IT IS no small secret that the public’s appetite for microcars, hatchbacks and sedans is on the wane. 

New car buyers have been migrating from the passenger segment into SUVs and utilities for years now, but with sales of conventional sedans, hatches, people movers, limousines and sports cars now accounting for less than 20 percent of the total new car mix (according to VFACTS year-to-date figures), the question must be asked – is selling passenger cars a viable strategy for the remainder of the 2020s?

Nissan Australia was an early mover when it came to doing a hard pivot away from passenger cars. 

After dumping the Micra, Pulsar and Altima, the Japanese automaker’s lineup is now made up of SUVs, the extensive Navara range, the Leaf EV and, when it arrives at the end of August, the Z sportscar. 

Ford has adopted a similar strategy in the USA, culling passenger cars to focus on SUVs, Crossovers, pickups, vans and the Mustang, and the Blue Oval’s local arm has followed that template – the Focus and Fiesta have been granted a stay of execution in Australia, but are now only offered in performance-oriented (and higher margin) ST guise.

Non-volume brands are also feeling pressure to exit the declining passenger segment. Renault now has the Megane RS hot hatch as its sole passenger car offering in Australia; the rest of its showroom being populated by crossovers, SUVs and commercial vans. 

Meanwhile, at the bottom end of the market, the era of cheap hatchbacks with driveaway prices in the mid-teens appears to be almost over. The Toyota Yaris, Suzuki Swift and Mazda 2 are now priced above the $20K barrier, and even the Chinese-built MG MG3 Core starts at $18,990 before on-roads.

But according to Kia, there’s still money to be made in the passenger segment – even at the price-sensitive, thin-margined micro end that it occupies with its Picanto hatch, one of the last cars to have a price tag that begins with ‘15’. 

Looking at Kia’s sales figures, the depression in its passenger car sales generally follows what other brands are experiencing, but according to the company that’s not entirely because the appetite for non-SUVs has evaporated:

“A lot of that is stock-driven,” Kia’s general manager of product planning Roland Rivero told GoAutoNews Premium. “We’re getting very little Cerato, we could sell a lot more Cerato if we were given more.”

And while some of the Cerato’s supply shortfall may be the result of ongoing supply chain disruption in semiconductors and from rolling COVID-19 outbreaks, another factor is simply the question of priority. 

“Cerato comes out of the same factory that produces Sorento – so globally it makes more sense to build more Sorentos than it does to build more Ceratos,” Mr Rivero explained. 

However, if the production cap could be lifted, Kia’s chief product planner says the brand’s humble hatchback and sedan would be able to move plenty of metal out of showrooms.

“I have always said I reckon Cerato can reliably do 2000 a month… it’s actually crossed 2000 a couple of times, but I think that Cerato, with free supply, could easily shift 2000 [cars] a month.”

“But we’ve never really had free supply of Cerato, it’s been limited in a similar fashion to Picanto. 

“As you can understand, manufacturers have moved away from micro because it’s not a profit-making vehicle by any stretch, but it is a way of getting customers into the brand that maybe have never looked at it, and their budgets may have only been pointing them toward the used car market. [But with Picanto] we can give them a brand-new vehicle with a seven-year warranty.

“So we don’t want to give up on our passenger range. We still think that whilst that micro, light and small segments are in decline, we don’t want to give up on them and our plan is to still have presence in that passenger category for many, many years to come.

“We have no plan to abandon Picanto for a while and, while there might be a bit of rebranding – a Cerato may not be called a Cerato anymore – it doesn’t mean we won’t have a presence in the small car category [either]. We’re bolstering SUVs, but we’re not abandoning the passenger segment anytime soon. Definitely not in the foreseeable future.”

The current JA-series Picanto has been on sale since 2017, putting it in its fifth year of production – ordinarily the twilight years for a passenger vehicle. 

However, Mr Rivero indicated that the JA’s lifespan may stretch further than normal before an all-new replacement eventuates – a move that could signal a change in strategy to give Kia greater return on investment in its lower-margin products. 

At the premium end of the new car market, higher retail pricing and customers more willing to spend on accessorisation should, in theory, help bolster the business cases of all passenger car lines. 

However, recent rumours that Mercedes-Benz is planning to retire the A- and B-Class hatchbacks suggest that even those at the top end of town are struggling to justify non-SUV products at the bottom end of their lineups. 

Yet while Audi has embraced SUVs as readily as Mercedes-Benz and reaped the benefits of that market shift, it still has plenty of faith in the longevity of passenger cars.

Audi Australia’s general manager of marketing, Nick Reid, said: “We now have Q2, Q3, Q5, Q7 and Q8, so we have a full suite of [SUV] product, and we’ve seen [a sales increase] that’s pretty much in line with the market.” 

“But I think it’s important for us to say that we still see a solid opportunity for what would be classed as passenger vehicles – sedans, hatches and wagons will still be a part of our model lineup for years to come.“

But the sub-segments those sedans and hatches operate within may change.

Audi’s chief executive officer Markus Duesmann said earlier this year that the A1 light hatch won’t be renewed when the current generation retires, citing a lack of profitability at the lower end of the price spectrum and an offering that didn’t align with his vision for Audi as a premium brand. 

To be fair to the A1, though, that fate isn’t really the outcome of it being a passenger vehicle, Mr Duesmann indicated that the Q2 compact SUV will also be retired without replacement.

In Australia though, Audi is still a believer in the A1 and signalled to GoAuto that it isn’t going anywhere for the foreseeable future. Having arrived here in mid-2019 as a 2020 model year, the second-generation A1 still has two-thirds of its lifecycle to live out, and while sales have dropped this year, Audi’s Aussie arm remains committed to the nameplate for now.

The A3’s place in the Audi range appears much more secure. 

With the box-fresh GY generation arriving locally in March in front-drive, all-wheel drive and sporty S3 trim, Audi’s small sedan and hatch has so far achieved respectable volume, with 632 year-to-date sales putting it just behind the BMW 1 Series despite only being in the country for four months. 

Now bolstered by the arrival of the top-tier RS3 hyper hatch, the A3’s potential is now – like so many cars – being held back by supply.

Mr Reid told GoAuto: “We definitely want it to do more, but that’s really being held back by supply at this stage. But we see a pretty healthy pipeline coming.”

“The transition to electrification will also see a healthy level of passenger product in Audi’s future showroom, with the e-tron GT adding a sleek all-electric four-door later this year and the A6 Avant e-tron concept unveiled in March pointing toward a shapely battery-powered wagon. 

An e-tron variant of the A3 is also expected, as it is for the new-generation A4 that’s just around the corner.

“We want to offer a full range of vehicles and I think entry vehicles are very important because we want to get people into the brands, get a younger customer into the brand and have a longer relationship with them. That’s where those entry-level models are still important,” he said. 

“The range at the moment is pretty healthy across the board. They all have defined roles, which is really important for us, and we’re lucky to have the range that we do have.”

Comment by Tony O’Kane