They don't sell like they used to, but they're big money-makers

Minivan meltdown, maximum margins

They don't sell like they used to, but they're big money-makers

Kia calls its next Sedona a multipurpose vehicle.
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Judging by minivan sales, the segment has crashed over the past decade. But don't tell that to dealers who sell them.

Volume, shmolume, retailers say. Many consumers buy loaded, higher-end models, so minivans deliver good margins. And minivan buyers often become a dealership's loyal customers -- even more than in the minivan's heyday more than a decade ago, says Brian Heney, director of operations for the nine-store Kelly Automotive Group in Danvers, Mass.

"Customers used to come in with a lot of shopping options on which minivan they might buy," says Heney, whose stores sell the Chrysler Town & Country, Honda Odyssey and Nissan Quest. "Now they might be choosing between just two. They know what they're looking for and they pay for it.

"It's a good transaction and a loyal customer," Heney says. "You start loading up a Town & Country and they sell for $45,000. We like selling them."

That may explain why some automakers are quietly suiting up for battle in what many perceive as a deflated old segment from the era of Britney Spears and Pokemon.

Chrysler revealed in May that it will consolidate its segment-leading minivan offerings under the Chrysler brand, dropping the Dodge Grand Caravan. The move will steer minivan enthusiasts to a more luxurious product: The Dodge version starts at $21,590, including shipping, but the Chrysler version starts at more than $10,000 higher. Chrysler also said it will introduce a plug-in hybrid version of the Town & Country in 2016.

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Ford's 'unminivan'


Ford Motor Co. is also begrudgingly re-entering the minivan market after abandoning it eight years ago. Ford's new mid-sized Transit Connect Wagon looks, operates and feels like a minivan -- but Ford is marketing it as an "unminivan."

Kia Motors America unveiled a stylish new-generation Sedona minivan at the New York auto show in April to go on sale this fall. But even as Kia aims for more minivan sales, it refers to the Sedona as a multipurpose vehicle.

This is the conflict of the minivan in 2014.

Minivan buyers love them. Dealers make money on them. Manufacturers that still sell them declare their zeal for the segment.

But in an era of hipsters drinking espressos and driving downsized compacts with maximum fuel economy, bulky minivans are not exactly the brand image that automakers want.

Critics have taken potshots at minivans for years, dismissing them as "mom-mobiles" that advertise an unhip lifestyle of suburban domesticity as they carpool screaming kids with McDonald's Happy Meals. Their very designs tend to communicate an out-of-shape America. Minivans tend to be a bit frumpy and bottom-heavy with a husky derriere, compared with the more athletic look of the various crossovers that many buyers have opted for over the past five years.

Ford is marketing its Transit Connect Wagon as an "unminivan."

Hot seller at $49K


But while all that may be true, says Toyota dealer George Girjel, people still want their minivans. And many buyers want plush ones.

"I sold more Siennas than Camrys last month," says Girjel, owner of Toyota of Cool Springs in Franklin, Tenn. "I've got 11 on the lot right now and wish I had a few more.

"They're good moneymakers," he says. "And the more loaded they are, the faster they sell. The Sienna Limited retails for about $49,000, and we can't keep any in stock. They come in and they're gone."

Girjel acknowledges that minivans have a stigma as "a woman's car."

"But I've got news for you -- men drive out of here in them," he says. "They're luxurious. They've got heated seats, cooled seats, reclining seats. It's a good segment."

But the segment's sweet margins have come only after some competitors dropped out.

General Motors barely managed to make a dent in minivans during the 1990s and 2000s and dropped its Saturn, Pontiac and Chevrolet minivans during its 2009 bankruptcy. Before then, vanishing brands such as Oldsmobile and Plymouth took their minivans along with them.

Ford surrendered the minivan field in favor of more promising segments -- introducing the Flex crossover in 2007 as the wind was coming out of the minivan market. And now Dodge is soon to follow.

Fewer players


Hyundai Motor America CEO Dave Zuchowski, speaking at an industry conference in April, said the tighter segment is healthier.

"When there are eight or nine entries in the minivan segment, nobody makes any money," Zuchow-ski observed from the sidelines, since Hyundai also abandoned the segment after 2009. "When four people drop out because they can't afford to stay in and there are just four or five remaining players, they all make money."

But, he warned, "as you add more entries and it gets more competitive, the margins get squeezed."

One brand that appears to be worried about neither margins nor shifting customer preferences is Honda. Honda remains bullish about minivans, says Daniel Tiet, senior product planning manager for the Odyssey.

"The segment overall has decreased, but the core buyers are still buying minivans," he says. "It's a strong model for us. People buy two or three Odysseys in succession."

Tiet cites data from J.D. Power's proprietary Power Information Network shopping market research that 38 percent of Odyssey owners come out of one Odyssey to buy another one. And of those Odyssey owners who move out of the Odyssey, a large percentage buy other Honda vehicles. The Odyssey also gives Honda the highest transaction price in its portfolio, Tiet says.

The Odyssey's best-selling trim package is the EX-L, which comes standard with leather seats. The EX-L base price is $32,955, including shipping.

Tiet acknowledges that many consumers remain dismissive of the segment. And he acknowledges that some of his competitors have tried to slip away from the minivan identity to offer vehicles that attempt to package the minivan's attributes of roominess, cargo space and easy entry into a nonminivan design -- such as the Ford Flex.

"But we embrace the minivan," he says. "We embrace that customer. We've found that people really like the minivan and its configuration, and we embrace that customer. Those sliding doors work great for people."

The Odyssey yields Honda's top transaction price.

Rising residuals


Throughout the segment's decline, Chrysler, Honda and Toyota have remained the leading minivan manufacturers, even as challengers such as Nissan, Kia and Mazda have jockeyed for more sales.

And while the field has narrowed, the margins have not.

ALG, the industry guide for setting vehicle values, says residual values for minivans were higher last year than in the segment's glory days in 2000. ALG says projected 36-month residual value improved from 47.2 percent of new value in 2000 to 48.9 percent in 2013.

Eric Ibara, director of residual value consulting for Kelley Blue Book, reports that used values on 2013 Odysseys and Siennas are now higher than they were for used 2009 models at the same point in their life cycle, and used values for the 2013 Town & Country have increased by even more than the Honda and Toyota models.

Ibara's point: The industry may be selling fewer minivans, but consumers are willing to pay more for used minivans today than they were when the segment was more robust.

"We're at a point where the pendulum has swung," Ibara says. "Five years ago, there were too many minivans for the demand in the marketplace. Today there might well be a slight shortage."

Excluding the to-be-discontinued Grand Caravan, there is a counterintuitive price-sales relationship among the top competitors: The more expensive the offering, the more successful the nameplate is in the market.

The Town & Country has the highest base price, at $31,760, including shipping, and excluding the Grand Caravan, it sells at the highest volume. The Odyssey's $29,655 sticker price, including shipping, is the segment's second highest, and it is the No. 2 seller. The Sienna's $27,780 price, including shipping, is third highest, and it is the market's third-best seller.

Not surprisingly, one of the changes that Kia will make in its new-generation Sedona this fall will be the introduction of a more expensive premium package, called the SXL.

You can reach Lindsay Chappell at lchappell@crain.com.


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