There’s demand for cars, often lower priced. Abandoning them was an idiotic move to please Wall Street that’s now haunting the Big Three US automakers.
By Wolf Richter for WOLF STREET.
To please Wall Street and concentrate on the highest-profit margin trucks, SUVs, and crossovers, GM, Ford, and FCA have killed nearly all their sedan models. GM stopped taking orders for the Malibu in February. They kept their muscle cars, and Cadillac kept two models. But the whole mainstream lineup of sedans is disappearing.
At Ford, for example, outside of the Mustang, every car model got axed, from the entry-level Ford Fiesta that had a starting MSRP of $14,200 in 2019, its last year of production, to the Ford Fusion Hybrid, a large well-designed car that got around 40 mpg, which would be sorely needed at today’s gas prices.
It was a move, designed by some corporate idiot perhaps with the support of some lavishly paid recently graduated MBAs at some big-name consulting firm, to please short-termism-infected analysts on Wall Street.
And Toyota is having the last laugh. The former #3 in new vehicles sales in the US, and then the #2 after Ford walked away from sedans, is now #1.
Toyota was #1 for the first time ever on a quarterly basis in Q2 2021, largely because it still had access to chips, while others didn’t, and it blew everyone away.
But in Q1 2022, Toyota was #1 again. This time it also suffered from chip shortages and its sales were also down from a year ago. But it sold lots of those hated sedans, including lower-priced sedans that cost a lot less than SUVs and pickups, that the others have walked away from.
And Toyota is now rubbing it in publicly.
“A lot of our market share growth is really in the car side of the business,” Bob Carter, executive VP of sales for Toyota Motor North America, told reporters at a briefing Wednesday.
“Cars are still an important part of the market,” he said.
“Unlike other brands that have exited the sedan market, we’re choosing to double down,” he said.
Honda and other foreign automakers are still selling lots of sedans as well – many of them lower priced cars that get great gas mileage. Tesla is making the Model 3, its lowest-priced model. GM, Ford, and FCA just walked away from the market to please some analysts at Wall Street banks, which will likely go down as one of the stupidest decisions ever in automotive history.
Toyota’s sales in Q1 fell by 14.7% from a year ago, to 515,592 vehicles, but this surpassed the sales of GM (512,846 vehicles) and Ford (432,132).
Toyota’s sales included 142,523 cars, Toyota and Lexus models combined, with 47,501 Corollas at the low end and 78,151 Camrys at the higher end. Car sales were down 25% from a year ago, as Toyota cannot make enough of them due to the chip shortage, and it too is prioritizing high-profit-margin trucks and SUVs, whose sales also declined as dealers ran out of inventory, but there is enough demand for cars.
GM, Ford, and FCA just surrendered this business to Toyota, Honda, Tesla, and the other automakers that are still making sedans. And with gas prices where they are now – $6.15 a gallon of regular at my local gas station – those cars sure come in handy. GM, Ford, and FCA may never be able to fully recover from this monumental blunder.
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.