TOKYO—A bet by Japanese auto makers that Americans still want sedans is turning out to be expensive.
April sales in the U.S. from Japan’s big three auto makers—Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co.—were down, with Nissan suffering a double-digit drop.
The big culprit was the sedan, the bread-and-butter car for the Japanese car makers since they entered the U.S. decades ago. As Americans’ taste shifts toward sport-utility vehicles, Nissan’s U.S. sedan sales fell almost 35% in April from a year earlier, driving an overall decline of 28%. Honda’s overall sales fell 9.2%, while Toyota’s dropped 4.7%.
It isn’t that the Japanese companies have ignored the U.S. trend. They all make pickups, SUVs and crossover SUVs, and they have been ramping up production as quickly as they can, sometimes by exporting from Japanese plants that have more capacity. Toyota’s best-selling vehicle last year was the RAV4 crossover SUV.
Yet the tug of past success remains. Toyota and Honda both put engineering and marketing muscle last year into complete redesigns of their flagship sedans, the Camry for Toyota and the Accord for Honda. Nissan is set to do the same later this year with its Altima sedan. The companies are slashing weight and increasing horsepower in an effort to highlight the vehicles’ performance edge over more top-heavy SUVs.
Toyota President Akio Toyoda personally unveiled the new Camry at the Detroit auto show in January 2017. “We view this as an opportunity to reignite the midsize sedan market,” Mr. Toyoda said then. “I mean, why should SUVs get all the glory?”
Better performance, fresh design and long-trusted brand names haven’t done the trick, however. Toyota has resorted to deep discounting, managing to increase sales of the Camry slightly this year. It sold nearly 30,000 Camrys in the U.S. last month with an average incentive of $2,483, according to analysis by Jefferies. That is a big bite for a car whose manufacturer’s suggested retail price starts at $23,495.
Nissan’s experience shows what happens when manufacturers get stingier—a punishing decline in sales. It reduced Altima incentives to $3,445 in April from $3,804 in March, according to Jefferies. Sales of the vehicle fell 49%, partly because some customers were likely waiting for the new model.
Nissan’s sales decline, which also hit its trucks and SUVs, in part stemmed from a reduction in fleet sales, such as to rental-car agencies that buy many vehicles at a discount.
Honda maintains that its Accord, which was named North American Car of the Year in January, still can recover although sales fell by nearly a fifth in April.
Henio Arcangeli, the company’s U.S. sales chief, said “growth opportunities still exist within the passenger car side of our business” because “not all customers in the market want a truck or SUV.”
Even if they aren’t selling well, sedans are still valuable as a hedge against higher gasoline prices, as Japanese executives see it. Trucks and SUVs accounted for a majority of the U.S. market in the early 2000s, but the pendulum swung the other way after the 2008 global financial crisis and an increase in fuel prices.
Gas prices are now rising again, averaging more than $2.80 a gallon. If they continue to climb, Americans might show renewed interest in sedans—in particular fuel-sipping models such as Toyota’s hybrid Prius.
However, today’s oversize people haulers aren’t the gas guzzlers they once were.
Crossovers, in particular, are nearly as fuel-efficient as sedans, and offer more space for only a slight premium in price. That means gasoline prices may need to rise significantly higher before Americans are willing to compromise on space for a slight edge in fuel efficiency.
U.S. car makers are betting that isn’t going to happen any time soon. Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles NV have all pulled back from the sedan business, with Ford saying it will stop selling the cars in the U.S. almost entirely.