Industry Debates Minivan Survival Amid Ongoing Sales Slump

Some auto industry observers consider the minivan an endangered species, like the station wagon it replaced, while others claim the traditional minivan need only undergo an image makeover to spice demand.

Against this debate, the numbers clearly show the segment’s current appeal is on a slippery slope. Sales of minivans in 2006, classified as Small Vans according to Ward’s segmentation, fell 11.7% through November, to 896,458 units vs. 1,015,392 in like-2005, Ward’s data shows.

With December drawing to a close, the segment likely will miss the 1 million-unit mark for first time since 1992.

This year’s downturn almost exclusively comes at the expense of the domestic makes. Sales of segment-leader Chrysler Group’s Chrysler Town & Country fell 10.1% to 148,228 units through November, while the Dodge Caravan dipped 5.1% to 197,045.

But these are outgoing models. Chrysler will show its much-anticipated next-generation family of minivans at January’s North American International Auto Show in Detroit. The vehicles are slated to go on sale in the fall and are expected to help revitalize the segment.

Meanwhile, sales of import brands inched up slightly through November but not enough to offset the fall in domestic brands.

Sales of the fourth-place Toyota Sienna saw a 0.6% uptick to 147,179 units, while American Honda Motor Co. Inc.’s second-place Honda Odyssey reaped a 2.4% gain to 161,888.

Honda Odyssey sales not enough to offset domestic minivan downturn.

With both General Motors Corp. and Ford Motor Co. effectively exiting the segment in the near future, many in the industry say the minivan’s days are numbered.

“The minivan market is toast,” Ford sales analyst George Pipas told Ward’s earlier in the year, predicting the segment would drop below 1 million units this year and noting many minivan sales are to fleets.

Ford stopped building the Mercury Monterey in August and says it will kill its twin Ford Freestar minivan next year.

Instead, the auto maker is focusing on new cross/utility vehicles while readying the Ford Fairlane as a replacement for the Freestar, believing CUVs show more growth and have none of the stigma of traditional minivans.

“The CUV is perfect because it’s got utility but (with) more comfortable ride and handling,” Pipas says.

Nissan attempted to dress up its third-generation Quest for the U.S. market with an unusual silhouette and funky interior. It also launched a marketing campaign showing female Quest buyers in non-traditional roles to counter the soccer-mom stigma. But hoped-for sales never materialized.

A refresh for the ’07 Quest saw a toned-down interior, relocating the controversially placed dials from the top of the center stack to behind the steering wheel, but again to no avail. Quest sales trailed year-ago by 22.9% through November, leaving Nissan with a whopping 193 days’ supply at the end of the month.

Thomas Lane, Nissan corporate vice president-product planning and strategy, says there’s no question minivans have an image problem. Car buyers don’t want to be seen driving the vehicles, he recently told Ward’s.

“So everyone’s exploring with things that look different to try and meet the same needs,” he says. “We will try that to some extent. I don’t know how far we’re going to go, but we’re trying to understand what people want.”

Bob Lutz, GM vice chairman-global product development, agrees there’s a stigma associated with the segment. “The minivans were maybe a little bit too specifically family oriented,” he says. “They just reek of mothers with little kids, and not everybody wants that.”

GM will scuttle its largely forgettable family haulers – the Buick Terraza, Chevrolet Uplander, Pontiac Montana SV6 and Saturn Relay – when its Doraville, GA, plant closes in 2008. A plan to build new CUV-based minivans in Spring Hill, TN, was canceled last month.

Sales of the GM models through November tumbled between 20.1% (Uplander) to 55.2% (Relay).

GM hopes families needing 7- to 8-passenger vehicles with third rows and folding seats will turn to the new GMC Acadia, Buick Enclave and Saturn Outlook large CUVs. The auto maker reportedly also will build a large CUV for Chevrolet at the Spring Hill plant, possibly as an ’08 model.

“You position them very distinctly as SUVs,” Lutz tells Ward’s of the Acadia, Enclave and Outlook. “The way to get the minivan buyer is not to say, ‘Hey, we’ve got a minivan here for you that looks like an SUV.’ (The CUVs) need the non-minivan image, very clearly, and then the minivan buyers discover them.”

But there are some in the industry who say the pending death of the minivan has been greatly exaggerated.

Steve Wilhite, chief operating officer-Hyundai Motor America – which this year introduced the Entourage, built on the same platform as sister-brand Kia Motor Corp.’s Sedona – predicts minivans will rise again.

Wilhite acknowledges Entourage sales have been “much softer than expected,” with only 10,407 sold through November, lagging the 30,000 units Hyundai hoped to sell this year in the U.S. However, he thinks the utility a minivan provides is unmatched by any other vehicle type.

“I think we’re in a funny industry, where product trends ebb and flow,” he says. “The minivan market has not been as robust as it once was, but it’s still a very important segment of the market and it still provides a certain functionality for very specific needs.”

Indeed, Ward’s AutoForecasts shows the situation isn’t that dire for the humble minivan. Although North American production of small vans is predicted to dip to 889,856 units next year, the segment will climb back above 1 million (1,013,769 units) in 2009.

That’s when Kia likely will bring its Sedona stateside (the auto maker plans to open a new plant in West Point, GA, in 2009) and also when Volkswagen AG will get a version of Chrysler’s next-generation minivans.

The additional output will offset expected production cuts by Toyota and Honda, which build their minivans in Indiana and Alabama, respectively, and also the Quest’s move from Nissan’s Canton, MS, plant to a plant in Japan in 2009.

Nissan executives tell Ward’s they are committed to the minivan segment, despite the Quest’s current sales slump, and the shifting of production to Japan should not be taken as a sign the end is near for the model.

“People are still going to have kids,” Nissan’s Lane says. “It’s the second kid that triggers the minivan. As long as kids don’t go out of style, I think there’ll be some vehicle like a minivan.”

– with Scott Anderson and Byron Pope

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