Americans go rogue as compact SUV purchases eclipse sedans

 01 Sep 2017 - 0:18

By Jamie Butters and John Lippert / Bloomberg

Toyota Motor Corp.’s U.S. sales chief predicted in late 2015 that the RAV4 would outsell Camry within five years. It won’t take nearly that long.

Family sedans like Toyota’s Camry -- the top-selling U.S. car the last 15 years -- will be surpassed for the first time by a trio of compact sport utility vehicles: the Nissan Rogue, Toyota RAV4 and Honda CR-V. Until Hurricane Harvey hit, some analysts expected strong demand for these models to pace the industry’s first monthly sales gain this year in August.

The faster-than-anticipated rise of crossovers reflects a sweeping shift in American consumer taste and rushed efforts by manufacturers to rework their factories at the whims of car shoppers. As the companies reconsider projections for just how much appetite there is for compact SUVs, more pointed advertising campaigns are going to help determine which models come out on top.

“It’s so hard to forecast small SUVs,” Bob Carter, Toyota’s top U.S. sales executive, said this month. “We forecast for growth, then it blows through the forecast and goes further.”

Harvey Impact

After Harvey slammed Houston -- one of the largest vehicle markets in the country -- Kelley Blue Book and LMC Automotive each trimmed their August sales projections released before the hurricane made landfall. Analysts predict the annualized selling rate, adjusted for seasonal trends, may drop to 16.4 million, according to the average estimate in a Bloomberg News survey, from 17.2 million a year earlier.

Demand for vehicles to replace those damaged by flooding in the Gulf of Mexico region may boost auto demand starting as soon as September and continue into next year. Reconstruction projects for businesses, homes and infrastructure may spur sales of full-size pickups, like Ford Motor Co.’s F-Series, General Motors Co.’s Chevrolet Silverado and Fiat Chrysler Automobiles NV’s Ram models, the only models that still outsell crossovers.

Throwing Elbows

Through July, the Rogue was the top-selling vehicle in the U.S. after those full-size pickups, with deliveries surging 25 percent. Toyota’s RAV4, up 15 percent, is only about 1,500 units behind.

This summer, Toyota ads in some regional markets were specifically aimed at winning over buyers who were considering a Rogue, and RAV4 outsold Rogue in July.

“They’ve been pretty aggressive,” Judy Wheeler, Nissan’s vice president of U.S. sales, said in a phone interview. “They’re running interference with our Rogue success.”

Toyota has no national strategy for knocking off Nissan’s crossover, and the ads were likely aired by regional dealer groups, Carter said. He said some of the Nissan Rogue’s sales gain this year can be attributed to deliveries to fleet customers, such as rental-car companies.

To catch up, Toyota is working with suppliers to boost production of the hybrid version of RAV4, which is built in Japan. While sales of Toyota’s segment-leading Prius line have tumbled 19 percent this year through July, sales of the gasoline-electric RAV4 are up 6.4 percent and would be even higher if dealers could get more of them, Carter said.

“A lot of these went to hybrid buyers who were loyal to the brand but who were cooling off on conventional sedans,” Carter said. “We’re capacity constrained.”

Even if Toyota can get more hybrids, Nissan may still have the last laugh. The Rogue line is expanding with the rollout of the Rogue Sport, a slightly smaller and cheaper version just now reaching wide distribution.

Turf war aside, automakers supplying the popular crossovers are benefiting from the shift in consumer taste. Analysts are projecting Toyota and Honda will report the biggest sales gains in August among the six largest automakers in the U.S., while Nissan is seen holding largely unchanged with an average estimate for a 0.6 percent decline.

The seismic rearrangement of the sales rankings that’s seen SUVs overtake sedans has been bubbling up for a while, said John Mendel, Honda Motor Co.’s former top U.S. sales executive.

“It’s like watching kids grow,” Mendel, who retired in April, said by phone. “You watch them every day and you don’t really notice so much. Then all the sudden you look back from two years ago, like, ‘Holy crap! When did that happen?’”