Why Major American OEMs Discontinued Sedans: Demand Shifts and Profitability
In recent years, major American automotive manufacturers like General Motors, Fiat Chrysler Automobiles, and Ford Motor Company have made significant changes to their product lines, particularly discontinuing sedan models in favor of SUVs and pickups. This decision has sparked interest and debate, with a common misconception being that it's solely attributable to competition from European, Japanese, and Korean brands. However, the reasons run deeper, rooted in both market trends and business strategy.
Market Trends and Profitability
The shift toward discontinuing sedans is not a reaction to European, Japanese, or Korean brands but rather a strategic move to stay in line with the current consumer demand and ensure profitability. Here are some key reasons behind this transition:
SUV and Pickup Dominance
The data is stark: according to recent reports, Ford's profits are overwhelmingly driven by truck and SUV sales. In fact, approximately 90% of Ford's profits come from these categories. General Motors (GM) has also seen a significant uptick in SUV sales, accounting for over two-thirds of total large SUV sales in the United States. GM's large SUVs, such as the Tahoe and Suburban, bring in an impressive $10,000 profit per vehicle on average. Similarly, Chrysler has made strides in sales of full-size pickups, challenging Chevy for market share solely due to the more car-like interiors and larger infotainment systems within their trucks.
American Sedans and Their Decline
American sedans have become less popular, especially outside of North America. When models like the Dodge Dart, Chrysler 200, and Jeep Cherokee were all based on the same CUSW platform in 2015, it made sense for the company to focus on more profitable models like the Jeep. The Jeep's superior sales and higher price points justified the factory being shifted to build more Jeeps, leading to higher profitability. This is a strategy that many American manufacturers have adopted, realizing that sedans are not as profitable in a changing automotive landscape dominated by SUVs and pickups.
The Changing Buyer Preferences
The reasons for this shift are multifaceted, but the most compelling is the changing buyer preferences. Modern consumers, especially women, are gravitating towards SUVs and trucks for several key reasons:
Visibility and Comfort
SUVs and their larger pickups offer higher seating positions, providing better visibility, especially in urban areas. They are often equipped with four-wheel drive, which is particularly useful in rainy or snowy conditions. The added passenger capacity and cargo space are significant advantages over traditional sedans.
Styling and Features
In the modern automotive landscape, SUVs and pickups often come with more stylish and advanced features, such as larger dashboard-mounted infotainment systems. These features appeal to a broader audience and contribute to higher overall satisfaction.
Economic Factors
While some Americans still appreciate the traditional sedan, the economic reality is that sedans do not bring in as much profit. Therefore, manufacturers are investing more into models that resonate more with current market demands. This shift does not necessarily diminish the appeal of sedans but reflects a more nuanced approach to meeting consumer needs.
Conclusion: Embracing the Future
In conclusion, the decision to discontinue sedans by American automakers is driven by clear business logic and market trends. Rather than a knee-jerk reaction to foreign competition, it is a strategic move to capitalize on the growing success of SUVs and pickups. As consumer preferences continue to evolve, American manufacturers must stay agile and responsive to ensure their continued success in the market.