Nomura: Japan’s automakers to benefit as Ford cedes US passenger car market

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Ford has basically withdrawn from the U.S. passenger car market, offering a tailwind for Japanese and South Korean automakers, Nomura said in a note on Thursday.

The iconic U.S. carmaker has said this week that it will only invest in the niche Mustang passenger car and keeping the Focus as a crossover variant, in a bid to refocus on higher margin SUV and pickup models and cut costs to boost its profit margins.

“In North America, Ford is almost completely withdrawing from regular sedans that compete with the key offerings of Japanese automakers,” Nomura said.

“We regard the growing withdrawal of U.S. automakers from the passenger car market as good news for North American operations at Toyota Motor, Nissan Motor, Honda Motor, Hyundai, and Kia, which have a strong presence in this segment,” Nomura said.

But it added that Ford’s plan to offset the abdication of passenger cars with higher sales of light trucks, including SUVs, means competition in that segment in North America is set to “get fiercer.”

“The gap in earnings between highly profitable SUVs and less profitable sedans is likely to shrink gradually,” Nomura said.

Nomura estimated that after three years, Ford’s North American passenger car sales would be lower by 450,000 vehicles. That figure is about 5-6 percent of the North American passenger car market, including Canada and Mexico, Nomura said.

It noted that in 2017, Ford sold 595,000 passenger cars, including Lincoln models, in the U.S., of which 82,000 were Mustangs.

Nomura expected the North American passenger car market to keep shrinking amid a customer shift toward SUVs, noting that Fiat Chrysler has also already withdrawn from the segment and GM has cut its allocation to it as well.