Skip to main content

Automakers shift to SUVs as consumers steer clear of Sedans

Auto sales for 2017 were strong going into the last two shopping months of the year, bolstered largely by high transaction prices and the increasing popularity of SUVs and trucks -- as passenger car sales fell.

As the year draws to a close, auto companies are again celebrating a near-record number of cars and trucks sold and a near-record average transaction price per vehicle.

But the news isn’t all good. New car sales for 2017 have been marked by demand for SUVs rising to unprecedented heights, while interest in traditional passenger cars has plummeted.

Many car companies that sell both kinds of vehicles have gained sales in one segment only to lose them in another. Manufacturers that lean more toward passenger cars could soon be stuck with factories and production lines making vehicles no one wants. If the trend continues, cars that once led sales segments could disappear altogether.

“This may mean that some successful car models are on the chopping block,” said Kelley Blue Book senior analyst Karl Brauer. “Basically everything in the large sedan category is an endangered species.”

The shifting landscape will be a top concern at the upcoming L.A. Auto Show, which opens to the public Friday at the Los Angeles Convention Center, where attendees will have to hunt hard to find exciting new sedans among the dazzling array of new SUVs and crossovers.

Year-to-date sales in the U.S., compiled by the auto data company TrueCar, are running slightly behind the all-time high for 2016. Together, carmakers sold 14,175,611 cars and trucks through October, compared with 14,427,310 last year, when the full-year total ended at a record 17.5 million vehicles sold.

Cars are selling for more money too. The average transaction price for a new car in October was $35,263, according to Kelley Blue Book, $100 over October 2016 and just a tick off the all-time high set last December.

The strongest segments by far were trucks and SUVs, which both outpaced passenger cars. The top-selling sedan is only the sixth top-selling vehicle this year.

Going into the last two sales months of the year, full-size truck sales were more than 100,000 units ahead of the same period last year. SUV sales were up more than 350,000 units over 2016.

But those losses are largely erased by drops in other categories — all of them passenger car groups.

Without exception, all sedan categories were down, from subcompact to compact to midsize to full size, including the premium models within those segments.

The most dramatic negative growth numbers occurred in midsize, compact and subcompact cars. Together, TrueCar numbers show, car companies have sold half a million fewer cars in those three categories in 2017 than in 2016.

“A lot of the car companies are split,” said Jessica Caldwell, director of industry analysis for the auto research company Edmunds. “The truck and SUV business is doing decently, but they are struggling on the car side.”

That could mean a limited life expectancy for cars that a decade ago were solid sellers for major companies. Kelley Blue Book’s Brauer said he saw a doubtful future for the Hyundai Azera, Chrysler 300,Chevrolet Impala, Ford Taurus and Toyota Avalon.

“If my livelihood were depending on selling those cars, I’d be worried,” Brauer said.

The shift from sedans to SUVs is harder on companies that have focused more on passenger cars. Kia, Hyundai, Acura, Chrysler, Buick, Dodge and Lexus have all seen their overall numbers fall substantially from 2016 to 2017, in part because their vehicle mix leans more heavily toward sedans.

So have Chevrolet and Ford, leaving aside their booming truck segments, as their non-truck vehicle sales have fallen by 70,000 and100,000 units this year, respectively.

That has required some quick pivoting. Chevrolet was able to fast-track its affordable Trax crossover when it saw buyers leaning toward SUVs because it already was building the Trax overseas for foreign markets.

“Two or three years ago, the small SUV segment was almost nothing, but we saw a hole in our portfolio and were able to fill it quickly,” said Steve Majoros, the company’s marketing director for cars and crossovers.

As a result, Majoros said, car buyers are getting out of Cruzes and into a Trax or out of Malibus and into an Equinox or Tahoe.

“We’ll take a Malibu loss if the customer goes into a different Chevrolet,” Majoros said.

Toyota is seeing sales declines on its Camry and Corolla, but also is watching sales rise for its Tacoma and RAV4, currently the best-selling non-truck vehicle in the country.

Premium and specialty car companies are experiencing a similar scenario. Jaguar, Maserati, Alfa Romeo, Porsche and Bentley all saw their total sales numbers climb.

That’s largely because of the introduction of new SUVs, like Alfa’s Stelvio and Jaguar’s F-Pace, Caldwell said, and to ongoing strong sales of SUVs already in the market, like Porsche’s Macan and Cayenne.

Major American car brands are in a double bind. They are committed to building midsize and full-size sedans because those traditionally have made up the bulk of their fleet sales to government agencies, for example, and rental car companies.

The shifting sales picture has created headaches at the retail level too. Many dealers have had to expand their physical footprint to accommodate new SUV models, while also saving room for the less-popular sedans — and keeping sufficient inventory of both types of vehicles, in enough trim lines and colors, to satisfy the manufacturer and the anticipated consumer.

“Dealers are being asked to build these huge Taj Mahal showrooms that showcase the SUVs and the whole lineup of cars, by manufacturers who believe they are following the market,” said Aaron Jacoby, who handles dealership legal matters for the Arent Fox.

The tension between the dealers and car companies is exacerbated, Jacoby said, because dealers are required every five to seven years to upgrade their showrooms to stay current with new models.

But the market is changing so fast that $5-million to $10-million face-lifts may not make sense if gas prices rise, for example, and SUVs and larger vehicles go out of favor.

“Dealers would like to stay where they are until the future is more clear, so they don’t spend millions of dollars to service a need that turns out to be obsolete five years from now,” Jacoby said. “But the here and now is that gas is cheap and people want to buy bigger cars.”

Chevy’s Majoros advised, however, that the current enthusiasm for crossovers does not necessarily mean the end of traditional sedans.

Comments

Popular posts from this blog

Heavy Defection hits APC

Barring any change, the ruling All Progressives Congress (APC) may be hit by mass defection, in the next few months.

Daily Sun gathered that some APC governors, senators and members of the House of Representatives are seriously dissatisfied with events in the ruling party.

Some of them are said to have cut a deal with the Peoples Democratic Party (PDP), with a view to joining the opposition political party.

This is coming at a time the PDP has declared that its platform was open to all Nigerians to actualise their dreams of contesting elections.

But reacting, National Publicity of the APC, Mallam Bolaji Abdullahi, told Daily Sun that the party won’t want to react to such information when no name of any governor or chieftain was mentioned.

However, competent sources among those who attended the PDP’s recent National Working Committee (NWC) meeting in Asaba, Delta State capital, revealed that top APC members, who will defect may join the PDP latest by May.

Eleven PDP governors and othe…

The CEO of Adesua Auto thanks those who stood for her yesterday

The only female Nigerian auto dealer in US, took to her IG page to sincerely appreciate those showed her much support yesterday.  She wrote; I just want to send kisses and love to those people who prayed, stood by me on the day of my disclaimer.  The love you guys showed me on that day was unbelievable, I could not believe even though you never met me before, you fought and fought, stood by me! Gosh! I was just reading an amazement,, when you have a situation that's when you will know those who truly love you!.. 

Kiss Daniel dragged to Court

Nigerian pop star, Anidugbe Oluwatobiloba Daniel, popularly known as Kiss Daniel, has been dragged to court by the management of G-Worldwide Entertainment, for allegedly breaching the seven years artiste management deal he signed with the record label in 2013.
A statement from the Label read;

“The attention of G-Worldwide Entertainment Limited (‘the Company’) has been drawn to acts by Oluwatobiloba Daniel Anidugbe (alias ‘Kiss Daniel’), who recently has been making publications on different print media and social media platforms soliciting for bookings to perform songs from his album NEW ERA and EVOLUTION. Mr. Anidugbe executed a 7-year Recording and Artist Management Contract (’the Contract’) with the Company in 2013 and which Contract is still subsisting.


“Contrary to the express provisions of the Contract, Mr. Anidugbe has taken steps to appoint a new manager, solicited for bookings, and has continued to negotiate and enter performance agreements in respect of the songs from the album…