Trends: Big SUV sales fall off a cliff
By Bernard Simon
Wednesday Sep 27 2006 12:00
George Pipas says that in his 30-year career as a car sales analyst at Ford Motor (NYSE:F) , the stampede away from sport-utility vehicles "is easily the most significant shift that I've observed".
After more than two decades of unstoppable growth, the SUV market in the US now appears to be in long-term decline. But does this mean the end of the road for the vehicles that many Americans have loved, and many others have loved to hate?
The SUV, also known as an off-roader or 4x4, made its first appearance in the early 1980s. Keith Bradsher, in his book High and Mighty, singles out the Jeep Cherokee as the first true example of the breed – a four-wheel-drive vehicle that has a pick-up truck's body-on-frame construction, but a comfortable interior.
The SUV’s height, spaciousness and perception of improved safety quickly made it a hugely popular alternative to the family car during the 1990s.
Demand reached a peak of about 3m units, or 18 per cent of US light-vehicle sales, in 2000. The most popular model, the Ford Explorer, made up 11 per cent of Ford’s total US sales that year. Sales outside the US also burgeoned.
The SUV has also generated intense controversy. Although drivers and passengers may feel safer, Mr Bradsher – among others – has blamed the vehicles for a climbing death toll on US roads. SUVs are more prone to roll over than other vehicles. Their size and height have made roads more dangerous for people in smaller cars.
While SUVs have evoked an image of the rugged outdoors among many supposedly environmentally aware buyers, the vehicles may have done more harm than good to nature.
The SUV contributed to a steady rise in the average fuel consumption of new US vehicles, and to growing greenhouse gas emissions. Mr Bradsher estimates that switching from a family car to a large SUV consumes as much energy in a year as leaving a fridge door open for six years.
Global Insight, a consultancy, estimates that SUV sales will drop to fewer than 2.2m units this year, or less than 14 per cent of total light-vehicle sales. It forecasts a further slide below 1.9m, or 12 per cent of the total, by 2011.
The jump in fuel prices during 2005 and the first half of this year have undoubtedly accelerated the decline. But they are only part of the explanation.
“The baby boomer is becoming an empty nester,” Mr Pipas notes. “They don’t need a vehicle as big as they once drove. The idea of using a stepladder to get into a 4x4 vehicle doesn’t have the same appeal.”
Carmakers are catering to that demographic shift with the crossover. Similar in appearance to a small SUV, the crossover is built as a single unit, with roof, sides and floor welded together, like a car.
Toyota pioneered the crossover segment in 1996 with its RAV4. More than 40 models are now available in north America, and crossover sales are likely to overtake other SUVs this year. Crossover model numbers are expected to grow to about 70 in 2009, with sales possibly outstripping passenger cars by the end of the decade.
Unfortunately for SUV critics, the drop in sales in heavily concentrated in mid-size models for which crossovers are a convenient alternative. Explorer sales tumbled by 31 per cent in the first eight months of 2006, against a year earlier.
According to JD Power, a market research group, the proportion of mid-size SUV owners opting for the same kind of vehicle has fallen from almost 32 per cent to 24.3 per cent in two years.
Owners of the biggest vehicles have so far turned out to be much more loyal. JD Power surveys show that almost 40 per cent of owners of big luxury SUVs, such as the Cadillac Escalade, Lincoln Navigator and the Hummer, remain loyal to the segment when they buy a new vehicle. Another 10 per cent opt for other – less luxurious -- large utilities, such as GM’s Chevrolet Tahoe.
These buyers are wealthy enough to shrug off the jump in fuel prices, or need a vehicle to transport a large family, or to tow a boat or large caravan. With the help of a new model, Tahoe sales were almost a quarter higher in August than a year earlier.
While the SUV as a category may not be dead, some 1990s behemoths are endangered – if not extinct.
Last autumn, Ford pulled the plug on the 19-foot, V-10 Excursion after six years on the market. Sales of the Excursion sank from 51,000 in 2000 to 16,300 last year.
The cost of filling the Excursion’s 44-gallon fuel tank had ballooned to $133 in southern California at the time of the model’s demise, more than triple the bill a year earlier.
GM halted production in June of the Hummer H1, the original, and biggest, version of the gargantuan brand. Yet the smaller H3, introduced last year, continues to sell strongly.
Clearly, while some SUVs may be headed for the museum, others are still very much alive.
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