Seven Car Companies Pulling Ahead Despite Recession

Includes: F, GM, HMC, HYMLF, NSANY, TM
by: Rick Newman

America might be in a recession, but the auto industry is in a depression.

Car sales so far this year are down 35 percent compared with 2008, and that was a bad year, too, on account of $4 gas and the start of the Great Recession. Auto sales in the United States peaked at nearly 17 million in 2006, and automakers used to consider 14 million in annual sales a bad year. In 2009, automakers will be lucky to sell 10 million vehicles.

Some of the victims, like recovering bankrupts General Motors (GMGMQ.PK) and Chrysler, are well known. But stalwart Toyota (NYSE:TM) is struggling, too, along with its youth-oriented Scion division. Niche brands like Saab and Volvo have lost traction. Nissan's (OTCPK:NSANY) Infiniti luxury division is down.

Other brands, however, have gained ground at the expense of their tire-spinning rivals. With the market so depressed, no major automaker has registered a year-over-year sales increase. But several automakers have gained market share, usually thanks to thrifty cars with good quality that buyers consider a great value during tough times.

To measure who's pulling ahead, we analyzed data from J.D. Power & Associates to determine which automakers have gained the most market share so far in 2009. Companies gaining share during a downturn often become consumer favorites and position themselves to thrive when the economy returns. So automakers inching up the food chain now could become market leaders in a better economy. Here are the brands that have gained the most market share so far this year, compared with 2008:

Hyundai (OTCPK:HYMLF) (4.3 percent market share, up 1.1 points). The South Korean automaker has been aggressively expanding its presence in North America, with a strategy that seems tailored to a sharp recession: Offer lots of features at lower prices than the competition, while boosting quality. The Genesis sedan, named North American Car of the Year, gave Hyundai its first entry in the luxury market last year. Other vehicles like the Santa Fe and Veracruz crossovers, the Sonata and Accent sedans, and the Entourage minivan have all picked up market share at a time when customers are stingy with a buck. The test will be whether buyers stick with Hyundai once the economy recovers, and they're feeling a bit more flush.

Kia (3.1 percent market share, up 0.9 points). This South Korean nameplate employs the same value formula as its sister division, Hyundai, with more of an emphasis on funky cars for 20-somethings. The new Soul, for instance, is a boxy hatchback with a sporty ride and flashy options like pulsing lights that match the cadence from the speakers. The new Forte is a cheaper alternative to compacts like the Toyota Corolla and Honda Civic (NYSE:HMC). Other models like the Sorento and Borrego crossovers are borrowed from the Hyundai lineup.

Subaru (1.9 percent market share, up 0.7 points). This Japanese automaker offers just four basic models, but its streamlined approach and focus on pragmatic, all-wheel-drive vehicles have worked well among consumers fed up with marketing hype. The new Forester crossover has earned high marks for comfort, practicality, and value and earned twice the market share of a year ago. And since it has no huge SUVs, Subaru hasn't been forced to do damage control as buyers shift to smaller vehicles.

Ford (NYSE:F) (13.6 percent market share, up 0.5 points). This domestic automaker has been losing billions of dollars and urgently restructuring, but unlike GM and Chrysler, it has avoided bankruptcy and a federal bailout. That makes Ford a chief beneficiary of its rivals' woes. Buyers who want to back the home team but are turned off by the bailouts have been flocking to Ford, boosting share for high-volume vehicles like the Escape SUV and the Fusion sedan. Forecasting firm CSM Worldwide predicts that the parent company, including Lincoln and Mercury, could be the top-selling automaker in the United States within a couple of years.

Volkswagen (2 percent market share, up 0.5 points). The big German automaker has dabbled in SUVs and minivans, but its core vehicles—fun compact cars—have been its strength. Sales of the Jetta sedan are up this year, and new models like the Tiguan crossover and CC sedan command premium prices even though they're on the small side for their class.

Honda (10 percent market share, up 0.3 points). Critics once blasted Honda for failing to build a big pickup or SUV, or offering a V-8 engine. Turns out to have been a smart strategy. The worst-performing vehicle in Honda's lineup is the Ridgeline, a low-volume, medium-sized pickup. Five other vehicles have gained market share, including the Fit compact, the CR-V crossover, and the new Insight hybrid.

Nissan (6.4 percent market share, up 0.2 points). There's no dragon slayer in Nissan's lineup, but the Rogue crossover and Versa hatchback have notched decent market share gains, while the edgy new Cube is drawing young buyers looking to make a statement. Oversize vehicles like the Titan pickup and Pathfinder SUV are losing share, but feisty performance cars like the 370Z and superfast GT-R have helped pick up some slack. Big may be out, but speed, apparently, is timeless.

Disclosure: no positions