Rogue leads crossovers' surge as cars continue fall

Crossover sales are going rogue in more ways than one.

The segment now accounts for roughly one in every three vehicles sold since October 2016, with the Nissan Rogue driving to become the top-selling nonpickup in America.

"That is the hottest segment in the market, and Nissan is definitely going for a volume strategy," said Jessica Caldwell, Edmunds senior analyst.

Sales of crossovers since 2012 have increased 58 percent to more than 5.6 million sold in 2016, while car sales during that time declined 7.8 percent.

Crossovers accounted for 33.9 percent, or 1.4 million, of the 4 million vehicles sold in the first quarter of 2017, according to the Automotive News Data Center.

"It's something that has been going on for more than 10 years," said Kelley Blue Book analyst Tim Fleming. "It just really accelerated three years ago when gas prices came down -- when fuel economy became less of a concern."

The growth of crossovers comes as car sales face double-digit declines this year and the industry experienced a 1.6-percent first-quarter drop in sales -- the first three-month drop to begin a year since 2009. The Rogue compact has experienced a 47 percent increase in sales during the first quarter compared with 2016 to dethrone the Toyota Camry -- last year's best-selling nonpickup.

Nissan sold 101,421 of the vehicles during the first three months of the year -- topping the well-established Honda CR-V and Toyota RAV4.

"Rogue has been surprising," Fleming said. "Almost 40,000 units in March -- that's big."

Fleming and others said the Rogue has played an integral part in Nissan's volume play to capture 10 percent U.S. market share, which it has done with the help of increasing incentive spending 18.2 percent for the year so far to an average of $2,820 per unit -- about $250 over the industry average, according to Autodata.

"It's a good product, but it's also certainly about them driving share and pulling the levers to keep that going," said IHS senior analyst Stephanie Brinley.  

But last month, automakers' incentive levers couldn't keep overall U.S. sales growing.

The quarterly decline was on par with many analyst expectations of a flat to slightly down year. However, a 1.7 percent drop reported last week by automakers for March was a surprise to many who predicted heavy incentive spending would lead to a slight rise in sales. 

"We are seeing inventories building and incentives rising," said Autotrader senior analyst Michelle Krebs. "It is taking more effort and more money to move vehicles -- particularly cars." 

Incentive spending by automakers increased 14.9 percent on average last month to $3,563 per unit, according to Autodata Corp. The incentive spending between cars and trucks was nearly equal, despite utility vehicles commanding higher transaction prices. 

The seasonally adjusted, annualized sales rate fell to 16.6 million, well below a forecast of 17.2 million and the lowest pace of sales since February 2015. The SAAR was 16.66 million in March 2016 and 17.57 million in January and February.

Higher incentives, tightening credit and a rise in interest rates suggest the auto industry is losing momentum heading into the key spring selling season after seven consecutive years of gains.

"All these signs show sales are just starting to slow," said Caldwell of Edmunds. "And of course, automakers have levers to pull, but the natural sales rate is declining."

NADA Chief Economist Steven Szakaly on Wednesday, April 5, said there are "some headwinds overall" in 2017, but just "moderate" economic growth, expected tightening in financing and a federal interest rate hike aren't enough to keep sales from remaining above 17 million for a third consecutive year. "What we're looking at is still a very strong year," he said on a conference call with news media. "As far as the new-car part of the business, we are still very optimistic."

The overall U.S. economy is expected to grow in 2017, with a projected 2.6 percent growth in gross domestic product and job growth of 150,000 to 180,000 a month.

Szakaly said a probable tightening of credit for the year is expected to negatively impact sales by 100,000 to 175,000 units, which was factored into the association's original forecast.

Factors that could adversely impact new-vehicle sales include longer auto loan terms and higher interest rates that stretch out the buying cycle, and a large supply of off-lease used vehicles entering the market that will likely pull some new-car buyers into the used-vehicle market, Szakaly added.