Why Sales May Slump at Honda and Toyota

U.S. sales of Honda's Accord were down 14% through July. Is another big drop in store for August? Source: Honda.

Analysts are forecasting a small drop in U.S. auto sales in August, a decline of 1% to 2%. The market's not slowing, they say; rather, Labor Day is later this year, and that's traditionally a big car-shopping weekend.

That's not a big deal, and it's not a sign of trouble for the overall market. Most automakers are expected to post small year-over-year decreases in U.S. sales for the month. For most, that won't be anything to worry about.

But Honda and Toyota are expected to post bigger declines. What's going on?

Analysts see big sales drops for both of the Japanese stalwartsEdmunds expects Honda's U.S. sales to fall 6% in August, while Toyota's will fall 12%, they say. Other analysts expect similar drops for the two Japanese stalwarts.

We won't know for sure what's causing the drops until the two automakers release their U.S. sales results for August. That will happen sometime on Tuesday. But we can make an educated guess: Americans aren't buying as many sedans as they once did.

For both automakers, sedans are their bread and butter. Toyota's Camry and Honda's Accord have been the two companies' sales leaders in the U.S. for years. Both also sell big numbers of compact sedans -- like their midsize siblings, Toyota's Corolla and Honda's Civic have long been among the industry's leaders.

But of the four, only the Corolla has posted a sales gain in the U.S. this year through July. Why? It's because the market is changing. With gas prices down and "crossover" SUVs posting better fuel economy than ever, more and more buyers are trading in sedans for SUVs.

That has led to booms in sales for the Detroit automakers, which have historically led the SUV market segments. But Toyota and Honda haven't been completely left behind.

Both are selling more trucks, and so far that has helped In recent years, both Toyota and Honda have put considerable effort into developing appealing SUV-like vehicles for the U.S. market. That has helped them weather this shift in buyer preferences much better than they might have otherwise.

Through July, Honda's sales of "trucks" -- mostly crossover SUVs, plus the Odyssey minivan -- were up 7.7% this year. Likewise, Toyota's truck sales were up 14% over the same period.

For both, those gains were more than enough to offset year-over-year declines in car sales through the first seven months of 2015. Compact crossover SUVs, in particular, have surged: Toyota's RAV4 was up 18.5% through July, while Honda's CR-V gained 6.3% -- enough to pass the Accord in total sales for the year to date.

Strong SUV sales -- along with favorable exchange-rate shifts -- helped Honda to a 20% jump in profits last quarter. The effect was less dramatic at Toyota, but the RAV4's gains did help bolster the bottom line at the world's largest automaker.

The upshot: If sales fall, slumping sedans are the likely culpritsIf analysts' predictions for big sales declines at both Toyota and Honda hold true, it's likely that further slumps in compact and midsize sedan sales will be the cause. With gas prices low, and most automakers' SUVs better than ever, fewer buyers are seeing a reason to live with a sedan's compromises.

For the two sedan stalwarts, that won't be good news.

The article Why Sales May Slump at Honda and Toyota originally appeared on Fool.com.

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