A year after Ford and Chevrolet abandoned the compact-car segment to prioritize SUVs, buyers are abandoning those makes and shopping for cars made by Hyundai, Toyota and Honda.
Some 42% of Ford Focus and Chevy Cruze compact-car owners have stayed in the compact-car segment, with a significant percentage buying competitors' vehicles, according to an industry study by Edmunds that finds a deterioration of market share for the Detroit makes and a decline in brand loyalty.
Hyundai, for example, saw sales of its Elantra compact car more than double this November over last year. The brand has also introduced an all-new 2020 midsize Sonata that — like the all-new Toyota Camry and Honda Accord introduced in 2018 — the automaker hopes will capture buyers who still want sedans.
"There are 6.5 million car owners who do not have a successor sedan for them from their manufacturer. Forty-four percent of those say they want a sedan, so if you look at the raw numbers, there are still a lot of buyers out there," said Mike O'Brien, Hyundai's vice president of product planning, at a media test of the new Sonata in Phoenix.
Since Chrysler dropped its 200 sedan after the 2017 model year, he said, there has been an exodus of 20 nameplates from the sedan market.
The Edmunds study focused on compact cars, which is the biggest car market — at 9.1% of share — in the United States today. The Ford Focus and Chevy Cruze have both left the segment in the last year as the Detroit makers concentrate on market demand for SUVs.
To be sure, a healthy share of former Focus and Cruze owners are acting as Ford and Chevy hoped: by moving into one of their SUVs. To date this year, 18% of Focus owners traded for a Ford SUV, while 21% of Cruze owners traded for a Chevy SUV.
But those buyers tend to have extra cash to spend as small SUVs can cost between $4,000 to $8,000 more than a small car, reports Edmunds. As a result, those staying in the compact-car segment are increasingly turning to the remaining foreign brands.
"Ford and GM made a strategic decision to prioritize profit at the expense of market share," said Edmunds auto analyst Jessica Caldwell. "While this may set them up better in the long run so they have the cash they need to fund electrification and autonomy, there's no question that decision is giving their competitors an edge now."
Focus owners trading in their car to buy another Ford vehicle decreased from 40% in 2016 to 33% in 2019. The drop in brand loyalty has been steeper among Cruze owners — from 57% of owners trading in for a Chevy in 2016, to 45% this year.
Asian carmakers have benefited: the Honda Civic picked up 4% of former Focus buyers, the Toyota Corolla 3.5% and Hyundai Elantra 2.3%. Cruze trade-ins for Civics and Corollas nearly doubled from 2016 to 2019.
With the termination of the Ford Fusion and reported demise of the Chevy Malibu in a few years, foreign makers are hoping for the same playbook in midsize sedans.
That may be a tougher sell, given that midsize sedan sales have plummeted from 17% to 8% of market share.
But, said Hyundai's O'Brien: "Not everyone hates their sedan. We see a healthy outlook for the future." He points to the 6.6 million Honda Accords that are on the road, and the 7.2 million Toyota Camrys, 3.9 million Nissan Altimas and 2.2 million Hyundai Sonatas.
The Detroit Three have the profitable full-size pickup market virtually to themselves. But the midsize-pickup market can be seen as a test case for brands that abandon whole segments: Ford left the declining midsize pickup market in 2012 only to return in 2019 with Toyota's Tacoma dominant. Since re-entry, Ranger hasn't been able to command the share it once did — but it boasts a 49% higher price that's in line with the company's profit-focused strategy.
While Asian automakers also have significant skin in the SUV and pickup market, they see the compact-sedan market as critical to attracting first-time, low-income buyers into their brands.
"The catch is, if Ford and GM don't have affordable options for shoppers who are buying their first or second new car, it could be much harder to win them over later," Caldwell said.
"Catching consumers early and keeping them in the family has been a basic tenet of automotive brand strategy for decades.
"But it feels like we're in the midst of a transformative time for the industry where automakers are being forced to rethink everything."
