As the US and world economy struggles the auto industry continues to get hammered. Sales have fallen to historic lows and the US government recently lent a $17.4 billion lifeline to GM and Chrysler to help those companies get through the first quarter of 2009. Even the so-called import brands are feeling the pain as Toyota recently announced its first ever annual operating loss. The company has forecast a $1.7 billion loss for the fiscal year ending March 31, 2009, driven by poor sales and the rising value of the yen. Standard & Poors is even considering downgrading the company’s debt for the first time.

So what’s driving the bad news at Toyota? Are they a victim of a poor worldwide economy or is it something more? Compete data show that Toyota’s pain comes from a drop in demand after a great first half of 2008. For context, Toyota Division has historically attracted about 20% of in-market shoppers market-wide. In the first half of 2008 the launches of Corolla, Matrix and Sequoia drove Toyota demand up; Toyota outperformed the market overall, as seen by its Share of Market Interest (SMI) approaching 30% (meaning nearly 30% of all in-market shoppers shopped a Toyota). That translated into 231,000 units sold in May ’08, Toyota’s 2nd best sales month in over 5 years. Of course, high gas prices and Toyota’s wealth of small and fuel efficient models helped. As gas prices hit record highs in June and July, demand for Prius, Corolla, Yaris and Camry increased dramatically—as did sales, with Prius reaching record heights.

But since then, Toyota demand has fallen to record lows. While demand for the entire market is at record lows, Toyota has actually underperformed the market, with SMI returning to pre-2008 levels. Demand for the hot models from the summer has cooled significantly, driving overall Toyota demand lower. Lower demand is at the core of Toyota’s lower sales, down to 114,000 units in November ’08. Lower demand can be partially offset with better conversion of shoppers to buyers—exactly why Toyota began its 0% financing efforts.

At the model level, results are somewhere between steady and soft relative to the market. Share of Market Interest for most Toyota models has dropped back to more traditional levels—with the exception of Corolla and Prius, the SMI of both is down year-over-year. SMIs for some of Toyota’s trucks are better, with RAV4 and Highlander up year-over-year. Even Tundra has a pulse, no doubt aided by lower gas prices and the recent launches of the Ford F-150 and Dodge Ram.

But while on a Share of Market Interest basis several Toyota models are steady or even up, the problem is the context: with overall market demand at all-time lows, a steady share means much lower demand, and hence sets the stage for much lower sales.

For Toyota (or any OEM) to regain footing in this market, it will need to boost Share of Market Interest not just maintain it—as the Toyota results show all too well. And since the global recession is likely to keep oil and gas prices below 2008 highs for a while, Toyota will need to boost SMI with cost-effective, targeted marketing and very successful launches of must-have products. For Toyota, those include the ’09 Venza, ’10 Highlander and ’10 Prius. And while Compete’s early demand results for Venza look promising, it is too early to say whether it will drive overall Toyota Share of Market Interest upwards. Stay tuned.

No matter the resolution to the current state of the auto industry, the impact of a bailout on car buying behavior is much debated. Clearly people are concerned based on the traffic to gmfactsandfiction.com. With nearly 180,000 unique visitors in November; a 3000%+ increase over October.

How are people finding out about this site? In the chart below we can see that 3 of the top 10 sites referring people to gmfactsandfiction.com are GM brands.

Furthermore, at number 10 is YouTube with the below video.

But how will it impact vehicle sales? See a great piece of market insight from our cousins at TNS who recently survey consumers on purchase intent. The TNS survey showed that in either scenario (Government aid or bankruptcy) vehicle sales are likely to be impacted negatively. Bankruptcy, however, the worse of the two, could potentially cost the industry $50 billion in sales.

So will people buy GM cars? The facts show that it really depends on the bailout – either way hold your breath.

Regardless of whether the Big 3 automakers survive as is, get loans or seek bankruptcy protection, they will need to operate more efficiently. Advertising is a huge portion of their operating costs and therefore is a key place to focus efficiency improvements.

One very basic, yet powerful, way to measure ad effectiveness is by comparing ad dollars spent to the number of in-market shoppers the advertising generates. The result (dollars per shopper) is a uniform way to measure ad spend efficiency across all automakers and across all ad spend types. To assess how the Big 3 are doing on this measure, Compete used its recurring demand measure and, in this case, ad spend data from our sister company, TNS MI. Here’s what we found.

Clearly the domestics are less efficient, spending $192 per shopper vs. $168 per shopper for the other automakers. That means the Big 3 get about 5,200 shoppers for every million ad dollars spent, while the others get about 6,000 shoppers – an efficiency difference of 15%. Next, we looked at results at the brand level.

So what do we see? While Mercury looks to be a clear leader at first blush, the reality is that the brand slashed its ad spend in 2008 and its shopper counts will certainly follow, albeit more gradually (efficiency is great, but if you’re not hitting your sales goals, you simply can’t cover fixed costs). The true successes are those with relatively high spend and low costs per shopper, such as Ford. Those in need of improvement include those with low spend and poor efficiencies, like Hummer.

These results are a good foundation to understand and address the challenges facing the US auto industry. The next step is to add context around things like market conditions. For example, are the off-pace results for Hummer the result of poor advertizing, off-the-mark placement, or simply an impossible hill to climb when gas prices were so high for much of the year? And once that puzzle is solved, the next element is how effectively autos makers convert the demand they generate into sales.

We know it’s that time of year when we first see it; a Lexus wrapped in a huge red bow could only mean one thing. Lexus’s annual December to Remember sales event is certainly the most recognizable holiday/winter sales event by any measure. But, while the most recognizable, it’s no longer the only one of its kind out there. Traditionally, December is the number one vehicle sales month of the year as dealers try to push out as many model years as possible before the next year’s vehicles hit the showroom floors. Of course with the current state of the economy don’t expect any sales records to be broken this December. However, that won’t stop any of these special sales events, and Lexus has company this year with Acura running its Drive Home for the Holidays event as well as Mercedes Winter Event.

The strange thing though is that only Lexus appears to be spreading the word online with banner ads promoting the December to Remember event while it’s almost impossible to find an ad for Acura or MB. While Lexus is promoting their current sales event, Acura and MB are concentrating their ad efforts on new model launches.

Of course the next logical question is; Has Lexus experienced any significant demand increases based on their dedication to this annual event? So I looked at the daily reach to each of these OEM’s websites over the last month.

What stands out the most here is the big jump in mid-November for Lexus which coincides with the beginning of their sales event advertising. However, we can also see Acura making a significant jump during the same time frame. The trend for all three is the same over time, though. Interest might have peaked during the onset of the events, but they have leveled out and are on somewhat of a downturn recently.

So what’s the conclusion? Is it that Lexus’s sales event is so commonplace now that people simply come to expect it, or is that the current state of the economy has people holding off on new vehicle purchases? I tend to lean towards the lack of online promotion of these sales events being the key factor. We see them plastered all over TV but we hardly see anything online. Perhaps well-placed ads on sites known to be visited by luxury car enthusiasts would be the most effective.

In his first interview after the election, President-elect Barack Obama emphasized the importance of a new energy policy, worrying that when gas prices fall “suddenly we act like it’s not important, and we start, you know filling up our SUVs again.” In October, the average price of a gallon of gasoline fell to $3.11, the lowest price since February and a dollar less than its peak in June. With gas prices continuing to fall, have Americans forgotten the pain of triple-digit gas bills or are they still willing to be seen in a Toyota Yaris?

It looks like the pain of high gas prices has been forgotten. After seeing a brief surge during the late Spring/early Summer, demand for vehicles averaging over 30 mpg has once again fallen below that of vehicles averaging less than 15 mpg. Perhaps more disheartening, the percent of new vehicle shoppers looking at cars subject to the “gas guzzler tax” has been increasing as well (note the gas guzzler tax does not apply to light trucks).

While the leaders of the Detroit 3 have been hanging around the Capitol building asking for some spare change, some have suggested that any bailout be conditioned upon raising the CAFÉ (fuel economy) standards. It is clear, however, that unless gas prices are sufficiently high Americans are not interested in small, fuel-efficient vehicles. If we want to adopt a new energy policy to begin to wean ourselves off fossil fuels and drive people toward fuel efficient vehicles we must increase the gas tax (gradually) to ensure that gas prices stay above $4. The revenues produced can be returned, in part, in the form of tax rebates, but also to repair our ailing infrastructure. Steady gas prices will also benefit the automakers by alleviating the wild swings in demand from SUV’s to small cars and back again. Will higher gas prices be painful? Of course. Are higher gas prices in our long-term interest? Yes. Will the gas tax be increased? I wouldn’t count on it.

Taking a look at BMW and Mercedes-Benz’s US based websites (bmwusa.com and mbusa.com respectively) and it’s easy to see that both are featuring their new diesels front and center. The Benz’s are currently on sale in the US with Beemer’s soon to come.

Both vehicles are impressive with fast 0-60 times, more torque than their gasoline counterparts and of course, better fuel economy; both claim nearly 600 miles on just one tank of fuel. This statistic instantly made me wonder how big the fuel tanks were but that took a little digging, or in BMW’s case, a lot of digging because it’s not posted anywhere on their site. Size of the tank aside, both post mpg figures in between 23-26 highway for SUV’s and BMW claims 36 mpg highway for its diesel 3 series. These are certainly impressive numbers, more impressive in my opinion than traditional hybrids that may only improve your gas mileage by a couple gallons per mile.

As with most new fuel efficient vehicles that have made their way onto the scene I figured prices of these vehicles would be significantly more than their gasoline counterparts but surprisingly they aren’t. Only able to research MB pricing I found costs to be either equal or slightly higher than the base gasoline version of each vehicle, not bad! Couple this minor price premium with a decline in diesel prices and this could be a match made in heaven.

So which of these brands is capitalizing on the new diesel craze the most? I decided to see which sites were people visited the most when searching for “diesel cars.” To my surprise Volvocars.com was ranked eighth, mbusa.com twenty-second and bmwusa.com was not even in the top 50.

Volvo is going to be releasing a new series of diesel cars under the name Drive, in Europe at least. These diesels achieve about 53 mpg but there is no US plan for them for now.

It appears the manufacturers with vehicles actually in or soon to be in the US market, and in particular Beemer, need to focus a little more attention on search engine marketing and search engine optimization to ensure their brands rank at the top of the search heap. Until then, Volvo is winning the diesel keyword battle.