Compact crossovers threaten midsized sedans in the US

Article by Anita Panait, on May 3, 2013

While midsized sedans remain to be the single largest segment in United States auto industry, they now account for a lesser chunk of the overall market, according to a report by Reuters, citing industry executives and analysts. US families now prefer to go about their daily lives in a crossover than in midsized sedans like the Toyota Camry and Honda Accord.

During a call with reporters to talk about US vehicle sales for April 2013, Bill Fay, general manager of the Toyota Division at Toyota Motor Sales USA, remarked that while the midsized sedan segment is still growing year-over-year, it is “nowhere near” its growth in 2012 as the industry was unveiling a lot of new midsized cars. Sales figures of major carmakers in the US in April 2013 show that auto sales in the country are boosted by pickup trucks and sport-utility vehicles. Crossovers – SUVs built of on a car-based platform – have proven to be appealing since they offer extra space for groceries than the typical sedan.

Crossovers – which include Ford Escape, Toyota RAV4 and the Honda CR-V – provide easier access for passenger entry and exit. Carmakers are also making improvements in fuel mileage of crossovers. The increasing appeal of compact crossovers is also attributable to the narrowing price gap between them and midsized sedans. According to Kelley Blue Book, a compact crossover costs just $1,300 more than the typical family sedan.

Excluding state taxes, this may mean less than $20 in monthly payments in some cases. Mustafa Mohatarem, chief economist for General Motors Co. remarked that fundamentally, both midsized sedans and compact crossover serve the family market. He noted that midsized sedans have become smaller and more expensive due to a number of factors. This prompted many consumers to switch to crossovers, since they “satisfy the family needs very well."

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