General Motors Co. is killing off the Buick Verano compact car – the most popular vehicle in the Buick lineup in Canada – in another sign of how consumers are abandoning passenger cars in favour of crossover utility vehicles.
Production of the Verano will cease on Oct. 16 at the Lake Orion plant in Michigan, General Motors of Canada Ltd. said in a memo to dealers on Thursday.
"This North American product portfolio decision was made in response to customer and market changes, including the shift in customer demand toward SUVs and crossovers," Mike Speranzini, brand director of Buick GMC Canada, wrote in the memo. "This is a clear trend that all manufacturers have observed over the last decade."
Sales of sport utility and crossover vehicles now surpass those of passenger cars, a sharp change in the Canadian market, once dominated by compact and subcompact cars.
Compact crossovers are the largest single segment in Canada, having outperformed compact cars in 2015, data compiled by DesRosiers Automotive Consultants Inc. show. A 15-per-cent surge in sales of pickup trucks amid low gasoline prices has pushed that category into No. 2 ahead of compact cars.
Soaring crossover sales are spurred by the two biggest demographic cohorts, said Dennis DesRosiers, president of the consulting firm. "It's the boomers and it's the millennials," Mr. DesRosiers said.
That demand feeds on itself, he noted.
"The vehicle companies have no choice but to respond and then what happens is that – as is typical of this industry – they over-respond," he said. "You're seeing just a massive amount of product being targeted into that segment. That then starts to drive the segment as well."
In Buick's case in Canada, however, Verano is outselling the rest of the lineup, including the larger Enclave crossover and the Encore CUV, which Mr. Speranzini said he now expects to replace Verano as the entry-level vehicle for the brand.
One GM Canada dealer wondered why the auto maker didn't also halt production of small Chevrolet passenger cars, given that it believes so strongly that SUVs and CUVs are the future.
Verano sales jumped 43 per cent to 2,397 in the first five months of the year from a year earlier. GM Canada dealers sold 1,510 Encore crossovers in that period, up 6 per cent.
But it's the U.S. market that is driving the decision. Verano sales fell 12 per cent to 10,624 in the U.S. market in the first five months of the year, while Encore deliveries rose 21 per cent and were more than double Verano sales at 23,808.
As crossover sales have grown, U.S. consumers have become more loyal to them, IHS Automotive said on Thursday.
An analysis of 1.9 million purchases during the first quarter showed that 63 per cent of SUV or crossover owners bought another SUV or CUV, IHS said.
IHS also noted the emergence of subcompact crossovers.
In Canada, sales of such vehicles soared 149 per cent in the first five months of 2016, while sales of subcompact cars slumped 14 per cent.
"The number of CUVs and SUVs in dealer showrooms has climbed," IHS Automotive said, "including a greater number of subcompact crossovers from mainstream as well as luxury brands. Manufacturers are also offering multiple products in the same size category to cater to both the off-road and the more leisurely buyer."
The shift out of cars is so pronounced that Barclays Bank PLC analyst Brian Johnson has identified a "sedan recession" as an underappreciated risk to the record sales auto makers are racking up in the U.S. market.