With Ford and Chevy cutting a large chunk of their passenger car lineups, we have to wonder, will other automakers follow suit? Are SUVs and pickup trucks going to be our only options for new vehicles in the near future? As unwavering fans of the passenger car segment, we had to get these important questions answered. This week, we joined the Midwest Automotive Media Association for a presentation from the Honda and Cox Automotive teams to get some data about the current state of the car and SUV markets and to hear predictions about what the future holds. Here's what we learned. 

The State of the Automotive Market

2019 Honda Passport
With automakers pouring resources into new SUVs like the Honda Passport, is there still room for cars?

There's no denying that SUVs and crossovers are dominating the market. Consumers' infatuation with these vehicles can be attributed to the desire to sit higher, have flexible seating and plentiful cargo space. As a result, there has been a significant jump in SUV and crossover sales from 2017 to 2018, including a 12% increase for compact SUVs and a 6% jump in mid-size SUV sales.

Seeing these numbers, it's no wonder automakers are throwing money at the SUV segment. There are a plethora of all-new SUV options offered by both luxury and mass-market brands including the Audi E-TRON, Audi Q8, BMW X2, BMW X7, Chevy Blazer and Honda Passport, to name a few. 

On the flip side, when you look at passenger car sales numbers in the same timeframe, the outlook isn't as bright. The compact car segment is down nearly 14% from 2017 to 2018 and the mid-size car segment is down as much as 16%. Despite the drop in sales, the lower price point of non-luxury passenger cars is keeping the segment chugging along. Non-luxury mid-size cars and compact cars are holding on to their spots in the top 5 segments for sales. 

Why Some Automakers Are Ditching Cars

Ford Fiesta
The "Fiesta" is over for nearly all of Ford's passenger cars. (image: Ford) 

Ford and Chevrolet are all but throwing in the towel on the compact and midsize sedan segments. Ford is cutting nearly every passenger car in its lineup including the Fiesta, Focus, and Taurus to focus on new SUVs and pickups. Chevy is also cutting car models like the Volt, Cruze, and Impala. The best explanation for these business decisions is that the car segment is not where Chevy and Ford are making their money.

If we compare the average retail transaction price of the car and SUV segments, a new compact car averages $20,409 vs. $28,592 for compact SUVs and $38,451 for midsize SUVs. When you compare the average compact car to the retail transaction price of trucks, the discrepancy is even greater with the average full-size truck selling for $48,279. Most car shoppers don't think of Ford and Chevy as passenger car brands. What they are known and loved for are their trucks and SUVs so that's where the resources are being allocated. 

First Time Buyers Still Prefer Passenger Cars

Honda Civic
The love affair between first-time car buyers and the Honda Civic is strong.

The car vs. SUV sales breakdown looks a lot different when we isolate first-time car shoppers. 55% of first-time buyers purchase a passenger car in lieu of an SUV or truck. That number jumps all the way to 70% for Gen Z (born between 1995-2010). The Honda team recognizes the needs of this group and the affordable Honda Civic presents an ideal solution.

Apart from the comfortable starting MSRP of $19,450 for the 2019 Civic, the reason for the young car buyer's love affair with the model is Honda's long-term reputation for building quality cars. As a result, the Honda Civic has been the #1 selling vehicle for millennials since 2011 and is now the #1 purchased vehicle by Gen Z. 

Are the kids of Gen Z (and their tight budgets) enough to sustain the passenger car segment? Our prediction is that brands which are known for affordability and reliability i.e. Honda, Toyota and Nissan will continue to invest in their passenger car lineups to capture the shoppers who can no longer purchase a new Ford Fiesta or Chevy Impala. Luxury brands and automakers known for their SUVs and trucks will likely follow the money and continue to improve upon their lineup of SUVs and trucks while reducing their passenger car lineups. 

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