Are cars making a comeback?
For years, SUVs, crossovers and pickup trucks have been key drivers of market share and profits for automotive manufacturers and auto dealers. But cars mounted a small comeback in the first quarter of 2023. Sedans, coupes, convertibles, hatchbacks, and sports cars represented 21.4 percent of the 3.6 million new passenger vehicles sold in the U.S. in the first quarter of 2023. That's up from 19.6 percent in the last quarter of 2021. It’s not a huge gain, but cars have been losing market share since 2002, when light trucks first gained a higher market share than traditional passenger cars. The market share dip for cars seemed to accelerate recently, dropping from 28% in 2019 to 21.1% in 2022.
High-Cost Vehicles, Cost of Living Likely Pushing Passenger Car Rebound
There are several factors that could be pushing consumers away from pickups, CUVs and SUVs. One of the most obvious is rising costs. As reported in our April 2023 MarketFirst Report, the average price of a new vehicle has increased to $50,636. In addition, the interest rate on loans is 8.95%, up from 5.66% last year. This has pushed the average new vehicle loan payment to $716 a month, according to Experian.
Another factor is the overall rise in inflation, which was up 5% in March 2023. Some basic staples—food and shelter—were up 8.5% and 8.1% respectively, according to the US Bureau of Labor Statistics.
Finally, though fuel prices have dropped recently, the average price of a gallon of gas was $3.56 as of May 3, 66% higher than it was in 2016.
It is quite possible the pendulum is starting to swing back to sedans, coupes, hatchbacks and convertibles simply because consumer pocketbooks can’t keep up with rising costs coming from every direction. For dealers, the question will be “Who are the customers willing to shift to a traditional passenger car?”
Why GenZ Could Make the Perfect Car Customer
In our April 20, 2023 blog (Auto Dealers Who Dismiss GenZ Will Miss Out on a Potentially Profitable Customer) we wrote about GenZ, born between 1997 and 2007, as potential customers. While overall, they are not buying vehicles at the same rate as other cohorts, GenZ customers are likely being held back by economics, not environmental altruism.
What makes GenZ more likely to drive a traditional passenger vehicle? Two key factors —first, they haven’t entered their peak earning years. The average GenZ income is only $32,000, according to GoBankingRates.com. Second—, people are waiting longer to have families. According to the US Census Bureau, in 2022, the median age of a new mom is 30. Younger customers simply don’t need a big SUV or minivan. With lower incomes and no kids to haul around, GenZ customers are in the right zone for passenger cars.
MarketAI Can Find the Right Customers for the Right Vehicles
Of course, the MarketAI platform can help dealers test that theory. With the ability to quickly develop and analyze highly targeted marketing campaigns, ZeroSum can help auto dealers match passenger car inventory to customers most likely to buy.
While the shift to traditional passenger cars could be short-lived, using a data -driven approach to automotive retail marketing will always be in style. Whether GenZ powers new or used vehicle sales or if Millennials cause a boom in minivans as they enter peak family years, the Market AI platform is an indispensable tool in driving dealership profits.