Charting The Changes In The US Passenger Car Market

The US passenger car market is hemorrhaging market share, forcing auto makers to rethink their product lineups. Most are scrambling to catch up with customer expectations, which are turning more and more to crossovers and SUVs. “It’s a fundamental shift,” said Jessica Caldwell, director of pricing and industry analysis for Edmunds.com.

In May, total passenger car sales by brand fell 23% for Acura, 12% for BMW, 35% for Buick, 22% for Cadillac, 24% for Chevrolet, 45% for Chrysler, 19% for Dodge, 26% for Ford, 47% for Infiniti, 15.2% for Mercedes-Benz, 15% for Toyota, and 22% for Volkswagen, according to Autodata. So far this year, only 42% of all new vehicles sold in the U.S. were passenger cars. that’s down from 50% in 2013.

“I think that we are going to get to a point where the pace of growth in SUVs moderates, but what we are looking at is a world where people prefer a crossover or a utility vehicle,” said Stephanie Brinley, senior automotive analyst for IHS Automotive. Changes in customer preferences have automakers scrambling to adjust their product mix. Some are are cutting back on car production plans or eliminating nameplates entirely.

In January, Fiat Chrysler Automobiles CEO Sergio Marchionne said production of the current Chrysler 200 and Dodge Dart passenger cars “will run their course.” Since then, sales of the Chrysler 200 have tanked. Workers at the company’s Sterling Heights Assembly Plant have been hit with prolonged layoffs. Another 1,300 are scheduled to be laid off in July.

General Motors has eliminated 500 workers at its Orion assembly plant where it makes the Chevrolet Sonic and Buick Verano.  Sales of the Verano are dismal. GM says it will stop selling it altogether in the in North American market this fall. Last year, Toyota announced a $2 billion plan designed to shift production of cars to Mexico and boost production of crossovers and SUVs in the U.S. and Canada.

Automakers that already make crossovers and SUVs are planning to make more of them. Those who don’t are racing to add then to their product mix. This month, GM is introducing the Buick Envision, a new crossover built in and imported from China. It will join the Encore and Enclave in Buick showrooms. Buick said it expects sales of crossovers to grow to 75% of its total sales.

Over the next four years, 73 of the 231 new vehicles that automakers plan to introduce will be crossovers, according to report published in April by Bank of America Merrill Lynch. Even brands like Maserati are getting into the SUV game. After years of planning, Maserati will introduce the Levante — a crossover — in the U.S. later this year. “We like to say it is the Maserati of SUVs — 100% Maserati and 100% SUV. The best of both worlds,” Harald Wester, chief technical officer for Fiat Chrysler Automobiles, said in March.

What factors are driving the renewed interest in crossovers and SUVs? Its not all about low gas prices. Many consumers prefer the higher riding profile and greater interior space they offer compared to conventional sedans. Historically low interest rates are also making it possible for more people to buy more expensive and larger vehicles. The latest models are more fuel efficient than prior generations of SUVs. “For about three years, you were not capable of writing ‘SUV’ without also writing ‘gas guzzler,'” says IHS’ Brinley.

Is Detroit overreacting — again? Once before, the Big Three became enthralled with selling mammoth groundpounders like the Hummer and Ford Excursion. Then sales of those vehicles plummeted as gas prices spiked upward to $4.00 a gallon or more.

“This does open up that risk,” Brinley said. “We are’t looking at a market where sedans completely fall away and nobody buys sedans and you only see utilities.” Still, she argues that automakers are aware of the risks and are unlikely to cut their car lineups back too far. Also, because today’s crossovers are so much more fuel efficient that the SUVs of a decade ago, a spike in gas prices is unlikely to spark a rapid drop in sales the way it did in 2008.

That may be whistling past the graveyard. When and if gas prices rise, consumers may go in an entirely new direction. Who knows. One day they may actually demand crossovers and SUVs powered by electrons rather than molecules.

Source: Detroit Free Press