‘Fundamental shift’: Why May car sales fell off a cliff – USA TODAY
DETROIT — May was another good month for crossover and SUV sales, but it was a bloodbath for cars.
The trend has been emerging for several years, but May sales numbers drive the point home and illustrate why automakers are scrambling to alter product development strategies, plant investments and production plans.
“It’s a fundamental shift,” said Jessica Caldwell, director of pricing and industry analysis for Edmunds.com.
In May, sales declined for six of eight best-selling cars in the U.S. as sales boomed for small and mid-size crossovers.
And it didn’t matter if the automaker was Asian, American or German.
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, 42% of all new vehicles sold in the U.S. were cars, down from 50% for 2013.
Among major brands, only Honda, on the back of a new Civic, and Subaru managed to come close to breaking even on total passenger car sales for the month.
“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.
The growing demand for crossovers is causing automakers to make difficult, costly choices. In many cases, automakers are rushing to develop new vehicles to satisfy the growing demand. In other cases, automakers are cutting back on car production plans or are eliminating nameplates.
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 and workers at the company’s Sterling Heights Assembly Plant have endured prolonged layoffs. The automaker also plans to lay off about 1,300 workers at its the plant in July.
General Motors eliminated a shift of about 500 workers in January at its Orion assembly plant where it makes the Chevrolet Sonic and Buick Verano. Last month, GM said it would stop selling the slow-selling Verano compact sedan in North America 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 produce SUVs and crossovers are developing more of them and those that don’t are jumping into the game.
This month, GM is introducing the Buick Envision, a new crossover built and imported from China. The Envision will join the Encore and Enclave on the SUV side of the Buick showroom. 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. That comes out to 31% of the new vehicle launches, an increase from 21% over the past four years.
Several factors are fueling demand for SUVs and crossovers.
•They are more fuel efficient than their predecessors. In 2006, a Ford Explorer with a V-8 engine built on a truck frame got a combined 15 miles per gallon. Today, Ford doesn’t even offer its Explorer with a V-8. The 2016 Ford Explorer, built on a unibody frame, gets a combined 19 mpg — a 25% improvement.
•Many consumers prefer the higher riding profile and they offer more space.
•Historically low interest rates are giving Americans the ability to buy slightly more expensive and larger vehicles.
Then, as now, the Detroit Three flooded the market with SUVs and became reliant on them for the bulk of their sales.
But in 2008, as the average price for a gallon of gas soared to more than $4, the cost of commuting to work in a big SUVs hit pocketbooks hard, causing consumers to part with their beloved big vehicles. A significant chunk of the public also started to view drivers of SUVs as insensitive to the environment.
“For about three years, you were not capable of writing ‘SUV’ without also writing ‘gas guzzler,'” says IHS’ Brinley..
But that stigma has faded as they have become more fuel efficient.