In 2008, auto consumers were concerned with rising gas prices, fuel economy and greenhouse emissions. The popularity of heavy passenger cars such as trucks and SUVs was declining despite the emphasis that the “Big 3” automakers (Detroit-based GM, Ford and Chrysler) had placed on the “SUV craze.” Consumers could not – and no longer wanted to – keep up with the costs associated with owning larger vehicles and were shifting their focus toward smaller, more economical cars. But when consumers turned to domestic automakers for sedans, few were to be found in their line-ups.
This white-space was a direct result of the Big 3’s decision to shift resources away from midsize and compact cars in order to give consumers what they wanted at the time. However, the assumption that consumer preference would remain the same over the long term proved to be a regrettable business plan. A prolific manufacturer of sedans, Toyota was able to leap-frog over Ford to become the #2 automaker in the US after Ford had held the spot for 56 years.
If this sounds familiar, it’s because the auto industry is in the process of repeating history a mere decade later. In 2018, Ford announced plans to discontinue their Ford Fiesta subcompact, Fusion midsize and Taurus full-size sedans. Ford plans to only keep their Mustang and Focus Hatch vehicles in the light passenger segment. When asked why they planned to abandon the sedan, Ford said they wanted to remain competitive, save money and capitalize on a dramatic shift toward trucks and SUVs.
According to Mintel research on automotive innovations, 45% of US consumers say sedans or SUVs would be their top pick for their next vehicle. Which begs the question, why does the industry portray sedans as unpopular? More importantly, what will Ford do when consumers shift back to preferring light passenger cars?
According to Mintel research, 45% of US consumers say sedans or SUVs would be their top pick for their next vehicle.
Based on the circumstances of 2008, Ford may be looking at a future in which they’re quickly losing market share to foreign original equipment manufacturers (OEMs). Asian automakers have a reputation for their superior sedan offerings; Toyota’s position in the market is particularly advantageous compared to Ford’s. Toyota is known for having a positive brand perception among consumers as well as being highly regarded in the industry. According to Mintel research on perceptions of auto brands, consumers view Toyota as a trusted company with safe and high quality vehicles.
As with any market, the automotive industry is cyclical, with the popularity of SUVs bound to wane. Automakers have shown no plans to shift away from their current focus, which will result in the SUV market outpacing consumer demand. According to its annual “Car Wars” study, Bank of America projects that by 2023 the number of SUV and crossover model nameplates will rise to 149, which is 25% more than the industry has ever seen for cars or trucks. In a market that heavily relies on vehicle capability to differentiate models, this means serious trouble for automakers as a whole. With so many offerings of virtually the same vehicle, consumers will struggle to differentiate why one model is superior to the other.
What we think
In 2019, consumers are still concerned with rising gas prices, fuel economy and how cars affect the environment. While there are more alternative options on the horizon, consumers have indicated they aren’t ready to switch from the traditional vehicles with which they are familiar. Ford has made it clear that they intend to double down on a future that caters to electric and heavy passenger cars.
Consumers have made it clear what they want, need and expect from their automobiles. It is unwise for any automaker to blatantly ignore their consumers. The future of the automotive industry in regards to electric and autonomous technology is not as close as Ford would have one believe. By committing to a future with more limited automobile offerings, Ford and others who have considered eliminating sedans are taking a large risk. By excluding an entire auto segment from their offerings, they aren’t taking steps towards the future; instead, they’re headed in the wrong direction.
