The old saying "they don't make them like they used to" stands true with what's happening in the automotive industry today, and for once that's a good thing! According to J.D. Power's 2017 U.S. Initial Quality Study, new-car quality is at an all-time high. But what's even more interesting than the improved quality is which auto brands are leading the charge this year -- there was quite a shakeup in the rankings. Here's a look at how the study works and which brands swapped top spots.
How does the study work?
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J.D. Power's 2017 IQS study is based on responses from roughly 80,000 vehicle purchasers and lessees of new 2017 model-year vehicles; after 90 days of ownership, those consumers were bombarded with a 233-question survey designed to provide insight into problems and issues with new products. And this year the survey found that automakers were offering more high-quality cars than ever before.
"Automotive manufacturers are responding to consumer feedback and producing vehicles of the highest quality," said Dave Sargent, vice president, global automotive, at J.D. Power, in a press release. "The industry has improved significantly in each of the past three years. Today's vehicles have more things that could go wrong but fewer things that actually do go wrong."
Key takeaways and surprises
One factor these studies have shown over the past years is how quickly a new, and often buggy, infotainment system can deteriorate a brand's score. That trend continues in 2017 with audio/communication/entertainment/navigation (ACEN) continuing to be the highest-problem area for consumers. That was an issue in recent years for Ford Motor Company (NYSE: F), which the company has since rectified jumped in the ranking. The survey scores problems per 100 vehicles (PP100), and Ford ranked near the top with the fourth fewest problems and a score of 86 PP100 -- for context, the industry average had more problems, at 97 PP100.
Detroit's success wasn't limited to Ford, either. General Motors (NYSE: GM) and Fiat Chrysler Automobiles (NYSE: FCAU) also had their bright spots. In fact, the Detroit three outperformed import brands for the second year in a row, according to J.D. Power, which was only the third time that happened since the study was first published in 1987. Domestic brands scored a 93 PP100 compared to the import brands' 99 PP100 -- although both groups improved from their prior years' scores.
There were certainly some surprises this year. While Kia taking the top spot might surprise some, it's actually the second consecutive year the brand took home top honors -- and that's a big deal considering it beat out a premium brand such as Porsche. Even more interesting was the large flip-flop between rankings of Toyota Motors' (NYSE: TM) namesake brand and Fiat Chrysler Automobiles' Ram brand. Historically, Toyota has ranked near the top of these rankings year after year, but in 2017 it dropped to just above industry average -- a low mark for the import brand. Meanwhile, FCA has become accustomed to seeing its list of brands ranked near the very bottom of these reports, yet its Ram brand was the second most improved in the entire industry and managed to tie Ford for fourth in the rankings.
For many, these annual surveys and studies are entertaining, especially when a number of brands swap spots as they did in 2017. But for investors, rankings such as this one are a little more important as they give some insight into which automakers are producing improved new products and how they compare to the competition. Finding an automaker consistently making better products is a great start to building an investment thesis.
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