A Ford executive recently told Automotive News that the Fusion sedan’s forthcoming discontinuance was the result of a “breathtaking” decline in the mid-sized sedan segment that has “accelerated over the past couple years” (Martinez, 2018).
In visual support of that perspective, Automotive News included a line graph that showed mid-sized sales from 2013-17. Almost all of the trend lines were indeed down. However, if you go back to 2007 — which includes the Great Recession and early recovery years — the picture looks somewhat different. Below is a graph that “stacks” the sales of each entry so you can compare individual performance with the segment as a whole.
In 2017, 10 entries saw a 21.7 percent decline in sales compared to 2014, when volume peaked at more than 2.2 million units. However, 2017 sales of roughly 1.74 million were more than halfway between that peak and 2009, when the mid-sized segment bottomed out at under 1.42 million units.
Seven out of 10 mid-sized entries sold fewer cars in 2017 than their historic annual average (going back to 2000 or their first full year of sales). However, the top-five entries — Toyota Camry, Honda Accord, Nissan Altima, Ford Fusion and Chevrolet Malibu — were down an average of 6 percent.
That’s not a terribly large amount, but it is happening despite a relatively strong economy. Even more ominously, sales have continued to fall in 2018. For example, in the first six months of 2018 volume has decreased 13.9 percent for the segment but individual performance has varied, from a 1.1 percent gain for Camry to a 36.4 percent drop for the Volkswagen Passat (Matthews, 2018). The big question, noted Automotive News reporter Jack Walsworth (2018), is where do sales bottom out?
Ford just wasn’t that into mid-sized sedans
Ford’s “sky-is-falling” schtick was presumably designed to justify the discontinuance of the Fusion sedan in North America. Ford has good reasons to be concerned: 2017 sales fell 31.7 percent from their peak in 2014. Even so, the Fusion has performed meaningfully better than two other competitors: Hyundai Sonata sales dropped 39.2 percent and both the Volkswagen Passat and Mazda 6 fell 37.2 percent during the same time period.
It’s true, as Automotive News noted, that the Fusion “never managed to loosen the iron grip Toyota, Honda and Nissan had atop the segment” (Martinez, 2018). However, this news story did not mention that Ford has made less of an effort to keep its product fresh than its higher-selling competitors. Since the Fusion was given a major redesign in 2013 it has received only modest front and rear revisions in 2017. Meanwhile:
- The Camry was substantially redesigned in 2012, given new sheetmetal in 2015 and unveiled an all-new design in 2017.
- The Accord received a major redesign in 2013 and another for the 2018 model year.
- The Altima was substantially redesigned in 2014 and given a facelift for 2016.
With one exception, the top-four entries with the most frequent and substantial redesigns generated more sales up through 2014 or improved their segment market share after that point. The exception was the 2017 Fusion’s refreshening, which corresponded with a 27 percent drop in sales and and a 1 percent decline in market share.
Could part of the problem have been that the revisions were too little, too late? Or was the core issue that Ford — at both the dealer and corporate levels — would really rather sell you a truck or SUV, which can generate high profit margins (Carey, 2018)?
Unnamed Ford officials told The New York Times that the company has recently been losing money on the Fusion sedan, Fiesta and Focus (Boudette, 2018). That sounds questionable regarding the Fusion. It’s not an entry-level small car like the Fiesta. In addition, Ford presumably achieves significant economies of scale by selling the same basic car in multiple world markets and stretching out the redesign cycle. How is it possible that the Fusion isn’t turning a profit when the current design is in its sixth year of production? The Fusion sold roughly 1.38 million units in the United States during 2013-17, averaging 276,000 per year. That ain’t the Edsel.
Pockets of relative stability amidst the boom and bust
The graph below shows how the Camry has had the most stable sales over the last six years. Volume hovered between a high of almost 429,000 in 2014 to roughly 387,000 in 2017. That’s a 10 percent decline.
Two lower-tier entries have also had relatively level sales. The Malibu gyrated around 200,000 units since 2010. Sales for 2017 — roughly 184,000 units — were actually a wee bit higher than in 2014. This may reflect the afterglow of the Malibu’s substantial redesign in 2016. Meanwhile, Subaru’s Legacy has been hovering around 50,000 units since 2012, with a high of roughly 65,000 in 2016 and a low of 42,000 in 2013.
Other mid-sized entries have seen greater variance in their sales. For example, almost 323,000 Accords were sold in 2017. This was well above 2009-12 levels but 17 percent off the nameplate’s recent peak of more than 388,000 units in 2014. Meanwhile, the Altima had experienced steady sales gains from 2009 to 2014, when it almost reached 336,000 units. By 2017 volume had fallen 24 percent to roughly 307,000, but that’s still well above Altima’s low of under 204,000 units in 2009.
Hyundai Sonata had a different sales pattern than most of its competitors. Sales peaked earlier — at almost 231,000 units in 2012 — and then zigzagged around 200,000 through 2016. Then, in 2017, volume plunged 51.3 percent from the previous year to under 132,000 units. This is still higher than the Sonata’s low of roughly 117,000 units in 2008. In contrast, Kia’s mid-sized entry, the Optima, plateaued at roughly 155,000 units from 2012-15, but then in 2017 fell 32.4 percent to under 108,000 units.
And then there’s Volkswagen’s Passat, which sold over 117,000 units in 2012 but has been in steady decline ever since. Under 61,000 units were sold in 2017, which was 48 percent lower than in 2012. At least that sales rate was almost twice as high as the Mazda 6, which was once again the lowest selling mid-sized sedan in 2017 at 33,000 units. Over the last decade the Legacy and Mazda 6 have traded places a number of times, but beginning in 2015 the Legacy has held a widening lead.
The empire strikes back
The contraction of the mid-sized segment is occurring at the same time that market share for its two traditional leaders has partially rebounded. In 2017 Camry’s market share rose to 22.2 percent, up 3.8 from 2011. Meanwhile, Accord reached 18.5 percent, up 4.5 percent during the same time period. Together the two controlled more than 40 percent of the segment for the first time since 2010. However, that’s still a long way from 2007, when they held over 50 percent of the market.
Altima’s market share varied very little from 2007 to 2017. For example, it fell slightly from 15.3 percent in 2015 to 14.6 percent in 2017. This helps explain why the Altima has maintained a solid third place in sales since 2007, with a brief foray into second place in 2011.
The Fusion held 12 percent of the market in 2017, so its departure offers opportunities for surviving entries. The biggest wildcard may be the sister brands Hyundai and Kia, whose entries enjoyed the greatest growth from 2007 to 2011: The combined market share for the Sonata and Optima increased from 11 percent to 18.5 percent. Since then the pair’s market share drifted downward to 13.7 percent in 2017.
Since 2009 the Malibu has been trading places with the Sonata for fifth place in sales. The Malibu’s market share peaked at 11.2 percent in 2016 and fell to 10.7 percent in 2017.
Even at their collective sales peaks in 2012, the Passat, Legacy and Mazda 6 together garnered only 9.5 percent of the segment. That figure fell to 8.3 percent in 2017, due entirely to the Passat’s sagging sales. Market share for the Legacy and the Mazda 6 went up (.6 and .3 percent, respectively) whereas the Passat’s dropped 2.2 percent.
It would be ironic if the Legacy overtook the Passat given that Subaru has traditionally placed far more emphasis on the Outback. The wagon-based Legacy derivative sold roughly 189,000 units in 2017, which was almost four times more than the Legacy. In contrast, VW thought that the road to high sales was a blandly conventional mid-sized sedan.
In light of reports that the Fusion may return as a crossover “sport wagon” similar to the Outback, might Subaru’s long-time approach become The Next Big Thing in the mid-sized segment (Hughs, 2018)? If so, that illustrates the importance of well-run independent automakers, who can be more nimble in pioneering new ideas than the bigger and more well-established players.
NOTE:
Sales figures and product information were drawn from Wikipedia pages for each mid-sized entry listed below.
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RE:SOURCES
- Boudette, Neal E.; 2018. “Ford Changed Leaders, Looking for a Lift. It’s Still Looking.” The New York Times. Posted April 24; accessed July 12.
- Carey, Nick; 2018. “GM, rivals chase luxury pickups’ fat margins as U.S. market dips.” Reuters. Posted March 1; accessed July 12.
- Hughs, Justin; 2018. “The Ford Fusion May Return as a Crossover ‘Sport Wagon.'” The Drive. Posted July 11; accessed July 12.
- Martinez, Michael; 2018. “Ford finally had a hit car but at wrong time.” Automotive News. Posted July 1; accessed July 12.
- Matthews, Jack; 2018. “Midsize Car Sales in America — June 2018.” Good Car Bad Car. Posted July, 10; accessed July 12.
- Walsworth, Jack; 2018. “Car sales on pace to hit lowest level in 60 years.” Automotive News. Posted July 2; accessed July 12.
- Wikipedia; 2018. “Chevrolet Malibu,” “Ford Fusion (Americas),” “Honda Accord,” “Hyundai Sonata,” “Kia Optima,” “Mazda 6,” “Nissan Altima,” “Subaru Legacy,” “Toyota Camry,” “Volkswagen Passat NMS.” Accessed July 12.
PHOTOGRAPHY:
- Author’s photos: “Ford Fusion: Wait, maybe that’s a Sonata . . .”
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