For so many years, sedan has been the staple of American automobile sales. Even before SUVs, minivans, and crossovers existed on the market, the sedan boldly represented the car industry in every garage in the United States, with its practically sized back seats and sufficient trunk space. But after a century of transporting millions of everyday passengers and taking numerous family road trips, these simple passenger vehicles are starting to disappear from the lives of many Americans, and there’s a big possibility that they may never return. The sedan began disappearing in 2008 from the US automobile market because of low prices of fuel and a better economy, and major improvements in the design of sports utility vehicles and trucks.
General Motors, Ford, and Chrysler, the Big Three car makers in Detroit, pioneered the major production of sedan, but in the next four years, these three will only be known as SUV and truck makers in the US. Automakers in America is shifting toward sport utility vehicles, pickup trucks, and crossovers, an observable movement that experts find irrevocable. In an interview with CNBC, Jeff Schuster, senior VP analyst for LMC Automotive, stated that, “Since 2009 or 2010 it has been a truck story. The exception was a slight pullback in 2012, when the midsize car segment underwent a major refresh.”
Decline in the Movement
Latest reports show that this trend has no signs of stopping, despite protests from environmentalists that trucks and SUVS are commonly less fuel-efficient compared to cars and disapproval from vehicle enthusiasts that crossovers generally lack the driving features of sedans.
By year 2022, LMC Automotive projected that 84% of General Motors’ vehicles on the market will be variations of SUVs and trucks. Ford will hit a ratio of 90% with their domestic SUV and truck sales. Fiat Chrysler on the other hand will grow by 97%.
“We have SUVs eventually crossing the 50 percent threshold by themselves in the near future,” Jeff Schuster added.
There will be a small portion for sedans in America, as predicted by automotive industry analysts and executives. Sports automobiles and replacement cars will make up most of these cars.
Ford Following Suit
One of the most recent shifts in the automotive industry is the announcement of Ford. The company will reallocate a total fund of $7 billion. It will be spent for research and development from cars to trucks and SUVs. The company also declared that it would phase out some car models in the coming years. After the company announced their 1st quarter sales, they declared their shift to pickup trucks and SUVs, including crossovers. At present, the Ford USA sedan range comprises of Fiesta, C-Max, Fusion (Mondeo), Focus, Taurus, and Mustang. Ford will not axe Mustang, or the pony.
A representative from Ford reported that they will drop passenger car Taurus first. By March 2019, the E-segment car will no longer be available in the US. Fiesta will go next by May 2019. New models will also no longer include Fusion, the company’s best-selling sedan. Its final sale is not yet determined. The same will happen with Focus. The newly released fourth-generation Focus sedan will no longer be available on the US market.
The Real Plan of Impact and Benefits
Ford’s latest announcement was welcomed by some auto industry analysts as decisive and necessary. Ryan Brinkman (car analyst at JPMorgan Chase & Co.) reported in Bloomberg that, “The passenger car rationalization plan is just the sort of bold and decisive action we believe investors have been waiting for. It is indicative of a management team for whom there are no sacred cows and which seems increasingly likely to pull other such levers to aggressively improve earnings and shareholder value.”
Ford is shifting its investment from sedans to pickup trucks and SUVs for North America. With this move, Ford anticipates to reach an 8% profit margin in 2020, 2 years ahead of their regular schedule.
Jim Hackett, CEO of Ford Motor Company, told Bloomberg that through this shift, the company can cut its cost by $25.5 billion by 2022.
“We’re going to feed the healthy part of our business and deal decisively with areas that destroy value,” Hackett added.
Electric vehicles may be the cause of money loss. Ford’s bold plans, however, are not inconsistent with the worldwide march towards autonomous driving and electrification. Both are causing huge impact in the automotive industry. Ford will dodge the risk of increasing fuel prices by allocating $11 billion to produce 40 electric cars by 2022. In 2020, they aim to release 16 battery-operated car models, such as the Mach 1 – an electric SUV with cutting-edge performance.