Spinning wheels don’t always accelerate. Ask Orange County automakers.
Nearly all of the county’s manufacturers experienced a slowdown last year that mirrored the broader industry, where sales dropped for the first time since the early days of the Great Recession in 2008.
Analysts predict a sales decline this year, too, but see a saving grace in demand for high-margin trucks, SUVs and crossovers—products OC automakers still lack in sufficient scale.
Hyundai Motor North America, Kia Motors America Inc. and Mazda Motor of America Inc. posted 2017 sales last week, all off from 2016—while Mitsubishi Motors N.A. Inc. and Hyundai’s Genesis brand, which reports separate results, had gains.
John Sackrison, executive director of the Costa Mesa-based Orange County Automobile Dealers Association, said that even though the industry and the brands here are cooling, it’s too soon to say the wheels are coming off.
“This is a cyclical business. When we see stabilization after some record years, we see that as a really positive trend.”
OC automakers attribute the decline to an uptick in used-car sales and shifting consumer interest from sedans to SUVs and crossovers. That’s why all, not counting Genesis, plan to roll out new and redesigned SUV and crossover models this year and into 2020.
Michael Stewart, Hyundai’s senior group manager of corporate communications, said a dip was inevitable after seven years of growth.
“We’re in agreement with predictions that there will be another slight drop in sales in 2018,” he said. “17.2 million vehicles were sold in 2017, the third straight year the industry has been over 17 million and only the fifth time in history. Some slowing is to be expected.”
Research firm Autodata reported that U.S. full-year sales, at 17.2 million units, were down 1.8% compared to 2016.
Sales are projected to fall this year to an estimated 16.7 million units, which Sackrison called a healthy number.
New Look
Don Swearingen, Mitsubishi’s chief operating officer and executive vice president, said the automaker decided early on to refocus its product mix.
“Four years ago we were seeing major shifts from sedan to CUV, and our decision then was to focus more on the CUV, as we saw that market have greater growth potential, and we’re still seeing that today,” he said.
The company has experienced growth for the past five years, total sales hitting 103,686 units last year, up 7.7% compared to 2016. While a low-volume manufacturer, it was one of the few automakers with U.S. operations based in the county to end the year with sales in the black.
Rolling out makes and models can take years in design and development, but Swearingen said a focus on consumer research enabled it to introduce the “right products at the right time.”
Mitsubishi already started shipping its new Outlander Plug-in Hybrid Electric Vehicle to dealers this month and will introduce the compact CUV Eclipse Cross in March.
Hyundai, Kia and Mazda may be a bit late to the crossover party, but at least they’ve arrived.
Stewart at Hyundai said that increasing shopper interest will come from reinvigorating its lineup through this year’s launch of the Kona SUV and an all-new Santa Fe.
“Both of these vehicles are exactly what U.S. buyers are demanding,” he said. “Longer range, we have plans to debut a total of eight new or re-engineered SUVs in the U.S. by 2020.”
Hyundai reported 2017 sales this month of 664,961 units, a 13.4% drop from 2016. The automaker said that was due to a concerted effort to cut fleet sales, where margins are lower. Fleet sales fell 31%.
Analysts have consistently cited Hyundai’s lack of SUV and crossover offerings as the reason for its inability to gain broader traction in the U.S. compared to General Motors Co. and Ford Motor Co, both posting 1% dips in sales in a challenging 2017 for all.
Kia, Hyundai’s smaller affiliate, sold 589,668 units, an 8.9% decline from 2016. It debuted its newest crossover, the Niro Plug-In Hybrid, at the CES consumer electronics trade show in Las Vegas last week. The latest model competes with Toyota’s RAV4 Hybrid and Ford’s C-max Hybrid.
Meanwhile, Mazda sold 289,470 cars and trucks, a 2.8% drop from 2016. The Irvine company is applying a heavy foot to drive up U.S. sales, including the introduction of a crossover in 2021 tailored to the U.S. market.
Mazda made headlines last week, announcing details of a joint venture with Toyota to open a $1.6 billion auto manufacturing plant in Huntsville, Ala. Mazda plans to use the facility to manufacture its crossovers, according to a company statement.
Taking the bait
A slew of new crossover and SUV models may float car shoppers’ boat, but Swearingen said it also comes down to dealer relationships.
“Dealerships will make or break the traditional [original equipment manufacturers],” Swearingen said. “Having a good group of dealers who are committed to a customer-first philosophy is extremely important, not only for that (first) purchase, but for future purchases.”
Sackrison of the auto dealers association said the economy and technology are driving forces in getting customers off the lot and inside signing deals.
“We’re seeing GDP growth, low unemployment and some growth in wages,” he said. “Interest rates are still low, they’re rising, but still low, which makes the affordability of new product a lot easier.”
Customer discounts also help and will likely continue this year, Sackrison said.
“Once sales plateau, manufacturers want to sell the same number of vehicles, but how do you do that in a market that’s declining? Price,” he said. “[Manufacturers] will provide greater incentives to produce results. That makes it a good environment for the consumer.”
