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Market Insight: Medium sedan sales re-boot

Why has the slide in mid-size sedan sales, once thought to be terminal, now reversed?

5 Feb 2024

WITH utes and SUVs growing in popularity, the market for hatchbacks, sedans and station wagons has seen a steady decline; it is this loss of interest in conventional passenger cars that helped send off an Australian car manufacturing industry that never fully committed to making vehicles that reflected shifting tastes.


While it is too late to save the local manufacturing industry, there has been a curious revival in the medium passenger car market. While the large passenger car segment is all but done (now down to three models representing just 0.2 per cent share of the market) it is no longer safe to assume that anything that is not tall (SUV) or has a tray (ute) is going the same way as large cars have.


The medium passenger market is parsed by industry statistician VFACTS into two categories; those models that start at less then $60,000, and those that start at more than $60,000. In 2023, the former was led by the Toyota Camry (10,877 sales), the latter by the Tesla Model 3 (17,347 sales).


Combined (less than $60K and more than $60K) medium segments of 26 models on offer totalled 48,234 units, or 4.0 per cent of the new vehicle market. That is small beer compared with the medium SUV market (22.1 per cent share) and even small passenger cars were ahead with 6.9 per cent share.


Yet the medium passenger car market appears to be coming back, or at least is having its last moment in the sun. While on a downward trend for years, it gets interesting to see what has happened over the last half a decade.


In 2018, the medium market had a 4.0 per cent share, or 46,231 sales. That declined to a low in 2021 of 2.9 per cent of the market, or 30,601 sales, which then reversed course with 38,638 units (3.5 per cent share) in 2022 and then 48,234 in 2023 (back to 4.0 per cent). 


So what happened? The Tesla Model 3. With no significant electric vehicle competition, the Model 3 arrived in 2022 with a bang, outselling the historically most-popular medium sedan until then, the Toyota Camry, by 1339 units despite the Tesla costing enough more to occupy the premium half of the mid-szer segment.


It got even better for the Model 3 last year, with an almost 7000-unit increase year-on-year.


Yet Toyota’s entrant, the Camry, should not be dismissed. While not a BEV like the Model 3, its efficient, proven hybrid powertrain and extensive Toyota dealer backup has made it the new Falcon taxi of the 2020s. The Camry is the go-to model for company fleets, ride-hailing services and, of course, taxis.


Yet the Camry has been in steady volume decline over the last five years, going from 15,269 units in 2018 to 10,581 last year. However, this is not necessarily because the model is less popular. All except the base grade Camry Ascent are hybrid models, and Toyota has introduced a stop-sale on petrol-electric variants as it cannot keep up with demand. 


We can only speculate on how many Camrys Toyota would sell if stock were freely available.


The rest of the medium passenger market is not particularly strong, with most models either just bumping along at similar volumes or declining.


BMW’s 3 Series is a distant third in the popularity rankings with 3147 deliveries last year, and aside from a dip to just under 3000 units in 2022, the 3 Series has had a ‘3’ in front of its volume figure for the last five years.


The remaining 23 models make up a bit less than half the volume in the segment. While there are some interesting shifts here (such as Skoda Octavia up from 963 units in 2022 to 1395 in 2023) it is all small beer.


However, with the arrival of promising new BEVs such as the BYD Seal late last year (already moving 471 units in December, its first month on sale), and possibly an easing on supply for Camry hybrids, 2024 might be an even healthier sales year for a segment we would have all but written-off as doomed not so long ago. 


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