DETROIT -- Stephen Ragsdale is no longer one of Honda Motor Co.'s "Happy Drivers." A loyal owner for a decade, he ditched a 2009 Accord just 18 months after he bought it. The reason: He coveted his mother's stylish Kia Optima.
He discovered last month he could get an Optima with heated rear seats, cooled front seats and a larger video screen for his navigation system -- and still save $40 a month. He traded in the Accord and also swapped a 2003 Honda CR-V compact sport- utility vehicle for a Kia Soul wagon.
"Honda has kind of fallen behind when it comes to how the car works," the Texas information-technology manager said. "All Honda has going for it is better resale value."
Ragsdale's shopping spree shows how the U.S. car market is shifting away from decades of dominance by Honda and Toyota Motor Corp. among buyers of compact cars and family sedans. While production shortages caused by the tsunami in Japan hastened that shift, it was under way already, said Eric Noble, president of The CarLab, an Orange, Calif., consulting firm.
"Both companies are losing ground because their products haven't been competitive in key segments for half a decade," Noble said. "The inventory shortages will force shopping that wouldn't have happened for another generation."
Toyota stumbled with last year's recalls and hasn't recovered its trust advantage with consumers, Noble said, while Honda has fallen behind when it comes to styling, creature comforts and innovation. No longer are the Corolla, Camry, Civic and Accord the default choices of value-minded U.S. consumers.
When car shoppers look around, they will find as Ragsdale did that Hyundai Motor Co. and Kia Motors Corp. no longer make budget cars, that Ford Motor Co. and General Motors Co. are no longer producing unreliable sedans, and that Volkswagen AG has slashed its prices.
Honda's market share has fallen to 9.9 percent this year from 10.6 percent. Toyota's share has tumbled almost two points to 13.2 percent.
Rivals have figured out that they can challenge Japan's once-unassailable leadership in fuel economy and beat them with styling.
"We've determined in our strategy with both the Sonata and Elantra to focus on design and fuel efficiency," said John Krafcik, chief executive officer of Hyundai's U.S. sales unit. "The cars look sexy, you want to put them in your driveway."
Toyota and Honda have been very good over the years in "quantifying the voice of the customer" in their products, Krafcik said. "They've taken a very scientific approach, which can lull you into doing something in a very logical fashion."
As competitors have stepped up, Honda and Toyota models have slipped down the ranks in Consumer Reports. Last year was the first time that neither the Camry nor the Accord was the top pick for family sedan. Nissan Motor Co.'s Altima took over and the Hyundai Sonata ranks second on the recommended list.
"Toyota and Honda seem to have lost the plot," said David Champion, director of vehicle testing for Consumer Reports. "The quality of some of Toyota's products is wanting. Honda has stood still in terms of introducing new technology."
While Camry remains the top-selling car so far this year, its share of the midsize segment fell to 9.6 percent from almost 11 percent a year ago, according to research Autodata Corp., based in Woodcliff Lake, N. J. Toyota's Corolla and Honda's Civic and Accord have all lost share this year.
The slides started well before the tsunami hit. In 2008, the Civic had 14.2 percent of the small-car market and its share fell to 13.5 percent last year. During the same time, the Camry's share of the midsize market fell from 14.2 percent to 11.5 percent, according to Autodata.
Shopping data show the same trend, said Jessica Caldwell, an analyst with Santa Monica, Calif.-based auto-shopping website Edmunds.com. Early last year, before Toyota's big recall, 7.6 percent of Camry buyers looked at a Hyundai Sonata. That doubled to 15.1 percent by the end of March, Caldwell said.
Same goes for the Civic. By the end of May, 14.3 percent of people shopping for a Civic looked at the Ford Focus and 10.3 percent considered a Chevrolet Cruze, Edmunds says. A year earlier only 5 percent looked at a Focus and just 2 percent considered a Chevy Cobalt, the Cruze's predecessor
Honda says it has stable customer-loyalty rates, which it has highlighted in ads with a "Happy Drivers" theme. Through the end of 2010, there was little change in customer retention for the Civic and the Accord, said Chris Martin, a spokesman for Honda, citing data from researcher Strategic Vision.
Customers switching from the "Civic to other models remained in the mid-20 percent range for the past three years, so up through 2010 the data don't show any significant shift away," Martin said.
Toyota has a new Camry on the way as well as other models that will get sales turned around, said Joe Tetherow, a spokesman for Toyota's U.S. unit.
Toyota is "not going to stand still," he said. "There are some things on the table that people are going to have to take a look at pretty soon," Tetherow said. "You can foresee that Toyota is going to be coming back with something significant."