Slow-selling minivans ripe for discounts

Updated 10/19/2006 12:06 AM ET

Enlarge Dealers have boosted the average incentive for the Honda Odyssey 91% from last year, to $707. Enlarge Average incentives for the Dodge Caravan are $4,485, up 79% from last year.

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By Sharon Silke Carty, USA TODAY | DETROIT — Minivan shoppers are being offered more rebates and other incentives this fall as automakers attempt to stanch the flow of customers looking for alternatives to the family haulers.

Minivan sales are down 12.4% for the first nine months of the year compared with the same time last year, and one industry watcher predicts sales could fail to top 1 million for the year for the first time since 1992.

"Basically, minivans aren't as popular anymore," says Alex Rosten, an analyst for car-shopping website Edmunds.com. Former minivan buyers are increasingly moving to crossovers — vehicles that have the same utility as SUVs but are built on car platforms for smoother rides and better fuel efficiency. "Those who need seven-passenger capacity are moving to crossovers. They are the new SUVs."

In September, the average incentive on minivans was $3,584, an all-time high, Rosten says.

The shift away from minivans could spell trouble for DaimlerChrysler's (DCX) Chrysler Group, which sells the No. 1 and No. 2 best-selling versions: Dodge Caravan and Chrysler Town & Country. Caravan sales are down 5% year to date, and Town & Country sales are off 10%.

DaimlerChrysler CEO Dieter Zetsche said last month that a shift to more fuel-efficient powertrains on minivans caught the company off guard. "We have a very good reputation for our minivans, but we are not perceived as being the most fuel-efficient," he said.

Still, the massive jump in September rebates seemed to help. Sales of the Caravan were up 49% for the month compared with a year earlier. Town & Country was up 74%.

But incentives may not be enough to help sales recover for the year. Last year, the minivan segment hit 1.1 million sales, about flat with prior years. George Pipas, sales analysis manager for Ford Motor (F), predicts minivan sales won't even reach 1 million this year. To hit 1 million, minivan sales will need to be 1% higher for the last quarter of the year compared with a year ago.

Lagging sales are part of the reason Ford is backing out of the minivan market. It will end production of Ford Freestar next year, and it ended production of Mercury Monterey earlier this year.

"When a segment shrinks, there's too little room for too many players, and that reduces the profitability in the segment," Pipas says. "Our feeling was, there's no point in being a Honda (HMC) Odyssey wannabe."

Tom Libby, senior director of industry analysis at Power Information Network, says Ford's decision to back out of the segment and General Motors' (GM) lackluster minivan offerings account for much of the decline in volume.

"GM and Ford have really retreated and seem to be accepting a secondary position in the segment," Libby says. The percentage of those owning Chevrolet Ventures or Ford Windstars, predecessor to Freestar, moving to another minivan is going down, he says. "They're not staying with the same companies, and they're leaving the segment."

According to Power data, 41% of people who traded in a minivan in the third quarter bought a new one, a rate that's about flat with the third quarter of last year. But that loyalty number isn't nearly as strong as some other segments. The loyalty rate for pickups, for instance, hovers around 70%.

Minivan owners who are getting out of the segment are increasingly switching to crossovers, midsize SUVs and even compact cars, according to Power.

"There's nothing wrong with the minivan product per se," Pipas says. "It's just that there are so many other vehicle choices now. When minivans were introduced in the '80s, consumers basically had to choose between station wagons and minivans — and that was an easy one."

Still, minivans aren't likely to disappear anytime soon.

"I don't think they're going to go into oblivion, because there will always be a need for them," says Rosten. "And they're a lot cheaper than crossovers."