Smaller Players Threaten Toyota, Honda, Nissan

It's no secret that the U.S. Big Three have been losing market share for quite some time. However, that erosion accelerated in the second half of the 1990s and since 1995 new vehicles sold by the rest of the industry have gone from about a 1:4 to 1:3 ratio.

The outlook for the next three years also bodes well for the rest of the industry, with market share for the non-Big Three companies projected to rise to 39% by 2005 from about 37% this year, according to DRI-WEFA forecasters.

Toyota Motor Corp., Honda Motor Co. Ltd. and Nissan Motor Co. Ltd. quickly come to mind when placing blame for the Big Three's market share loss. The trio's combined market share was 22% in 2002's first half, compared with 18% in 1995.

It's easy to believe that this second “Big Three” will continue to grow. But all have been entrenched in the U.S. market for decades and now are targets for other companies that are more serious about carving out a bigger chunk of the U.S. market.

Toyota-Honda-Nissan could continue to take share from the original Big Three for the foreseeable future. But overall growth may be stunted, and possibly reversed, by the combined forces of the remainder of the industry. Toyota, which has been a model of growth for years and speculated by some to eventually overtake DaimlerChrysler Corp. as the No.3 auto company in the U.S., could find itself just trying to keep what it has.

Nipping on the heels of these second tier companies are long-time players such as BMW AG, Volkswagen AG, Mazda Motor Corp. and Mitsubishi Motors Corp. as well as the relatively new players, such as Hyundai Motor Co. Ltd. and Kia Motors Corp. Hyundai and Kia are strong in small cars and have gained a foothold in the midsize market with the XG350 and Optima, respectively.

Two years ago Hyundai offered its first light truck (Santa Fe cross/utility vehicle), and is expected to have an entry CUV and SUV within three years. Last year Kia added a minivan (Sedona) in the U.S. and plans a midsize SUV to accompany its smaller Sportage this year.

On the luxury side, BMW is pushing Toyota's Lexus division for sales leadership among traditional luxury brands. It already is the undisputed top dog in the luxury car market with 13.4% of the segment in 2002, up from 8% in 1995. Including trucks, BMW pulled slightly ahead of Lexus at the halfway mark this year to temporarily become the luxury brand leader.

VW enjoyed a surge in the late 1990s sparked by the introduction of its new Beetle and re-emergence of its Audi luxury marque. Growth has flattened out, but that may be VW catching its breath. Later this year, the auto maker introduces its first CUV, the Touareg, followed next year by a redesigned Jetta. The new Microbus comes in 2005 to lift VW's stake in the van market.

Other red flags for Toyota-Honda-Nissan include the midsize Mazda6 replacement for the 626, and Mitsubishi's first CUV and redesigned Montero Sport in 2003.