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Changing Consumer Preferences are Driving a Shift in the Automotive Industry

Changing Consumer Preferences are Driving a Shift in the Automotive Industry

The automotive industry has gone through a period of fast-paced and major change. Ten years ago, the most prominent and successfully selling models for most automakers were sedans—in 2007, Toyota sold 368,390 Corollas in just the US during one model year—a staggering figure. It was clear that consumers favored sedans over other models at the time. But since then, something curious has happened, resulting in car companies attempting to rapidly adapt: consumer preferences have shifted away from sedans to crossovers and SUV’s.

Among the many driving forces behind this, a reason for the shift towards SUV’s is the loss of many of the disincentives that had traditionally deterred people from purchasing SUV’s in the past. For most consumers, the difference in gas mileage was a huge selling point and became a large contributing factor pushing people towards sedans and away from SUV’s—even if both vehicles were comparably equipped and priced. Back in 2007, the gas mileage rating for a Ford Explorer was 14mpg in the city, and 20mpg on the highway—while at the same time, the Ford Taurus was getting 18mpg city and 25mpg highway. For the consumer, a difference of 4 mpg city and 5 mpg highway would mean stopping for gas much more often, making the cost of normal operation much higher for SUVs over their more fuel efficient sedan counterparts. Another aspect that shifted consumers preferences towards sedans was safety, specifically with Ford. Ford SUV’s from the early 2000’s—as well as other SUV makers at the time—were incredibly prone to rollovers, and were not seen to be nearly as safe and secure as their sedan counterparts, which encouraged people to favor sedans over SUVs for more than just gas mileage.

Since then, the drawbacks and disincentives of SUV’s have decreased or disappeared altogether, SUV’s are now packed with all the latest technology for drivers, and the same luxury features for their passengers as their sedan counterparts. Safety is much improved as well, with added safety features becoming much more effective and widespread. The addition of technology such as blind spot monitoring, parking sensors, automatic braking, and lane keep assist are all extremely helpful for consumers as they navigate the world with larger SUV’s, keeping drivers safer. Where SUV’s traditionally struggled with poor fuel economy, there has been massive improvement. The new 2019 Ford Explorer gets 19mpg city and 27mpg highway, while the Ford Taurus from the same model year gets 16mpg city and 24mpg highway, making gas mileage a non-deterrent for SUV’s. This is making the decision between an SUV and a sedan even more difficult. With the traditional disincentives towards SUV’s addressed, more people have made the decision to purchase SUV’s, in favor of more space and a better driving position.

The new car sales figures reflect the strong and changed preferences of consumers. In 2006, Ford sold 174,803 units of the Taurus and 179,229 units of the Explorer. In 2016, Ford sold only 44,098 units of the Taurus while selling 248,501 units of the Explorer. That’s a 75% decrease in Taurus sales, and a 38.65% increase in Explorer sales. This trend isn’t just seen within the Ford Motor Company—sales of the Toyota Corolla from 2006-2016 decreased by 8% while sales for the Rav4 increased by 131.6%. Furthermore, this trend is consistent within the luxury car sector, where trends can seem to stray from the general car industry. from 2006 to 2016, Mercedes has seen a 2.93% decrease in E class sedan sales and a 63% increase in GLE sales, a comparably priced luxury SUV.

Automakers can’t ignore the trend: across the board, both domestically and abroad, SUV’s are the “car of the future” and are increasingly necessary for the financial success of companies. With the trend continuing to shift away from sedans due to consumer preferences and by becoming more economical, the explosive growth of crossover and SUV sales have car companies increasing the number of available crossovers and SUV’s in their lineups. However,what does that say about the future of the sedan, and car companies in general? Companies like Ford are seeing declines in market share—Year over Year, Ford says it has lost 0.7% of its market share from 2017-2018, due to “declines in all regions,” and in the same time frame, saw an annual decrease in global sales of 600,000 units. In addition, economists are beginning to see the phenomenon of “peak car” appearing, especially in urban areas. “Peak Car” is economists predicting that new car sales will no longer be increasing annually, but that the market will contract with a lower volume of new vehicles produced and sold.

Being faced with this stark shift in sales, many industry experts are predicting a decline in the growth of the auto industry and traditional automobile ownership over the next decade. As a result, car manufacturers who want to remain competitive are having to “trim the fat” on their balance sheets—which means eliminating parts of the automakers lineups. Some companies like Ford have already decided to cut sedan and car sales completely while increasing their number of new SUV models—meaning we are witnessing the death of the long successful and popular sedan. For other large companies, including BMW And Fiat Chrysler Automobiles (FCA), this could mean the cancellation of their niche brands such as BMW’s “Mini” or FCA’s “Fiat.” As preferences continue to shift and the car industry begins to contract, we will likely see more companies following the footsteps of Ford, thus cutting back or canceling the manufacturing of sedans, while others may eliminate their more niche brands and badges altogether.

This shift in consumer preferences is leaving us to witness a huge industry restructuring around crossovers and SUV’s, pushing ourselves further and further from the traditional popularity and sales domination of sedans. It is completely feasible that within our lifetime we could see a complete end to the production of sedans. Without anything pushing consumers away from the practicality of SUV’s and with a continued decline in sedan sales, it is no stretch of the imagination to think of a day where there are only SUV’s on new dealership lots. The only real question is how long the once mighty sedan can cling to life before it quietly fades into the history books.

Works Cited

“2018 Annual Report.” n.d. Financial Report. Ford Motor Company. https://shareholder.ford.com/investors/financials/annual-reports/default.aspx.

“Automotive Sales Statistics for Canada and the USA | GCBC.” n.d. Accessed September 7, 2019. http://www.goodcarbadcar.net/sales-stats/.

“Ford to Stop Selling Every Car in North America but the Mustang and Focus Active.” n.d. TechCrunch (blog). Accessed August 30, 2019. http://social.techcrunch.com/2018/04/25/ford-to-stop-selling-every-car-in-north-america-but-the-mustang-and-focus-active/.

Newman, Peter, and Kentworthy, Jeff. n.d. “‘Peak Car Use’: Understanding the Demise of Automobile Dependence.”

Rapier, Graham. n.d. “BANK OF AMERICA: We’ve Reached ‘Peak Car.’” Business Insider. Accessed August 30, 2019. https://www.businessinsider.com/bank-of-america-weve-reached-peak-car-2017-6.

“Search By Model.” n.d. Accessed August 30, 2019. https://www.fueleconomy.gov/feg/bymodel/bymakemodelNF.shtml.

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