Minivan sales slow down rapidly
Asked recently how the U.S. minivan market has been faring, Nissan Motor Co.’s Dominique Thormann had a concise answer.
“It collapsed,” said Thormann, a senior vice president of Nissan North America.
While the rapid sales decline of pickup and sport utility vehicles has been grabbing the headlines, minivan sales have also taken a tumble, falling 20% during the first five months of this year.
And unlike trucks, which could rebound once the construction industry picks up, it’s unclear whether minivans have a future in the U.S. market or whether they’re being killed off by crossovers and the stodgy taint of the soccer-mom image.
“The future of the segment is up in the air,” said Tom Libby, senior director of industry analysis for Power Information Network, a division of J.D. Power & Associates. Libby said the advantages of minivans -- the sliding doors and height -- had been eroded by negative stigma and consumer preference for SUV-like styling.
The minivan slump reflects what’s going on in the wider U.S. market. Overall auto sales were down 8% through May, and big vehicles took the brunt of it because of high gasoline prices. Large pickup truck sales fell 21% and large SUVs were down 32%.
It doesn’t help that families -- minivans’ target audience -- have been particularly affected by rising gas and food prices, falling home values and more difficulty in borrowing money, said Rebecca Lindland, an auto analyst for the Waltham, Mass.-based consulting company Global Insight.
“Everything that a family needs is more expensive right now, and so the last thing they’re looking at is do they need to replace their Honda Odyssey,” Lindland said.
But even before the U.S. economy began taking its toll, families were eschewing minivans. Minivan sales peaked at 1.37 million in 2000, 17 years after Chrysler introduced them. They’ve been falling at a steady rate since then, to 793,335 last year. This year, sales are expected to fall below 650,000 for the first time since 1986.
One reason is the rise of crossovers, which offer similar space but more car-like handling. In March through May 2004, 12% of minivan owners who traded their vehicles bought a crossover. That rose to 26% in the same period this year, according to the Power Information Network. Crossovers accounted for just 4% of the U.S. market in 2000; they now account for 19%.
Another reason for minivans’ decline is that some players have left the market. General Motors Corp. will stop making minivans by year’s end, while Ford Motor Co. quit producing the Ford Freestar and Mercury Monterey in 2006.
Thormann said Nissan had no plans for now to exit the market despite a 34% drop in sales of the Nissan Quest this year. Nissan first needs to figure out where large SUV buyers are going and whether they will choose to downsize to minivans, he said.
“The fact is that the minivan hit a particular need. Then, that same need was satisfied -- because fuel was cheap, because affordability was high -- with an SUV,” Thormann said. “But once you’re stuck up there and you’re thinking, ‘Oh, wait a minute, do I need to be a little bit more rational and do I need to come down a notch without sacrificing much utility?’ Does the minivan become an alternative to that or is it the crossover?”
Perhaps the biggest gamble in the shrinking market was made by Chrysler, which spent $1.4 billion on the redesign of its two industry-leading minivans, the Chrysler Town & Country and Dodge Grand Caravan. Despite the investment and new features such as swiveling seats, Caravan sales fell 35% through May. Town & Country sales were down 13%.
Chrysler remains bullish on minivans and says sales have dropped for several reasons. First, the automaker discontinued the cheaper, short-wheelbase version of the Caravan because it couldn’t accommodate the new features, a decision that priced some buyers out of the market. The 2007 Dodge Caravan had a suggested retail price of $19,055; the 2008 Grand Caravan starts at $21,930.
Chrysler also says it has significantly cut the low-profit sales it used to make to rental, corporate and other fleets. Non-fleet sales were up 23% this spring, the company said, and many buyers are choosing options like back-seat televisions that improve Chrysler’s margins.
“What is left is good-quality consumer business and we are right-sized for the market,” Chrysler spokesman Stuart Schorr said.
But Chrysler needs to watch its back against rivals Toyota Motor Corp. and Honda Motor Co. Chrysler continues to control 30% of the minivan market, but that’s down from 32% in the first five months of 2007, and the Honda Odyssey and Toyota Sienna have made larger market share gains than Chrysler’s minivans this year.
Lindland said it turned out to be an awkward time to discontinue the lower-priced option, but Chrysler couldn’t have predicted the rapid run-up in gas prices. The Dodge Grand Caravan gets an average of 18 miles per gallon, according to government statistics. The 2009 Dodge Journey crossover, which is meant to replace the short-wheelbase minivan, gets 21 miles per gallon.
Still, Lindland is also bullish about minivans. Global Insight predicts that U.S. minivan sales will settle in at around 650,000 through 2012, when they could jump back up to 700,000 as the market improves. Demographics are working in the vehicles’ favor, she said, as Generation Y starts having families and baby boomers circle back to minivans to transport their grandchildren.
“I don’t think the segment is going away entirely. It’s reorganizing itself,” Lindland said.