Subcompact SUV Segment: Almost Every Competitor Sells The Same Number Of Cars

|
Includes: F, FCAU, GM, HMC, HNDAF, HYMLF, HYMTF, NSANF, NSANY, TM
by: Anton Wahlman
Summary

The hottest almost entirely new segment in the U.S. light vehicle market over the last three years has been the subcompact SUV.

I have investigated the sales trends for the six most significant players in the U.S. subcompact SUV market, for the first half of 2018.

Two of these entries were new in early 2018. One launched in 2Q 2017, and the others have been in the market around three years.

Remarkably, the three "oldest" entries all sell around 8,000 per month in the U.S. market, and the three "newest" between 4,300 and 6,000 per month.

The newest ones have yet to "peak," and it could be that they too could reach 8,000 per month, but that's probably six months too early to tell.

I stumbled upon a most peculiar statistical coincidence, of sorts: Almost every subcompact SUV of importance in the U.S. market today sells just about the same number of units, or if the car was launched more recently, is on a path to sell a similar number of units too.

But before we analyze those sales numbers, we have to discuss why the conclusion of this statistical analysis is important, and then how I stumbled upon this surprising math.

First, why is the subcompact SUV-crossover segment so important all of a sudden?

It is common knowledge that SUVs and crossovers have increased sales greatly in the U.S. market in the last several years. For simplicity in this article, I'll just call them "SUVs" here, whereas it would be just as fine to call them "crossovers." Depending on the precise definition, SUVs and pickups are now approaching 70% of the U.S. market.

Once upon a time, SUVs were larger body-on-frame vehicles, very much geared to off-road capabilities and towing. The last 25 years have seen a gradual shift from body-on-frame to unibody construction, which means among other things lower weight, in turn improving fuel economy, handling, and interior space. Some nameplates that originally came out as body-on-frame in the 1990s or even 1980s ended up shifting to unibody construction in more recent generations.

The shift from body-on-frame to unibody construction was one evolution that happened. A more recent evolution is simply size. SUVs were generally very large. Then they became "midsize" and the best-selling SUVs are now so-called "compact" ones - Toyota (TM) RAV4, Nissan (OTCPK:NSANY) (OTCPK:NSANF) Rogue, and Honda (NYSE:HMC) (OTCPK:HNDAF) CR-V being the best-sellers in the U.S. in the last year or two. Those are the cars that sell around 400,000 units per year in the U.S., with many other segment participants now selling at least 150,000 per year.

In the last few years, these compact SUVs have become the best-selling non-pickup trucks in the U.S. market. It used to be that cars such as Toyota Camry and Honda Accord were the best sellers.

It's almost natural that we are now seeing a new and additional wave of even smaller SUVs becoming a great sales success in the U.S. market. Think about it: For every Camry, there's also a Corolla. For every Accord, there's also a Civic.

Given the U.S. market's focus on larger vehicles than in Europe and Asia, the Corollas and Civics are generally not selling as many as Camry and Accord, but the numbers are still very large. Basically, the smaller cars are not far behind.

It, therefore, follows that we have to track what's happening with the smallest ("subcompact") new SUVs that sit below the best-selling compact ones - RAV4, CR-V, and Rogue.

In doing so, I started by looking at one of the newest volume entries in the U.S. market, the Hyundai (OTCPK:HYMLF) (OTCPK:HYMTF) Kona. It sits below the Tucson, which sold 69,949 units in the U.S. in the first half of 2018, up a whopping 35% over 2017. The Kona starts at $20,480 but can, of course, be equipped far higher, to at least around $30,000.

The Kona began U.S. sales in February 2018 and thus far hit a monthly peak of 5,079 units sold in May, indicating an annualized sales rate of 60,000. However, this is still too soon to have stabilized. One would really need another several months to get a better sense of the longer-term trend.

That's interesting enough, but then I thought: What's the closest competitor in terms of the segment's market timing, to get a sense of how good the Hyundai Kona sales ramp is? That would be the Ford (F) EcoSport, which began sales in the U.S. market one month earlier, January 2018. It starts at $20,980 but as with the competition, it can be goosed up another 50% or so if you want it with all the optional goodies.

The Ford got a one-month head start on the Hyundai, and the sales numbers show as much: Sales hit more than 5,000 a month already in April, and by June, it reached 6,756. Still, the main observation here is how relatively similar the Hyundai and Ford performed in these two close-in-time sales ramps of similar products.

With the Hyundai Kona and Ford EcoSport under my belt, I turned to the next one in line - the Toyota C-HR, which entered the market around the second quarter of 2017. It's a thousand bucks more, so it starts at $21,990.

Looking at the Toyota C-HR U.S. sales, it did a total of 26,239 in the U.S. market in the first half of 2018, and it's amazing how even the monthly distribution has been. No month was lower than 3,923, and none was higher than 5,243. Its sales ramp seems to have stabilized - at a level very similar to where the Ford EcoSport and Hyundai Kona reached very quickly, in barely a quarter's time.

Then I looked at the remaining three major players in the segment - Honda HR-V, Jeep (FCAU) Renegade, and Chevrolet (GM) Trax. They have been in the U.S. market approximately three years now, plus or minus a little. Clearly, those sales have long since "stabilized" at some reliable numbers.

At this point, I might as well show you the entire table to make the final commentary a lot easier to visualize:

US 2018

Hyundai Kona

Ford EcoSport

Toyota C-HR

Honda HR-V

Jeep Renegade

Chevy Trax

January

0

500

3946

6259

6639

6106

February

199

2300

4420

6791

8249

6169

March

2360

3296

5253

7753

9771

8207

April

3315

5277

3923

7322

7735

8836

May

5079

5481

4366

8773

9512

8836

June

4240

6756

4331

8657

8533

8836

TOTAL

15193

23610

26239

45555

50439

46989

As you can see in the table above, those "oldest" three products - the three columns to the right - are all remarkably similar in terms of their sales numbers. They all sold between 45,555 and 50,439 units in the U.S. market for the first half of this year, and the monthly numbers are relatively even from month to month, especially if you average any two or three rolling months.

The obvious footnote here is that Chevrolet went from reporting monthly numbers to instead reporting quarterly numbers starting with 2Q 2018, and I simply divided the 2Q number by three, in order to make those entries. That will mean that this kind of analysis, in the future, will not include GM's product for any off-quarter months.

Conclusion Number One: The top 3

The Honda HR-V, Jeep Renegade, and Chevrolet Trax sell approximately 8,000 units per month in the U.S. with a remarkable steady state.

Conclusion Number Two: The next 3 are similar, too

The newer entries - Toyota C-HR, Ford EcoSport, and Hyundai Kona have all reached an average monthly U.S. sales rate of between 4,300 and 6,000 per month. It looks like the Ford and Hyundai have the best potential for breaking out of this range - to the upside - in the coming months. However, that needs at least another six months to say for sure.

It's well within the range of possibility that almost all of these cars could, within 6-9 months from now, reach an average of 8,000 units per month sold in the U.S. market. I think it's fair to say that even already, the similarity in these sales numbers is remarkable, but that it seems like the outcome in the next few months has the distinct potential to look even more remarkable.

Disclosure: I am/we are short TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: At the time of submitting this article for publication, the author was short TSLA. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.