Nissan betting sedan will be next big thing

At a time when younger people drive less and hail more rides, while SUVs reign supreme thanks to low gas prices, Nissan is betting on the humble sedan.

Over the past few decades, the auto industry, especially in North America, has been ditching four- and two-door passenger cars in favor of bigger vehicles: first it was minivans and now SUVs, crossovers and trucks. Automakers have become addicted to the higher profits offered by bigger vehicles, sought after by consumers seeking size, convenience and safety.

By next year, only 10% of Ford Motor Co.’s output will be passenger or sports cars.

Ivan Espinosa, Nissan’s newly appointed chief of product planning, contends that the sedan might be the right vehicle for a new generation of ecologicallyconscious younger drivers. They spend less on transport, get around using Uber or Lyft (many of them sedans) and aren’t as attracted to SUVs. They’re more interested in electric cars, which are usually sedans because less heavy metal usually translates into greater battery range.

The argument has some merit: Tesla Inc.’s top-selling EVs, the Model S and Model 3, are both sedans.

“SUVs might gradually be seen as a boring family car in the

future,” said Espinosa, who joined Nissan in Mexico, one of its most successful markets, and worked on product planning for over 15 years. “We’re starting to see some customers associate some of the SUVs that are in offer today to what the minivans were before — soccer mom cars.”

It’s a significant gamble, and much is on the line.

Nissan needs to reignite sales and restore its image, tarnished by the arrest of former Chairman Carlos Ghosn. Profits are at a decade low and the carmaker is struggling in the U.S., where Ghosn pushed for sales incentives that eroded margins and expanded volumes through fleet sales. Nissan’s product lineup is aging, and rolling out the wrong car models right now could deliver a life-threatening blow to the Yokohamabased automaker.

“I can understand the logic that SUVs are losing the cool attribute because of product proliferation,” said Tatsuo Yoshida, an auto analyst at Sawakami Asset Management Inc. “But that doesn’t mean customers will return to cars.”

Indeed, consumers don’t appear to be getting tired of SUVs, thanks to cheaper gasoline prices and plenty of choice among automakers. Carmakers’ combined sales in the segment, including pickups, climbed to a record 12 million units in the U.S. last year, while sedans hit a decade low. In the first half, sedan sales fell 10%, outpacing the 6.6% decline in SUVs.

Espinosa says, however, that cracks may be appearing in the SUV’s rock-solid popularity.

In a recent Nissan survey of drivers who don’t own a sedan in 11 markets including the U.S. and China, 75% said they would consider buying one now or in the future.

For millennials, Nissan found that the figure climbed to 8 in 10. In order to tap into that demand, Espinosa said Nissan will offer more options to appeal to younger drivers, such as all-wheel drive sedans.

That’s already happening in the U.S., where the share of AWD sedans has been on the rise. Lower fuel prices have made American car buyers less sensitive to their lower fuel economy, and carmakers have tweaked their drivetrains to improve efficiency. Automakers are also finding that younger buyers with less money are opting for practical, cheapto-own compact cars.

In May, Nissan promised to spend $437 million over the next three years to refresh all core models, introduce 20-plus new products and focus on American retail sales.

While North America remains a critical market, the real test of Nissan’s sedan strategy will be in markets such as China and South America. After outpacing sedan sales for a decade, sales of SUVs in China are starting to decelerate. SUV shipments in the country fell 2.9% last year, compared with a 2.8% decline for sedans.

“In China, there’s still very solid demand for this kind of vehicle,” Espinosa said. “Sedans are still seen as a symbol of success.”