As more cars disappear, affordability challenge grows

With General Motors set to end production of its Chevrolet Cruze compact car next year, another high-volume, entry-level option will be crossed off American car buyers' shopping lists.

On top of similar moves by Ford Motor Co. and Fiat Chrysler Automobiles, the demise of the Cruze adds to growing affordability challenges in the new-vehicle market. The continued death of cars is happening amid record-high prices and rising interest rates, but also shifting consumer tastes. Some dealers anticipate buyers will continue to gravitate toward compact utility vehicles or perhaps just defect from the American automakers that are shedding cars like birds molting feathers.

Consumers feel that affordability pinch especially when automakers drop car segments and focus more on crossovers, SUVs and pickups, said Chad Martin, a Bowling Green, Ky., dealer selling 12 brands including Chevrolet. And while some are loyal to a specific brand, customers generally seem to be shopping for a particular type of vehicle, such as compact cars. So if an automaker eliminates that option, those shoppers likely will turn elsewhere.

"What this is going to mean is, you're going to see a somewhat higher defection rate because you don't have the product lineup that particular consumer wants," said Martin, president of Martin Management Group.

GM said last week it would end production of the Cruze as part of a cost-cutting plan that would idle five North American plants and significantly trim hourly and salaried positions. GM also will stop production of the Buick LaCrosse, Cadillac CT6, Cadillac XTS, Chevrolet Impala and Chevrolet Volt throughout 2019.

Ford already said it will end sales of all sedans in North America as it transitions to a lineup heavy on crossovers and SUVs. FCA decided in 2016 to axe the Dodge Dart and Chrysler 200 cars.

Price will be a bigger hurdle for buyers who want to stick with one of the domestic brands. Many compact crossovers are $5,000 more than their compact sedan counterparts, Martin said. "Obviously, the consumer is going to have to absorb that $5,000 difference," he said.

According to Kelley Blue Book, the average transaction price for all compact cars this year through October was $20,623 vs. $28,448 for compact crossovers or $24,559 for subcompact crossovers. Automakers and dealers expect consumers moving out of compact sedans such as the Cruze to largely turn to the subcompact crossover segment.

Craig DeSerf, general manager at Gulf Coast Chevrolet-Buick-GMC in Angleton, Texas, said he was not surprised larger sedans such as the Impala and LaCrosse are going away: "With millennials coming along and these younger [buyers] coming along, the big sedans — I hate to say it — they're just dead."

But DeSerf was surprised GM plans to do away with the Cruze, especially before canceling Chevrolet's smaller Sonic or Spark. "If the car can stay under $18,000, it's a phenomenal car," he said of the Cruze. "We sell the heck out of them used."

While GM has not announced any plans to pull the Spark from the mini segment or the Sonic from the subcompact segment, there are rumblings that the Sonic could be discontinued. But those little cars' volumes pale in comparison to the slightly larger Cruze.

Through October, GM sold an estimated 19,407 Sparks and 18,265 Sonics vs. an estimated 124,536 units of the Cruze. Though sales are down an estimated 22 percent for the Cruze this year, it was still the fifth-best-selling model among compact cars, with 8.5 percent of the segment. It is being outsold by the Honda Civic, Toyota Corolla, Nissan Sentra and Hyundai Elantra.

In sixth place in the segment is the doomed Ford Focus, which sold 105,203 units during the period, down 21 percent. Across the segment, sales are down 14 percent this year, underscoring the well-noted reality of U.S. consumers migrating from cars.

Even so, compact cars overall accounted for 1.46 million vehicle sales through the first 10 months of the year, still a hefty number and nearly a third of all car sales.