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May 26, 2020

Sedans, Hatchbacks are Losing Favor with Buyers

People are shifting away from traditional sedans and hatchbacks, and preferring to go for SUVs and pickup trucks instead—that’s the definitive conclusion reached by JATO Dynamics, an automotive business intelligence firm. Their data from 54 markets across the globe indicates that demand for so-called “traditional cars” were negatively impacted by the volatile environment more so than any other body type marking a big change for the industry.

China, a typically safe haven for sedans saw their volume fall by 6.8 percent in 2019. And as Chinese household debt has remained high and consumer confidence has decreased, many consumers in China have delayed making large purchases. Of course, all models have suffered a similar fate, but it’s sedans that have borne the brunt of the slowdown. In previous years, Chinese consumers had favored compact sedans, however the arrival of new and more appealing SUVs combined with the cooling of the economy has dramatically changed outlook for manufacturers there.

The U.S. saw a similar shift. Ten years ago, the sales of sedans accounted for 39 percent of total market; now it’s down to 22 percent. Asian brands control 67 percent of the sedan segment forcing American carmakers to discontinue nameplates or pull out of the passenger car segment altogether.

According to JATO, the decline in sedan sales is also, in part, due to their style. They are not as useful as hatchbacks or station wagons; as spacious as SUVs; nor as comfortable as MPVs; and they are certainly not as glamorous as sport cars. To tackle this, manufacturers have been asking what they can do to regain consumer interest. Two ideas have emerged, each very different.

The first is electrification. Tesla has shown it can win customers with electrification through its popular Model 3. The second strategy is to make sedans more fashionable and appealing through the so-called “coupe-sedan”. Nonetheless, JATO notes that two examples, the Volkswagen Arteon and the Kia Stinger, are still struggling to attract the level of interest needed if the segment is to arrest its decline.

Meanwhile factors driving the decline in hatchbacks sales are more complex. Unlike sedans, hatchbacks lack appeal in the U.S. and China although they enjoy strong demand across Europe.

In 2019, hatchback sales fell by 12 percent to 9.2 million units. Half of the hatchbacks were sold in Europe, where demand decreased by 7 percent. The second largest market for hatchbacks was Latin America, with 1.2 million units, down by 11 percent. China was the third market in with 717,000 units, down by 36 percent.

The decrease in popularity across Europe and Latin America arose as hatchbacks increased in size. The larger they became, the less functional and maneuverable they became. This increase in size put them in the same playing field as SUVs, which have recently been on a mission to decrease their size. When it comes to choosing between a hatchback or SUV, consumers opt for the most appealing body type: the SUV.

The Volatility in the automotive industry has also impacted the position of station wagons. Where wagons used to be seen as the perfect car for families, it is now becoming a less favorable segment for many markets. Wagons have lost their popularity due to their similarities to SUVs, having big and integrated trunks. In a similar vein to hatchbacks, station wagons rely on Europe as their core market for sales. Last year 2.33 million consumers bought a wagon, down by 7 percent. And as it happens to hatchbacks, the SW rely on one only market, Europe, where 70 percent of the volume stayed.

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