Fri | Sep 21, 2018

New York Auto Show: How Nissan Altima, Toyota Camry, Honda Accord will pull through the car plague

Published:Sunday | April 15, 2018 | 12:00 AM

 

Think of them as the survivor cars. A triumvirate of mainstream midsize sedans, each with a loyal following, are sure to hang on and survive despite the droves of motorists shifting to crossovers, SUVs and pickups.

The shake-out is still unfolding, but it's already clear that Toyota Camry, Nissan Altima and Honda Accord will emerge, likely picking up even greater market share within their shrinking segment, once the most popular in the industry.

Nissan is hoping to remind consumers why it belongs in the top tier when it introduces a redesigned Altima at the New York International Auto Show on Wednesday.

For other automakers, their future with cars looks more uncertain after car sales plunged 10.9 per cent in 2017, according to Autodata.

Fiat Chrysler has ditched most of its passenger cars. Ford Motor announced this month that it's downplaying cars amid mounting speculation that the company may eliminate some struggling models.

Meanwhile, most other automakers are struggling to get passenger cars off dealership lots.

"There's definitely some rationalisation going on in the segment," said Michael Bunce, vice-president of product planning for Nissan North America. "It creates a healthier business for everybody remaining".

Indeed, the survivor cars have entrenched themselves at the top of the leader board as the list of true threats dwindles.

 

STRONG BRANDS

 

It's a reflection of their strong brands and a bold commitment to quick redesigns, new technology and comprehensive marketing, even as other automakers started pumping the brakes.

Put simply, they had strong brands, and they never wavered. All three companies have kept discounts low, compared to the rest of the industry, to preserve resale values. And acclaimed redesigns helped. The Honda Accord won the 2018 North American Car of the Year, and Toyota won accolades for its remade 2018 Camry, which CEO Akio Toyoda dubbed "sexy".

Camry, Altima and Accord are leading the "core group that will be able to survive in a less friendly world," said Karl Brauer, executive publisher for Kelley Blue Book.

"They have a lot of momentum," said Joe Wiesenfelder, executive editor of Cars.com.

A few others have been resilient, too, such as another Japanese brand, Subaru, which has had success with all-wheel-drive models that appeal to millennials and consumers with a love for the outdoors.

The Japanese automakers placed a bet that Americans would keep buying their stalwart sedans despite lower gasolene prices and shifting preferences towards bigger vehicles.

"Those three vehicles - the Camry, the Accord and the Altima - have been at the top of the midsize segment for a while," said Tom Libby, automotive analyst at market-research firm IHS Markit.

But many of industry's passenger cars have wilted as declining gasolene prices and preferences for roomier rides took a toll. US market share for sedans plummeted from 37.4 per cent in 2013 to 27.5 per cent in 2017, according to IHS Markit. Experts expect it to continue falling.

Passenger cars' loss turned out to be a gain for SUVs and crossover vehicles, whose collective market share has risen from 32.8 per cent to 43 per cent during the same period.

About two million passenger car sales have shifted to crossovers, SUVs and pickups in recent years, Toyota North America sales and marketing chief Bill Fay said.

"When you have a three- or four-year market shift like we've had, everybody has to look at that and either decide to reinvest in cars ... or stop investing in them altogether," Fay said.

"I think it's a possibility" that competitors will discontinue more models, he added.

Some are already doing so.

Fiat Chrysler has mostly got out of the small-car business, having already killed the Dodge Dart and Chrysler 200. The company still sells a few niche car models, including its struggling Alfa Romeo brand, but relies primarily on its Jeep SUVs and Ram trucks.

Others may follow closely behind.

"We wouldn't be surprised to see Ford reduce its US car portfolio outside of Mustang to just Focus, removing Taurus, Fusion and Fiesta," Barclays analyst Brian Johnson said on March 15 in a research note.

Ford introduced a refreshed Fusion sedan last week in Detroit in order to show it off at the New York Auto Show, but the revision likely was long in the works before the company decided to make SUVs and crossovers its focus.

Ford spokesman Michael Levine said in an email that the Taurus, Fusion and Fiesta "are important parts of the Ford lineup".

One factor that could keep some sedans alive is the global nature of the automotive business. Most automakers sell cars in other markets, where they're often more popular or even necessary to meet increasingly strict emissions requirements.

In other words, cars aren't going away altogether. Some consumers still want them.

"It's not the death of the car. There's definitely been a decline in demand for sedans. However, cars still make up about a third of the US market," Libby said. "So that's a substantial portion you can't ignore."

Selling cars may require steep discounts, however. Four companies are doling out discounts of more than US$4,000 on midsize cars so far this year, according to Cox Automotive.

One of the only models that's bucking the trend? The Honda Accord. Sales are down 12.9 per cent in the first two months of the year compared with a year ago, but discounts have declined 68.4 per cent to an industry-low US$1,186 per model.

Honda spokesman Sage Marie said the company is also not selling the Accord to rental car companies in a bid to preserve resale values. Despite the industry decline in overall passenger car sales, the Accord remains critical to Honda's line-up.

"There's a lot of volume there for us, and it's a big business," he said.