More than a year has passed since General Motors Co. in Detroit and Ford Motor Co. in Dearborn decided to end production of several popular small car models, pushing consumers to competing brands, according to a new report by Edmunds, an online car shopper guide with a Detroit office.
The analysis found that instead of switching to an SUV, 42 percent of Cruze and Focus owners are choosing to stay in the passenger car segment. So far this year, 23 percent of Cruze owners and 31 percent of Focus owners who traded in their cars bought cars from competitors.
Analysts say losing these shoppers could hurt GM and Ford in the long run because the compact car segment is the largest passenger car segment, accounting for 9.1 percent of vehicle sales through September of this year, and compact car owners are among the most loyal to brands.
“Ford and GM made a strategic decision to prioritize profit at the expense of market share,” says Jessica Caldwell, executive director of insights at Edmunds. “While this may set them up better in the long run, so they have the cash they need to fund electrification and autonomy, there’s no question that decision is giving their competitors an edge now.”
Brand loyalty of Cruze and Focus owners has been steadily declining in the last three years. The percentage of Focus owners trading in their vehicles and buying other Fords has declined from 40 percent in 2016 to 33 percent through September of this year. For Cruze, 45 percent of owners elected to trade their cars in for other Chevrolets so far this year, compared to 57 percent in 2016.
Many former Cruze and Focus owners are buying direct competitive equivalents such as the Honda Civic and Toyota Corolla. The number of these owners trading their vehicles for small Jeeps such as the Compass and Renegade models, the Hyundai Kona or Elantra, the Kia Forte or Subaru Crosstrek have also risen in the last three years.
Some former Cruze and Focus owners are moving into Ford and GM SUVs, just as the companies hope. So far this year, 21 percent of Cruze owners who traded in their vehicles bought a Chevrolet SUV, and 18 percent of Focus owners traded their cars in for Ford SUVs. However, the buyers who choose to move up to an SUV are those with extra cash to spend – small SUVs can cost between $4,000 and $8,000 more than buying another small car. As the average price of a new car comes closer to record highs, Edmunds analysts note rising costs puts pressure on younger and more price-sensitive buyers.
“The catch is, if Ford and GM don’t have affordable options for shoppers who are buying their first or second new car, it could be much harder to win them over later,” says Caldwell. “Catching consumers early and keeping them in the family has been a basic tenet of automotive brand strategy for decades. But it feels like we’re in the midst of a transformative time for the industry where automakers are being forced to rethink everything. Time will tell if it will end up the right call in the long run.”
The full report is available here.
Edmunds offers reviews of every new vehicle, shopping tips, and market insight. It is based in California and has a satellite office in Detroit.