Rising gas prices push Americans toward smaller cars, boosting Hyundai Motor, Honda

Compact SUVs and sedans gain ground over large SUVs

Hyundai Motor, Honda benefit from staying in the sedan market

New-vehicle sales expected to dip in third quarter amid affordability pressures

American consumers are turning back to smaller vehicles. As gas prices and sticker prices climb together, more buyers are gravitating toward compact SUVs and sedans over larger, more expensive models.

According to the Wall Street Journal on Thursday (local time), General Motors said sales of compact SUVs such as the Chevrolet Trax and Trailblazer surged in the third quarter. Hyundai Motor's Elantra sedan posted an 18 percent gain, and Toyota's Corolla also saw strong sales growth this year. All three models carry starting prices below $25,000.

Large SUVs, by contrast, struggled. Sales of the Chevrolet Suburban and Tahoe fell, Hyundai Motor's three-row Palisade SUV slipped 1 percent, and the Jeep Grand Cherokee plunged 30 percent. Randy Parker, CEO of Hyundai Motor America, said at an Automotive News event in Detroit this week that he was "really glad we didn't give up on passenger cars," adding that the decision had allowed the company to steadily grow its market share.

Honda said its passenger car sales rose 18 percent in the third quarter — the best performance since 2020. Lance Woelfer, vice president of Honda's US operations, said that as financial pressure on consumers grows, "customers who never considered a passenger car before are now putting sedans on their list." Some shoppers who had been looking at compact SUVs have shifted to sedans, lifting Accord sales and leaving Civic sedan inventory running short.

Honda was not alone. Over the past three months, foreign automakers broadly improved their overall results as sales of relatively affordable models picked up. It was a quarter that rewarded those who kept cheaper cars in their lineup.

Market research firm Edmunds projected that total US new-vehicle sales for the third quarter would come in slightly below the same period last year. Most forecasters expect full-year sales to be flat or lower compared with last year, reflecting the strain that high vehicle prices and fuel costs are placing on buyers' budgets. According to Cox Automotive, combined third-quarter sales for Detroit's Big Three declined.

GM's overall third-quarter sales fell 5.5 percent, though the automaker held onto its top sales ranking. Toyota, however, is closing the gap. GM said demand for diesel-powered Silverado and Sierra pickup trucks remained solid even as diesel prices hit record highs. Duncan Aldred, president of GM's North American operations, said it was more important to maintain the existing sales mix than to reshape the product lineup in response to short-term fuel price swings.

Ford's third-quarter sales dropped an estimated 7 percent, according to Cox. CEO Jim Farley attributed the decline to a temporary halt in production of the best-selling F-150 pickup truck caused by parts shortages.

Stellantis posted third-quarter sales roughly in line with the prior year. The company, which owns Jeep and Ram, has few models priced below $40,000. CEO Antonio Filosa said Chrysler would soon introduce more affordable vehicles, calling the sub-$40,000 segment "a strong opportunity" and adding, "We know we can enter that market."

While GM and Ford — having largely abandoned sedans in favor of high-margin SUVs and pickups — stumbled, Hyundai Motor and Honda moved in to fill the gap by staying committed to passenger cars.

mokiya@heraldcorp.com