This year has been a notable one for mid-size cars, or the segment that perhaps most embodies the characteristics of practicality, versatility, and “every-day driver”.
Considering the significant number of new mid-size cars sold each year – the segment accounted for 16% of all new deliveries in 2012, second only to the 19% share assumed by compact cars – having a viable competitor is an essential element in any mainstream manufacturer’s well-rounded product portfolio.
While profit margins on cars are substantially less than on most trucks, the imbalance per unit can be made up in volume, and for those OEMs heavily invested in large pickups, selling large quantities of mid-size cars helps to satisfy federal greenhouse gas and MPG requirements. And from a marketing angle, adding 100,000-to-200,000 + mid-size cars to the road each year goes a long way towards raising brand awareness.
Recognizing these benefits, manufacturers competing in the segment have substantially upped the ante in terms of product over the past few years. For the ’12 model year, Kia, Toyota, and Volkswagen launched reworked versions of their respective Optima, Camry, and Passat models, while Chevy, Ford, Honda, and Nissan introduced new versions of the Malibu, Fusion, Accord, and Altima for the ’13 model year. Counting Hyundai’s ’11 model Sonata redesign, this means that 8 of the 14 models in the segment have been completely overhauled within the last three model years.
The success of each redesign can be measured in a variety of ways, with new vehicle sales and market share growth being two of the most obvious. Focusing primarily on models redesigned for the ’13 model year, so far the winners in these categories have been Ford’s Fusion and Honda’s Accord.
On a prior year basis, sales of the extensively re-worked and much-talked-about Fusion grew by 13.4% over the first seven months of year, and its share of total segment sales increased from 11.4% to 12.5%. Sales growth for Honda’s more conservatively styled but highly acclaimed Accord has been even more impressive, with deliveries up nearly 19% year-to-date and share improving by two percentage points to 15.1%. Sales and share for Nissan’s Altima have improved by more muted figures of 7.4% and a half-point, respectively, while the Chevy Malibu has had deliveries fall off by nearly 20% and share tumble from 10.9% to 8.5%.
Kia’s redesigned Optima, now two model years old, continues to woo consumers into the company fold, as sales are up by 12.4%, while deliveries of its corporate twin the Hyundai Sonata are down by almost 12%.
As far as surprises are concerned, sales of the Dodge Avenger – last freshened for the 2011 model year – are up by substantial 15.7% (due to a low price point and high fleet sales), while sales of the Toyota Camry, the perennial segment sales king, are off by just over half-a-percent. Despite having a design that is only two model years old, clearly the pressure imposed by more recent and highly competitive redesigns is chipping away at the Camry’s position of preeminence.
As you’d expect, the positive or negative movement observed on the new side of the market has largely translated over to used vehicle prices.
In August’s edition of the Official Used Car Guide®, used value retention (used average trade-in value divided by typically-equipped MSRP) for both the Accord and Fusion stood at 81% - tops in the segment.
The ’13 Accord’s retention was up nine percentage points from the 72% figure recorded for a comparable 2012 model year unit, while the Fusion’s retention figure was a stellar thirteen point improvement over the ‘12’s 68% figure last August.
Despite a very poor new sales showing, retention for the Chevy Malibu stood at 76% in August, up nine points from the ’12 model’s figure of 65%. This gave the Malibu a slight edge in retention over the Nissan Altima, where retained value on the ’13 improved to 75%, up a similar nine points from the 12’s figure of 66%.
Even though figures remain squarely in the middle of the segment pack, retention for the Kia Optima, Hyundai Sonata, and VW Passat was on average six points lower than what was recorded last year. Retained value for the Toyota Camry remained unchanged at 74%.
So what can be taken away from this?
Primarily that long-held positions of dominance are no longer a given and redesign shelf-life simply isn’t as long as it used to be.
But while the challenge of knocking a redesign out of the park, or at least securing second base, will mean more sleepless nights for OEMs, consumers will benefit because the increased level of competitiveness will undoubtedly lead to continuous improvements in product, and ultimately, retained value.