SEGMENT SPOTLIGHT

Large cars, after brief comeback, lose traction

New and redesigned models such as the Toyota Avalon, pictured, Hyundai Azera, Kia Cadenza and Chevrolet Impala fueled sales gains for large cars last year. But sales have slumped in 2014.
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The large car’s comeback appears over.

After a solid rise in 2013, U.S. sales of nonluxury big sedans dropped 5 percent through May, while car sales were flat and total light-vehicle sales jumped 5 percent.

Volumes are falling as consumers switch to mid-sized cars and crossovers and automakers pull large sedans out of their fleet offerings, analysts say.

For years, the segment was largely ignored as automakers placed a bigger priority on other, larger segments, such as smaller cars, mid-sized sedans and crossovers.

But new and redesigned models such as the Toyota Avalon, Hyundai Azera, Kia Cadenza and Chevrolet Impala fueled segment gains last year. Large-car deliveries rose 5 percent to 590,674 units in 2013, accounting for 3.8 percent of the light-vehicle market.

The rebound came after a 1 percent dip in 2012 and a 7 percent slump in 2011.

The large-car segment hit its most recent peak in 2006, with a little more than 1 million units sold, accounting for approximately 6.4 percent of the light-vehicle market.

This year, large-car sales have been a mixed bag. The revamped Azera suffered a 30 percent decrease in deliveries through May, while the new Cadenza’s sales rocketed 731 percent.

AutoPacific analyst Dave Sullivan predicts large-car sales will account for only 3.4 percent of the light-vehicle market this year. IHS forecasts large-car sales will average about 500,000 units a year over the next few years and account for just 3 percent of the market by 2018.

Mid-sized cars, crossovers move in

Mid-sized cars and crossovers are helping to squeeze out large cars.

Last year, mid-sized car sales jumped 1 percent, accounting for 16.5 percent of the light-vehicle market with 2.6 million units sold.

As mid-sized vehicles get larger, some consumers are bypassing the large-car segment for lower prices and better fuel economy offered in the mid-sized segment, Sullivan said.

The mid-sized segment suffered a 3 percent loss in U.S. sales volume through May, accounting for 16.3 percent of the light-vehicle market -- the only decline in the past five years.

But the popularity of mid-sized cars remains strong with four of the 10 top-selling cars in the United States through May being mid-sized vehicles, including the Toyota Camry and Honda Accord.

Crossover sales rose 10 percent through May.

For the same money as a large sedan, consumers can get a larger and more versatile crossover, independent auto analyst John Wolkonowicz said.

“The only advantage the large sedan has over the crossover is style -- or handling if you’re interested in that,” he said. “In every other practical attribute, the crossover wins.”

Fleet cutbacks

Through April, U.S. fleet sales were down 3 percent for the seven largest automakers. Much of the decline is the result of daily rental companies strategically keeping vehicles longer before reselling them and therefore buying fewer new units.

Large-car sales are dropping as a result of the cut in fleet orders, Sullivan said.

The Impala -- a staple of fleets for years-- has been sold only to retail buyers since its 2014 redesign. Sales of the Impala Limited, which General Motors has continued to build and market to fleet users, dropped 54 percent through May, and total Impala sales were down 3 percent.

Sullivan said GM knew Impala sales would drop with the redesign. In return for lower sales volumes, GM and other automakers are seeing heftier profits by charging higher prices for redesigned large cars.

U.S. sales of the more expensive, redesigned Impala were up 986 percent through May, GM says.

GM revamped and repositioned the Impala to make it more fully competitive with the Ford Taurus and the Avalon, Wolkonowicz said.

Taurus sales fell 16 percent, and Avalon deliveries slipped 15 percent through May.

Ford also retooled the Taurus in 2010 and reduced fleet sales of the car to generate higher average transaction prices, Wolkonowicz said.

On top of pulling some large-car models out of their fleet offerings, automakers dropped once-popular models such as the Ford Crown Victoria and Mercury Grand Marquis.

Here to stay

Despite dwindling demand, large cars remain a vital part of an automaker’s portfolio.

“It makes you a legit brand,” said Eric Lyman, vice president of industry insight for TrueCar. “Large cars can be important in helping define the brand.”

Sullivan said the large-car market is not going to disappear because many of the vehicles in the segment share parts and frames -- allowing automakers to boost volumes over multiple brands, drive incremental sales and still preserve profits.

For example, the Impala and Buick LaCrosse share some parts.

“Higher volume means better pricing,” Sullivan said. “Even if sales aren’t great -- underneath, if these cars are engineered properly and purchasing is done properly, that helps increase the profitability” of the segment.

You can reach Nora Naughton at nnaughton@crain.com.


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