SUVs are running sedans off the American roads

Ford phasing out traditional sedans

America's love affair with cars has clearly entered a new phase. Ford's (F) decision to discontinue almost all sedans in the U.S. market caps a decade-long trend of more and more Americans forgoing sedans and instead choosing SUVs for their ability to carry people and cargo.  

As gasoline prices dropped from about $3.50 a gallon in 2012 to about $2.50 in 2015 and stayed near there, the U.S. market share for sedans has plummeted from 38 percent in 2012 to 26 percent in 2017, according to consultants IHS Markit. SUVs have  picked up most of that share, rising from 32 percent to 43 percent. Pickups grew three percentage points over that time to 16 percent. 

Sedan market share could be heading still lower. Prior to the Ford decision, Fiat Chrysler (FCAU) eliminated the Chrysler 200 and Dodge Dart sedans in 2016. Buick has stopped selling the Verano. "I think General Motors (GM) must be reviewing cars like the Chevrolet Impala and Malibu and asking themselves if they really need them," said Jessica Caldwell, executive director of industry analysis at Edmunds.com. 

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The sedan situation bears a bit of resemblance to the earlier elimination of many minivans. "Most manufacturers had minivans, but as the segment stagnated or shrunk, some manufacturers opted out of the category," said Matt DeLorenzo, managing editor of Kelley Blue Book. Ford eliminated its Freestar minivan in 2007. Vans, including minivans, are now less than 5 percent of the U.S. market.

Last week, Ford announced it was eliminating its Taurus, Fusion, Focus, Fiesta and C-Max sedans. But it will continue selling Mustangs -- a signature Ford model that's more like a sports car.

Here's how industry analysts view the U.S. automotive future following Ford's decision: 

Could rising gas prices reverse this trend?

Gas prices have climbed lately to about $2.80 a gallon nationwide for regular -- the highest level since 2014, according to AAA. But that's unlikely to send car buyers running for sedans. Compact and subcompact SUVs are built on car platforms and have fuel economy almost as good as the sedans from the same automakers. "These are not the old gas-guzzling SUVs," said Caldwell.

For example, Honda's (HMC) Accord sedan has a combined city/highway mileage rating of 33 MPG, while its CR-V compact SUV gets 30 MPG. That's a differential of $150 a year in gasoline costs as computed by the EPA at a recent price of around $2.50 per gallon.

The very large SUVs like Chevrolet's Suburban (combined mileage 19 MPG) would probably be hurt if gas prices really spiked. But those shoppers likely would buy a smaller, more fuel-efficient SUV, not a sedan.

Who benefits? 

Honda and Toyota (TM), which have led the sedan segment with names like Accord and Camry, respectively, will likely pick up some sedan sales. But these Japanese companies also are selling more SUVs than they did in the past. 

Will Ford sedan loyalists be upset? 

You won't find much loyalty for nameplates like Taurus, which started as a midsize car, changed its name to the Ford 500, then came back as a Taurus while stepping up to the large sedan class. However, Toyota Camry and Corolla have had the same names -- and considerable loyalty -- since they arrived here in the 1970s and 1980s.

Is Ford's decision risky? 

Perhaps somewhat. The company may not be able to persuade the sedan customers it will lose to stick with Ford for an SUV. But SUVs and pickups -- not sedans -- have been the profitable segments for Ford. And it will continue to sell sedans overseas, so it could bring a model from elsewhere into the U.S. market if sedan demand rebounds.