In the U.S., Import Cars Gain Ground

Led by the Japanese, foreign automakers continued their attack on traditional domestic brands and captured a record 40% of the U.S. market for passenger cars and trucks in 2003, up from 38.3% the year before.

Industrywide, 16.7 million passenger vehicles were sold last year, down slightly from 16.8 million in 2002. But it was still the fifth best year in history. Analysts said a flood of incentives and rebates, largely from the beleaguered domestic brands, helped pump up sales.

Despite incentive spending, the cumulative market share for General Motors Corp., Ford Motor Co. and Chrysler Group’s domestic brands dropped to an all-time low of just 60%, down from 61.7% in 2002. As recently as 1995, the Big 3 held 73.2% of the U.S. market.

The import onslaught was led by the California-based U.S. operations of Japanese giants Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., which all enjoyed strong sales gains.

Together the trio accounted for nearly a quarter of all new car and truck sales in this country last year with combined sales of 4 million units, up 7% from 2002. Toyota posted a 6.3% sales gain in 2003; Honda sales were up 8.2% and Nissan sales rose 7.4%.

Meanwhile, all Big 3 automakers suffered sales declines. A struggling Ford saw market share for its domestic brands fall to 19.5%, the lowest level since Henry Ford ran the company 75 years ago. Ford’s sales dropped 3.5% in 2003.

Chrysler Group’s domestic sales were off 3.9%, while GM’s fell 2.1%. Chrysler’s market share dipped to 12.7% for 2003 and GM’s dropped to 28% as the world’s biggest carmaker failed to repeat the gains it scored in 2001 and 2002.

“I’m not sure they wanted to give away enough vehicles in December to gain the numbers they would have needed,” quipped David Healy, auto industry analyst with Burnham Securities. He was referring to the staggering $4,300 per vehicle in incentives that GM offered in December, or about twice the annual average of incentives by all car companies.

The market share figures do not include the domestic automakers’ European brands. GM owns Saab. Ford owns Volvo, Land Rover, Jaguar and Aston Martin. And Chrysler Group’s sister company is Germany’s DaimlerChrysler, which sells Mercedes-Benz.

The foreign automakers, many of which also build vehicles in the U.S., were helped by a variety of new and redesigned vehicles that caught consumers’ attention.

Toyota remained the top-selling import brand in the country and posted a record 1.87 million sales.

Toyota’s Camry sedan edged out the Honda Accord to become the bestselling passenger car in the U.S. for the second year in a row and the sixth time in the last seven years. And Toyota’s Lexus brand topped the luxury segment for the fourth consecutive year, leading second-place BMW by 18,896 units.

The big Japanese car companies weren’t the only ones to prosper.

Porsche posted a 33% sales gain; Saab was up 26.7%; Volvo sales rose 21.7% and BMW reported a 7.9% increase, helped by a 46.4% jump in sales of its Mini cars. Mercedes-Benz sales were up 2.5%. South Korean automaker Hyundai Motor Co. reported a 6.7% gain. Hyundai’s Kia unit will not report sales until today, but analysts estimate that Kia will show a gain of about 1% for the year.

There were even some winners among domestic brands.

GM’s Hummer unit, maker of oversized SUVs, posted an 80% gain and its Cadillac division reported an 8.2% increase. Ford’s Lincoln unit posted a 5.9% gain.

The few losers among imports included Japan’s Mitsubishi Motors Corp., down 25.6% for the year; and Isuzu Motors, which won’t report sales until today but is estimated by analysts to be off 42%. Germany’s Volkswagen group, which includes the Audi, VW and Bentley brands, was down 8.2% with the VW brand accounting for almost all of the decline.

Overall, trucks, minivans and sport utility vehicles continued to outsell traditional passenger cars.

Domestic brands kept their lead in full-size pickup and sport utility vehicle sales. But the Japanese are pushing hard into this lucrative market.

Nissan’s new Titan pickup and Pathfinder Armada full-size SUV, both made in Mississippi, and Toyota’s award-winning Tundra pickup and the full-size Sequoia sport utility are expected to gain market share.

“I think this is worrying Detroit,” said Jim Sourges, Detroit-based vice president of Cap Gemini Ernst & Young Global Automotive Group. “I don’t think you’ll see [imports] eating away at the domestics’ market share” in pickup trucks as quickly as in passenger cars, he said, “but it will be an interesting battle over the next few years.”

Analysts expect 2004 to be a slightly better year, with total vehicle sales approaching 17 million units amid a soft economic recovery accompanied by continued heavy incentives and easy financing terms.

The steady erosion of the domestic brands’ market share is expected to continue, though. “Foreign brands still have superior product,” Healy said.

But though the quality gap is narrowing, there is also a perception problem.

“Half the car buyers in California wouldn’t even consider darkening the door of a GM dealer because of past problems,” Healy said. “Even though [domestic] cars are better than before, there’s an image problem that the imports don’t have.”