DETROIT -- General Motors wants to raise its game in the car space so badly that it's thrown the kitchen sink into the next-generation Chevrolet Malibu sedan, from automatic braking to a hybrid version that will return the segment's best fuel economy.
GM executives are confident that they'll reap more than $1,000 in extra per-vehicle profit from the 2016 Malibu when it goes on sale this fall, simply by offering head-turning features and options rather than fire-sale prices. They expect the same from the redesigned Cruze, scheduled for an unveiling here this week.
But those cars will arrive in a market that is squeezing car margins, not expanding them. Industry incentives on both midsize and compact cars last month hit their highest levels in more than five years, as automakers try to keep customers interested amid a shift toward crossovers. And more cars have been making the profit-sapping journey to rental-car lots in recent months.
The deteriorating outlook for car sales will make it tougher for GM and other automakers to achieve the returns they once envisioned for their car lines. And they may need to get used to it.
Analysts increasingly see the malaise in car demand not as a cyclical blip caused by lower fuel prices but as a long-term consumer migration toward the utility that crossovers offer. The trend has implications for everything from financial forecasting to brand positioning and the cadence of future vehicles, analysts say.
"I think we're headed for a world where the relative importance of a brand's reputation and image will be more tied to crossovers than sedans," says Karl Brauer, senior analyst for Kelley Blue Book.
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