Apparently, compact car owners aren't as interested in buying SUVs as Ford and GM thought they'd be.
There’s absolutely no doubt that Ford and GM’s decision to pull away from cars in support of SUVs is a controversial move. Ford in particular is completely abandoning the compact car and sedan segments in the U.S to focus solely on profit-happy SUVs and trucks. In theory, the idea is that buyers for these segments will stay brand-loyal and switch to SUVs. However, an analysis from Edmunds suggests a good portion of those buyers are dropping Ford and GM and taking their money to competitors who still offer the vehicles they want to buy.
The study takes a close look at Ford Focus and Chevrolet Cruze owners – two well-liked compact cars that recently got the ax in the U.S. market. Looking at various factors through September 2019, Edmunds determined that 42 percent of Focus and Cruze owners are not making the jump to SUVs. Specifically, 23 percent of Cruze owners left Chevrolet and bought a car from another automaker. The number is even higher in the Focus camp, with nearly a third of these former Blue Oval owners trading in their car for something from another brand.
Gallery: 2019 Chevrolet Cruze / Cruze RS
Where are these buyers going? The study doesn’t offer concrete stastistics, but it does point to “competitive equivalents like the Toyota Corolla and Honda Civic – two compact cars which have remained among the 10 best-selling models in the U.S. despite the onslaught of SUVs. The study also mentions some of these buyers are indeed switching to compact crossovers, but from automakers like Jeep, Hyundai, or Kia.
The study does point out that some of these buyers are indeed staying loyal to Ford and GM. 21 percent of Cruze owners reportedly traded up for a Bow Tie-badged SUV, while 18 percent of Focus owners bought another Ford. Still, both companies are clearly losing customers who simply don’t want to pay the extra coin that usually comes with an SUV purchase, even entry-level compact models like the Ford EcoSport or Chevy Trax, both of which have base prices over $20,000. And though both the sedan and compact car segments are shrinking, they still account for over 4.5 million sales thus far through 2019. That’s a lot of buyers to simply abandon, and 2019 isn’t over yet.
Will this all-SUV strategy pay off in the long run? Only time will tell, but if we were in the higher ranks at GM or Ford, we’d be worried right now.
GM, Ford Sacrifice Loyal Buyers by Abandoning Small Cars, Edmunds Report Reveals
Former Cruze and Focus owners are heading to competitors to find affordable options as the average price of a new vehicle continues to break records
SANTA MONICA, Calif., Nov. 13, 2019 /PRNewswire/ -- Now that more than a year has passed since Ford and GM announced the strategic decision to end production of several popular small car models, the automotive experts at Edmunds have released a new report detailing how car shoppers are reacting. The analysis revealed that instead of jumping on the SUV bandwagon, 42% of Cruze and Focus owners are choosing to stay in the passenger car segment. So far this year, 23% of Cruze owners and 31% of Focus owners who traded in their car for another car bought from a competitor. Analysts say losing these shoppers to the competition could hurt GM and Ford in the long run because the compact car segment is the largest passenger car segment (accounting for 9.1% of vehicle sales through September of this year) and compact car owners are among the most brand-loyal.
"Ford and GM made a strategic decision to prioritize profit at the expense of market share," said Edmunds Executive Director of Insights 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."
The brand loyalty of former Cruze and Focus owners has been steadily declining in the last three years. The percentage of Focus owners trading in their vehicle and buying another Ford has declined from 40% in 2016 to 33% through September of this year. The drop in brand loyalty is more pronounced among former Cruze owners: 45% elected to trade in their Cruze for another Chevrolet vehicle so far this year, compared to 57% in 2016.
Many former Cruze and Focus owners are going into direct competitive equivalents such as the Honda Civic and Toyota Corolla, but other brands are proving attractive as well. The number of Focus and Cruze owners trading their vehicles in and buying a small Jeep (Compass or Renegade), Hyundai Kona or Elantra, Kia Forte or Subaru Crosstrek have all risen in the last three years.
However, a decent share of former Cruze and Focus owners are doing exactly what GM and Ford are hoping they do ― move into one of their SUVs. So far this year, 21% of Cruze owners who traded in their vehicle bought a Chevrolet SUV, and 18% of Focus owners traded in their car for a Ford SUV. But the buyers who are choosing to move up to an SUV are those with extra cash to spend, as small SUVs can cost between $4,000 and $8,000 more than buying another small car. As the average price of a new car now hovers in record territory, Edmunds analysts note rising costs puts continued pressure on younger and more price-sensitive buyers.
"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 noted. "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. Time will tell if it will end up the right call in the long run."
To read the full report, visit the Edmunds Industry Center.