Sedans are gateway to luxury brands for some carmakers
Whistler, British Columbia — In the Age of Ute, the future of mainstream sedans is in flux: Detroit automakers Ford Motor Co. and Fiat Chrysler Automobiles are largely exiting the passenger-car market to concentrate on profit-rich SUVs.
But for foreign automakers, sedans are not only profitable, they're seen as an opportunity. Sedans as well as SUVs are important foundation stones for their luxury brands — and introductory gateways to higher-priced models. As domestic automakers leave sedans, some auto insiders wonder if they are ceding a competitive advantage to full-line foreign automakers.
Take Honda Motor Co., which depends on less-expensive Honda-branded offerings to feed new customers to luxury-brand Acura.
"That’s one of the reasons why Acura exists, in order to have a home for people looking for something more than a Honda," Gary Robinson, Acura's senior manager for product planning, said at the launch of the all-new RDX crossover in Canada this summer.
The RDX begins the reboot of an Acura brand that lost its way in the last decade. Yet, even as Acura struggled with its identity in a hotly contested luxury market, its Honda brand continued to bring hundreds of thousands of new customers a year to the Honda-Acura product portfolio.
"One of the advantages that a mainstream brand has is the full lineup of vehicles, and the ability to grow with their customer," says IHS senior auto analyst Stephanie Brinly. "That’s the best way to start brand loyalty."
Complementing strong SUV sales (HR-V, CR-V) with a staggering 750,000 sales between its three entry-level sedans (Fit, Civic and Accord) last year, Honda buoyed Acura despite the latter's identity crisis. The aging RDX, for example, was the second-best selling luxury compact SUV.
"Our customers understand quite well what's similar between Acura and Honda," says Robinson. "They understand the good resale value, and that there is a similar corporate approach between vehicles."
While the RDX is aimed at the red-hot SUV market, Honda executives don't see its customers as coming exclusively from Honda SUVs, which are booming. They say that the affordability of an entry-level Honda Fit subcompact sedan may bring a new customer to the Honda portfolio — but when their life circumstances change, they might be interested in a luxury crossover.
"The inflow from Honda is critical to us," continues Robinson. "I’ve never thought of the inflow in terms of sedan vs. SUV. With both Civic and Accord, it has to do with finances, with age, with lifestyle considerations, so it's not just customers going from Civic (sedan) to ILX (compact Acura sedan), or Accord to TLX (mid-size Acura sedan). It's very much people changing segments depending on what they are interested in at the time."
Korea's Hyundai has followed the Honda model by introducing its Genesis premium brand to the U.S. market with the G70/G80/G90 sedans after building customer loyalty for its mainstream Hyundai brand with its popular Accent/Elantra/Sonata sedan lineup and SUVs.
"Genesis will offer at least six models including SUVs by 2021," says Genesis' U.S. chief Erwin Raphael. "Sedan customers are very important to Genesis at this stage of our existence, as we currently offer sedans in three luxury segments."
Like Acura and Genesis, the premium Lincoln brand is looking for a fresh start in the U.S. market — but does so at a time when the mainstream Ford brand is abandoning sedans.
However, auto analyst Rebecca Lindland of Kelley Blue Book says that's not a bad thing.
"Import luxury brands have benefited because their sedans are still popular. It makes sense for them," she says. "But Ford isn't making profit on small cars. There is an opportunity here for both Ford and Lincoln to turn things around. With a new lineup of crossovers, Ford can attract younger buyers — because they are not doing it now."
Ford sedan sales are half those of Honda, so with the market shift to crossovers comes a chance to start over.
"I think domestic Ford buyers will welcome the body style that Ford is talking about," she says. "There is an opportunity here if they get the right product on the showrooms - and the Lincoln is not going to lose out."
Industry insiders agree that Ford risks alienating enthusiast buyers if it moves away from its Focus and Fiesta ST performance models. Such buyers are missionaries for the brand and likely would migrate to competitive alternatives like Honda's Civic Si or Volkswagen's GTI.
IHS auto analyst Stephanie Brinley sees Fiat Chrysler Automobiles' premium brands like Alfa Romeo as vulnerable in the U.S. market because Fiat Chrysler's entry-level brands are so weak.
Fiat Chrysler's Jeep is a powerhouse. Not only is one of the fastest-growing brands in the industry, but it's the rare mainstream brand that is cross-shopped against premium makes. Still, Jeep does not play in sedan markets. Dodge and Chrysler have no entry-level offerings — either sedan or SUV.
And Alfa's natural source of customers, Fiat, barely registers in the U.S. market in sales. Fiat sold a mere 26,492 cars in the U.S. in 2017 — less than the Honda Civic sells in an average month.
"It’s interesting about FCA. It’s a full-line manufacturer — and it’s not," says Brinley. "They have something in every segment, but it’s all under different brands with different personalities. FCA does does not have as much ability to grow with their customer (into the premium space) because it's hard to see customers going from a Fiat 500 to a Dodge Challenger to an Alfa Romeo."
Henry Payne is auto critic for The Detroit News. Find him at firstname.lastname@example.org or Twitter @HenryEPayne. Catch “Car Radio with Henry Payne” from noon-2 p.m. Saturdays on 910 AM Superstation.