really moved away from that. It’s a little bit more aggressive now.”

Ciordas explains that the market now encompasses a much wider range of vehicles.

“Today’s cars have more technology. There’s the four-wheel drivetrain and these are the popular vehicles now: the S2000, STI, 350Z, G35, G37, 370Z, G-TR, and then you have the C63 and the new M3. Those are our vehicles today,” he says. “Are those classified as sport compacts? No, I think it would be safer to simply say they’re sports cars.”

He also points out that today’s “sport compacts” have more power and efficiency than classic muscle cars did when they came out.

“As recently as 1995, the Mustang LX only had something like 225 horsepower stock. Now, your mom’s Altima has 240 horsepower,” says Ciordas.

Most agree that the market has, and is, evolving. These changes have come not only in the cars and customers that comprise the market, but also the companies who supply the parts.

“The sport compact market today is currently going through quite a few changes,” says Ryan Nufable of HKS USA Inc., Los Angeles. “Many of the fly-by-night, lower-quality companies are now gone, and customers have come back to spending their hard-earned dollars on products from companies that are proven to be reliable, while providing noticeable increases in performance.”

He adds that many of the cars that gained popularity since the fast and furious days still have a cult following-namely front-wheel-drive drag racers-but many enthusiasts have shifted their preferences to front-engine, rear-wheel drive vehicles and turbocharged, all-wheel drive vehicles.

“Many of the cars that the consumers can purchase today are factory turbocharged, whereas during the earlier part of this decade, turbocharged cars were just not sold by the manufacturers,” says Nufable.

Market In General

With today’s economy being what it is, it’s a good idea to check up on the overall status of a market more often than usual.

Commenting on the general state of today’s market of imports, sport compacts and sports cars, Tony Shagday of Skunk2 Racing in Norco, Calif., notes, “I think the market in general is definitely down a bit right now. With consumer spending being down, jobbers aren’t as willing to stock products on their shelves right now, which in turn is slowing down the distributors.”

Unfortunately, but not surprisingly, Shagday is far from alone in his observations. However, even this storm has clouds with silver linings and shafts of sunlight that break through.

“The current market situation is slower than in previous years,” Nufable acknowledges, “but we have found that the enthusiasts will still put money aside so that they can purchase performance products for their vehicle. Though fuel prices were at an all-time high, they did not have a major effect on the products sold by HKS. Consumers are spending their money much wiser than before by choosing products that are reliable and of higher quality.”

Ciordas seems to concur. “Sales have definitely tapered down, but we haven’t seen a decline on our side. So, speaking for the general consensus, I’ve heard sales are down. But, sales have been pretty good for us. I guess we’re doing something right in terms of quality and performance.”

He adds that while the economy has affected the market, it’s being helped by the fact that enthusiasts who comprise the market aren’t just driving the entry-level Hondas and Nissans they bought used any longer. Ciordas also points out that he doesn’t think suspension, along with wheels and tires, will be hit as hard as others during 2009.

“Now they have the EVO, G35, STI, 350Z and 335i, and the owners of these cars are still purchasing coilovers. They’re not going to drive stock,” he says.

Hot Vehicles

Ciordas just rattled off several cars often associated with the sport compact market. However, his top producer may surprise.

“It’s the BMW 3 Series, and it shows in our data. We looked at the numbers just before the holidays, and it was clear that for us, the 3 Series dominates,” says Ciordas. “Everybody owns one in L.A.; I think they get them in high school. It’s actually a little ridiculous how many there are. Then there’s the IX and E92 M3 that also do well.”

Nufable points out that the sport compact market has always been driven by used cars, due to the lower initial cost of those vehicles and the money left over for modifications. He adds that the costs of new vehicles have risen above what most “entry level” enthusiasts can afford, so vehicles that are two- to three-years-old or previous-generation models always become popular.

“The hot vehicles continue to be the Mitsubishi Lancer Evolution (all generations), Subaru WRX and STI (all generations), Honda S2000 (all generations), Nissan 240SX, 350Z, Infiniti G35 Coupe and the Nissan GT-R,” says Nufable.

Shagday adds that at Skunk2, they still see the Hondas and Acuras being the hot vehicles, “But the Mitsubishi EVO and Subaru WRX are also hot platforms with good potential.”

Changes Coming?

Though very tough to do, it’s always a good idea for businesses to project ahead four quarters, as much as that is possible, in order to devise the best plan for their company. What changes are in store for this market in 2009?

“I wish I had that crystal ball. I’d be way ahead of the game,” says Ciordas. “It’s hard to gauge now. I think everyone is cautious with the moves they’re making. There’s not liberal spending taking place. I know other companies have buckled down and gotten ready, and we have done the same. You just try to weather this tough economic time.”

He adds that this is not the first time something like this has taken place in this market, noting that there’s a cycle members of this market have gone through before.

“There was that big boom all of a sudden and all of these shops and businesses showed up that saturated the market, and in many cases, they hurt the market. Then, the strong survive and business is lucrative for those companies again for awhile, but then the cycle starts again. This current trend isn’t part of our cycle, but that cycle has prepared us for it,” says Ciordas.

As for the competition niches, Nufable tells us that drifting is still a popular form of sport compact motorsports, and that growth could be seen in the areas of time-attack competitions and open track events with road racing. He adds that many consumers will purchase products that actually function as opposed to those that just give the look.

Shagday says he thinks that 2009 will force a lot of businesses to look at things differently.

“Not only do we have a slowing economy, but the Internet has changed how consumers make their decisions and purchase products,” he says. “I don’t really expect the market to grow that much this year. I think any positive growth during this period will be a good thing.”

Challenges

Tests and trials are inevitable this year, but aren’t they always? The main difference this year is that the market will not be as forgiving of mistakes. Those companies that do best will be those that employ cautious and aggressive policies in appropriate degrees in the proper places.

Fortunately, this isn’t mysterious and can mostly be achieved by sticking to the basic principles of good business.

“They really need to stay in touch with their customers and let them know what’s available,” Ciordas says of sport compact retailers. “Consumers stray very easily today. There are a lot of options out there for them, and shops need to focus on building a rapport and friendship with their customers.”

If you have been smart enough to build an email database of your customers, take advantage of that with grassroots marketing. Stay in touch with the crowd and be creative in enticing them to come to the shop. It should go without saying that you don’t want regular customers shopping elsewhere. Stay at the forefront of their mind, and it’s less likely that they will stray to the Internet or other competitors.

Nufable says that with the popularity of the Internet, shops will need a user-friendly Web site to help assist in their sales.

“As a manufacturer, the first thing we look at when considering a new shop to distribute our products is the information they put up about themselves on their homepage. Images of their facilities and their tuning expertise should be the center point of their site; product images and pricing are secondary,” says Nufable

He adds that if these shops specialize in a certain vehicle, make or manufacturer, they should find out what the popular Internet forums are for that vehicle and find a way to build their shop’s name and reputation through that venue.

Shagday also mentions the Internet in relation to upcoming challenges.

“The Internet has made every consumer a self-proclaimed DIY expert these days, so I think shops are challenged with still being able to provide a valuable service. If they are a solid-performing shop that offers good service, then they still have to deal with companies on the Web that have low overhead and are willing to operate on razor-thin margins,” says Shagday.

Opportunities

While being cautious is of absolute importance this year, there are also many opportunities that should not be passed up.

“Over the course of 2009, we should expect to see an increase in business from the mid-level shops and specialty tuners,” says Nufable. “With the vehicles being released today having engine management and control units that are sometimes beyond the level of tuning by the do-it-yourself-type enthusiast, customers will need to visit a reliable tuning shop to get their vehicles running as smoothly as possible.”

“I think this is definitely a market where shops need to think outside of the box to stay ahead. Too many times we see shops that simply say ‘it’s slow,’ or ‘no one has any money right now,’ and these are the kinds of shops that just wait around for the business to come to them and eventually die out,” says Shagday.

“The businesses that we see doing well right now are the ones that are being creative and using their customer base to the best of their ability. We are baffled to still find shops that don’t have a customer email list that they regularly send promotions or information out to. The exchange of information has become so easy to implement that anyone not using it is missing out on potential sales,” says Shagday.

Don’t let too much caution keep your business from pursuing and creating solid opportunities for profit.

_____________________________________________________________________________________

Drifting Series Ready for ’09

DI Grand Prix, the global drift racing sanctioning body, is headed back to the U.S. this year with four events planned from May to August.

D1GP USA has been developing a new racing format and track design to attract and expand its appeal to race fans.

“With our new management team in place, we decided to focus all of our initial efforts on two main objectives. The first was to make the events more appealing and accessible to local, out-of-town and new entry-level fans. The second was to deliver a new, high-impact, state-of-the-art racing experience that will define the future of drift racing in the United States,” says Rich Goodwin, President of D1USA.

The 2009 D1 Grand Prix USA Schedule will consist of four events:

  • May 2-Anaheim Stadium, Anaheim, Calif.
  • May 30-Dolphins Stadium, Miami
  • July 18-Wachovia Spectrum, Philadelphia
  • Aug. 1-Soldier Field, Chicago

“In order to achieve these objectives we had to think outside the box,” Goodwin says. “Moving the events to centrally located venues allows for us to achieve our objective of making the events more appealing and accessible to fans, along with mainstream local media. In addition, the wide-open spaces these venues offer also allow us to build in our aggressive new track design and to add in other exciting entertainment on and off the track.”

D1 Dojo

Dubbed the D1 Dojo, the new, aggressive track is designed to be a drifting entertainment experience that puts the show-goer trackside for an up-close and personal experience, Goodwin notes.

The track layout incorporates a bullring style with multiple entry and exit points and numerous turns, designed to allow for constant action-as one car exits out of the Dojo from one side of the track, the next car enters simultaneously from the other.

During breaks the track will take on exhibitions and other racing elements to entertain the crowd and when night falls on the Elite 8, the Dojo will be transformed into a dazzling display of lighting effects courtesy of Driven Events, a company made up of the original founders of Hot Import Nights.

Surrounding the Dojo will be the D1 Fan Fest, which will include a sponsor and exhibitor midway, stage performances, model pavilions, a car show and more.

Drifting in the U.S. has been around for 10 years, initially relegated to underground status, much like the early years of the sport in Japan. In 2003, the D1 Grand Prix made its first stateside debut with the help of Yokohama Tire Corporation as the title sponsor.

More information is available on the D1 Grand Prix Web site, www.d1gp.com.