Spring 2010

Perceived Quality Study

Mainstream and Luxury Models
Consumers often form perceptions about automobile brands based on very limited information, and hold on to these beliefs
well beyond their relevance. Despite the ever increasing wealth of data available regarding the automotive market, consumer
data and sales trends overwhelmingly support this statement as a general rule. For example, if consumers form negative beliefs
about a brands quality based on opinions from friends or family, or from high-profile incidents in the press, they are more
likely to believe that all models in that brand have poor quality. In contrast, some brands with strong emotional appeal, such as
Volkswagen, have established a strong perception of quality for all their models even though manufacturing quality continues to
significantly lag leading brands based on actual quality surveys.

ALG measures perceived quality by asking consumers to tell us what they believe about the quality of the vehicles associated
with each brand. We do this by partnering with Zogby International, a well-known survey firm, to survey approximately 3,000
4,000 U.S. consumers biannually to gauge perceptions of mainstream and luxury brands.

Perceived Quality Scores (PQS) for Mainstream Brands Toyota Declines

Dramatically

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 2009.

Since the inaugural ALG survey to derive PQS, Toyota

has claimed the top spot among mainstream brands.
However, in recent months Toyota has been plagued by
a bevy of quality issues and the ensuing media storm
around massive vehicle recalls. As a result, Toyota
incurred a decline in PQS of 20%, the largest drop
since the survey began, and is now ranked 6th with a
score of 67.6.

Assuming no further quality issues and a diminished

media focus, ALG expects Toyotas PQS to stabilize
and begin to improve over the next 6 months, with
recovery of half of the recent losses by the Spring 2013
survey. However, reclaiming the top spot in PQS will be
a herculean task for Toyota.

For full details on the impact of Toyotas PQS declines,

please see ALGs Toyota Recall Impact report.

ALG, A DealerTrack Company 805.898.8400 voice

3760 State Street, Suite 200 805.435.3775 fax 2010 ALG, A DealerTrack Company. All Rights Reserved.
Santa Barbara, CA 93105 www.alg.com
 The fall of Toyota leaves Honda with a
commanding lead of 12.6 ppts above all other
mainstream brands, cementing its position as
the leader in PQS for the foreseeable future.
However, Hondas overall PQS is down slightly,
with a loss of 2.5 ppts vs. the Spring 2009
survey. With the top two brands experiencing
declines in PQS, and 15 of the 23 brands in the
survey improving, what we see is the quality
perception gap closing among mainstream brands. This trend may also reflect growing confidence in the overall automotive
industry.

Perceived Quality Trends Ford Surge Continues, Kia Gains Traction

Many international paradigms in the automotive market are beginning to collapse. A Japanese brand once heralded for
impeccable quality has become a pariah in the media;
a domestic brand is filling its trophy case with top-tier
accolades thanks to an onslaught of strong product
launches; and a Korean brand is gaining recognition
not only for its value story, but for innovative styling
improvements and actual quality.

Toyotas woes are detailed above and widely known,

but Ford and Kias improvements, which have largely
developed under the radar, are now having an impact
with consumers. For nearly 5 years, Ford has made a
concerted attempt to build vehicles better aligned with
consumer demand, limiting brand damaging incentive
spending and daily rental fleet sales. These goals
have been supported by an entire portfolio of all-new
or redesigned products that have been well-received
both in the marketplace and among automotive critics.
Ford swept the North American Car and Truck of the
Year awards with the fuel sipping Fusion Hybrid and
commercial grade Transit Connect in January 2010.
Prior to these awards, Ford also collected both of Motor
Trends prestigious Car and Truck of the Year awards
with the aforementioned Fusion and the F-150 (which
also won in 2009).

ALG, A DealerTrack Company 805.898.8400 voice

3760 State Street, Suite 200 805.435.3775 fax 2010 ALG, A DealerTrack Company. All Rights Reserved.
Santa Barbara, CA 93105 www.alg.com
 Historically, Kias sales efforts in the US market were hampered
by many factors. Product quality, design and marketing campaigns
were inconsistent, erratic and well below the industry norm for
many years. Without a brand identity the main driver of Kia
demand was the value story. Simply put, a Kia purchase was
justified not necessarily by the emotional draw to a consumer
but the ease on their pocketbook. That began to change with
the first generation Sorento, second generation Sportage, and
more recently with the stylish Soul and Forte lineup. The second
generation Sorento is just hitting the market, followed by the all
new Sportage next year. Kia has finally settled on a consistent
design language that is enabling it to build a brand identity.
Historically, nameplates with strong brand identity have been able
to generate value and support brand image by appealing to the
emotional side of consumers. Like its corporate sister Hyundai,
and the Japanese brands decades before it, Kia is starting off
small and young, building a customer base around efficient and
compact vehicles that cater to the budgets and expectations of
first time car buyers.

Perceived Quality Scores (PQS) for

Luxury Brands Lexus Loses #1
Ranking, Saab Suffers
Like Toyota, Lexus has suffered from a spat of recalls and media attention, but to a much lesser degree. Nonetheless, the
impact resulted in Lexus losing its long-held perch as the number one ranked luxury brand in PQS. However, the declines were
not nearly as significant as Toyotas, and with the top eight brands only 10 ppts apart in the Spring 2010 rankings, consumers
view the most competitive luxury brands as being very close in perception of quality.

BMW and Mercedes have equally shared the #2 spot behind Lexus, and with the 6% declines in Lexuss PQS, Mercedes has
now claimed the top spot with a modest increase of only 0.8 ppts versus the Fall 2009 survey.

Saab was the only other brand in the luxury sector to experience any significant changes since the last Automotive Consumer
Attitude Survey. Saab narrowly escaped obsolescence, just recently falling into the arms of high end sportscar maker Spyker
after being nearly abandoned by GM. Concerns over the brands future combined with an increasingly long in the tooth product
lineup contributed to erosion of the brands perception of quality. The much anticipated 9-5 arriving in showrooms in mid-2010
should serve as a reminder to consumers that Saab is not only still in the market, but making competitive luxury products. The
eccentricities of its new Dutch parent company complements the quirky Scandinavian roots of Saab nicely, which is likely to
appeal to cult-like followers of the brand. It remains unclear, however, when and if Saab will be able to regain both the loyal
customers it has lost in recent years and the prestige of a European luxury brand.

ALG, A DealerTrack Company 805.898.8400 voice

3760 State Street, Suite 200 805.435.3775 fax 2010 ALG, A DealerTrack Company. All Rights Reserved.
Santa Barbara, CA 93105 www.alg.com