Wednesday, May 23, 2018
Business

Battle of the body style: Crossovers and trucks edging out cars

Trucks continue to outsell cars, and that could be a good sign.

So far this year, cars account for 47.4 percent of U.S. sales, according to data from WardsAuto. Analyst Haig Stoddard forecasts light trucks will outsell cars for the foreseeable future.

"Going forward, if cars can stay below 50 percent, it's a good economic barometer," Stoddard said.

Pickup sales continue to rebound with the housing industry. "As long as the economy keeps growing, pickups will be strong," Stoddard said. And a seemingly insatiable appetite for crossovers is a sign that consumers have disposable income and are upgrading their purchase. Conversely, cars tend to be the most affordable body style and get the best gas mileage, so their sales reflect a weaker economy or high gas prices.

The fallen status of cars represents a structural shift in the industry but perhaps not an ominous one.

Analysts say car sales are not declining because the offerings are poor. The consensus is that today's cars — including the lineups from General Motors, Ford and Chrysler, which are heavily weighted on trucks and utility vehicles — are the strongest and most competitive in years. Gone are the days when small cars from the Detroit Three were loss leaders to lure buyers to the brand in the hopes they would replace them with profitable models. And once Chrysler introduces a new 200, the domestics will all have credible midsize cars on the market.

When gas prices were high, small car sales seemed unstoppable and accounted for almost 20 percent of the market in 2012. They fell to 19 percent last year and will dip another tenth of a percentage point this year, Stoddard forecasts. The shine has come off the segment because of lower gas prices.

The other upside to the current sales trend is that light trucks deliver the most profit and Detroit's automakers are best poised to reap the benefits if they remain disciplined about keeping stocks in line so incentives don't undercut the bottom line.

Cars have historically outsold trucks. They accounted for 80 percent of the market in 1980. Then in 2001, the world tilted and light trucks (pickups and SUVs) broke the 50 percent barrier, capturing 51.2 percent of sales as urban cowboys bought pickups with no intention of putting them to work.

When the recession hit in 2008, affordability tilted the scale back in favor of cars. With signs of economic improvement in 2010, trucks were back on top. A spike in gas prices in 2011 gave cars a temporary edge before trucks once again regained dominance.

Automakers have worked to diversify their portfolios. Japanese automakers have added pickups; Detroit automakers improved their cars. Everyone added crossovers of all sizes.

The F-Series continues to be the best-selling vehicle in the U.S., but Jim Farley, Ford's head of global sales, said annual sales of about 700,000 pickups pale beside the 1.2 million utility vehicles that Ford sold globally last year.

All automakers continue to introduce new crossovers, especially small ones. The number of nameplates has grown from 180 in 2000 to 370 today, Farley said. One in five vehicles sold around the world in 2018 will be an SUV or crossover, accounting for 14 million global sales, forecasts IHS Automotive.

In the U.S., crossovers are at record market share of 25.5 percent and forecast to end the year with 27 percent of total light-duty vehicle sales, Stoddard said. Add traditional SUVs and these functional vehicles account for more than a third of U.S. sales.

Conversely, pickup sales have been on the decline this year and the segment represents less than 12 percent of the industry, down from about 12.3 percent at this time last year, said Erich Merkle, U.S. sales analyst for Ford.

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