The Slow Death Of General Motors

After a disappointing February, all major automakers reported significant growth in March sales. Auto companies, General Motors Company GM, Ford Motor Company F, Fiat Chrysler Automobiles N.V. FCAU, Toyota Motor Corporation TM and Honda Motor Co., Ltd HMC reported a year-over-year rise in auto sales, thanks to increasing demand for SUVs. American customers are changing their preference for crossovers and SUVs for quite some time now, which has led to a decline in demand for sedans.

This has resulted in a sharp decline in sales of sedans and has made all major automakers seriously consider discontinuing with their sedan variants. General Motors is reportedly planning to ditch its subcompact car Chevrolet Sonic. Following in the footsteps of General Motors is Ford, which plans to do away with Fiesta. And going by a Wall Street Journal report, the company might also kill its full-size Taurus sedan. Consequently, this has also made automakers shift their focus to crossovers and SUVs, demand for which is here to stay.

SUVs, Crossovers Drive Auto Sales in March

All major automakers reported higher year-over-year sales in March. That certainly is a good sign for the U.S. automobile industry after a decline in February sales. However, most companies attributed this jump in sales to higher sales of SUVs, pickup trucks and crossovers. Per Autodata, total sales for the auto industry rose 2.5% in March.

General Motors reported a 15.7% year-over-year rise in sales, on strong sales of SUVs and trucks. The company attributed this improvement to higher sales across its four brands, Chevrolet, GMC, Buick and Cadillac, which reported an increase of 15.6%, 11.4%, 28% and 12.7%, respectively. The sedan versions definitely gave General Motors’ sales a boost but it was the crossover sales of Chevy, Buick and GMC that were the real drivers. Sales of Chevy, Buick and GMC crossovers surged a robust 39%, 50% and 42%, respectively. The figures definitely hint at the growing demand of SUVs and crossovers.

Unlike General Motors, its rival Ford did not witness a steep rise in sales. However, Ford too attributed its 3.5% year-over-year rise in March sales to higher demand for its trucks and crossovers. The Michigan-based automaker’s truck sales surged 6.7%, while crossovers rose 7.5%. The company’s F-Series trucks alone contributed $4 billion to its March sales figure. Meanwhile, passenger cars saw sales decline of 8.1%.     

Much like Ford and General Motors, Fiat’s 13.6% year-over-year growth in March sales can be credited to the 44.7% jump in sales of Jeep. The company reported a 14.9% year-over-year increase in March sales, while its Fiat brand was down 13.3%.

Japanese carmaker Toyota also posted higher year-over-year sales in the United States driven by a sharp rise in sales of its SUVs and pickup trucks. The company reported a 3.5% jump in its year-over-year sales, with sales of crossovers, pickups and SUVs witnessing a double-digit jump of 13.9%. At the same time, Toyota reported a 6.8% decline in sales of passenger cars.

Honda Motor Company too reported an impressive 3.8% rise in its U.S. sales for March, with Honda brand truck sales increasing 7%. This Japanese auto giant’s AHM trucks set a new March sales record with an increase of 7%. Fiat, General Motors, Honda and Toyota each sport a Zacks Rank #1 (Strong Buy). You can see

the complete list of today’s Zacks #1 Rank stocks here .

Goodbye Sedan, Welcome SUVs and Trucks

The shift in demand for crossovers, pickups and SUVs comes at the cost of fading preference for passenger cars. This certainly has made a few companies reconsider their production plans. According to a Wall Street Journal report, Ford might soon discontinue with the larger Taurus sedan, which was one the best-selling cars in the United States. Alongside, it might also do away with the subcompact Fiesta. General Motors too might stop production of its small car, Chevrolet Sonic, by the end of 2018. And the company might even consider killing its full-size Impala sedan in another few years.

It’s obvious that automakers are shifting their focus to cater to the changing tastes of customers. Although, General Motors said that that it still has a lot of faith in sedans, and despite its dwindling sales, banks on it. Ford, in March, said that by 2020, 90% of its lineup in the United States will comprise SUVs and pickups.

Whether General Motors and Ford stop producing these sedans is something to be seen in the days to come. However, the popularity of crossovers and pick trucks has been growing by leaps and bounds over the last few years and Fiat was one of the first to foresee this.

In fact, Fiat had in 2016 said that it would pare compact sedans from its lineup in order to boost its sales of SUVs. This in fact has helped the company. Its Jeep Wrangler, a SUV designed for off-road driving, set an all-time monthly sales record of selling 27,829 vehicles in March, reflecting a 70% year-over-year increase.

Perhaps, Ford’s decision to ditch two of its sedans is backed by sales data. The company’s luxury SUV, Lincoln Navigator, has been selling so fast that Ford was compelled to ramp up production. Meanwhile, Honda too plans to cut down production of Accord sedan in Ohio.

Customer’s Choice

The growing popularity of SUVs and crossovers definitely has its set of reasons. With a wide array of electrified SUVs, lower gas prices and more fuel efficient engines have somewhat faded the appeal of sedans. Given the lower gas prices, buyers are no longer finding it difficult to maintain SUVs. Moreover, customers always prefer more storage space. SUVs and crossovers definitely are better bets in this regard. Moreover, higher ride height and all-wheel-drive options add to the appeal of SUVs.

That said, automakers also benefit because of this changing taste of consumers. Crossover cars don’t demand much designing knowhow yet allow auto companies to charge more. This has seen a number of carmakers come up with compact crossovers such as Ford EcoSport, Buick Encore and Honda HRV.

Summing Up

Automakers have realized that customers are fast shunning passenger cars and the best way to cater to their demand is by either stepping up production or by eliminating sedans from their line. This has seen most carmakers investing more in developing SUVs, crossovers and trucks. It needs to be seen what approach carmakers take in the future, as declining sales of passenger cars and growing demand for SUVs and crossover gives a clear picture of what customers want.

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Source : https://finance.yahoo.com/news/sedans-dying-slow-death-gm-134601855.html

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