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SUV Back in Vogue as Americans Rekindle Old Love Affair

August 02, 2014

SUV Back in Vogue as Jauntier Americans Rekindle Old Love Affair

Customers view an Edge Ford Motor Co. sports utility vehicle (SUV) in Torrance, California. Photographer: Patrick T. Fallon/Bloomberg

The SUV is dead. Long live the SUV.

Not so long ago, the Sport Utility Vehicle seemed on the road to extinction. When the economy cratered and gasoline prices surged, droves of Americans parked their land yachts or traded them in for something small and peppy. It became tacky to drive around in a Hummer getting 15 miles to the gallon.

Now SUVs are back in vogue. For the first time in decades, more people are buying SUVs than sedans. Two forces are driving the revival. One: Americans are feeling a little jauntier as the economy improves and are willing to indulge in a lifestyle upgrade. Two: Automakers have released a blizzard of new models that are good to look at, drive like sedans or sports cars and sip fuel -- at least compared with their hulking predecessors.

Even the Detroit Three have gotten the message, joining their Japanese and Korean counterparts with sexy, car-based crossovers such as the hot-selling Buick Encore.

“There’s just been a massive amount of product that’s hit the market,” Mark Wakefield, managing director and head of automotive practice at consultant AlixPartners, said yesterday. “They’re better than they were before and the heart of the market has moved to a more car-like feel, powertrain and efficiency. If you step out of a five or six year-old car, you won’t see yourself going to the pump more often.”

Dan Frost has been selling Chrysler vehicles in suburban Detroit for years. He remembers all too well that back in 2008 SUVs “were going to be a thing of the past.” He’s as shocked as anyone that Jeep brand SUV deliveries jumped 41 percent last month alone. Frost is most definitely not complaining.

Sweet Spot

General Motors Co. (GM:US) is in the sweet spot, having redesigned its entire lineup of full-size SUVs in the past year. Chevy Tahoe sales jumped 52 percent last month; the Buick Encore racked up an 80 percent sales surge this year through July. Even Ford Motor Co.’s (F:US) Explorer, a model once synonymous with top-heavy rollovers, is selling briskly.

Gas mileage has improved to the point that many of the smaller and mid-size models match the fuel efficiency of family sedans. A Ford Escape gets 26 miles per gallon with combined city and highway driving while the Ford Fusion sedan gets 28 mpg.

Crossovers, such as the Encore, also appeal to different age groups. Younger buyers starting families are keen to trade in their small, entry-level car for a mid-range crossover, said Michelle Krebs, a senior analyst at AutoTrader.com. Meanwhile, their parents are trading down from larger SUVs or trucks.

Tipping Point

SUVs, including crossovers, made up 36.5 percent of new-vehicle registrations this year through May compared with 35.4 percent for sedans, according to IHS Automotive. Sedans, which held the top spot for decades, had led 36.6 percent to 33.9 percent a year earlier, IHS said.

“The on-again, off-again relationship is back on and the love affair goes on,” Jeff Schuster, an analyst with LMC Automotive, said of surging SUV sales. “It shows that consumers are feeling good about the position of the economy. Combine that with some new products and relatively low fuel prices and the magic takes over.”

A harsh winter in much of the U.S. may also be fueling the SUV surge, Frost said.

“Last winter taught people you’d better have an SUV.”

To contact the reporters on this story: Tim Higgins in Detroit at thiggins21@bloomberg.net; Keith Naughton in Detroit at knaughton3@bloomberg.net

To contact the editors responsible for this story: Jamie Butters at jbutters@bloomberg.net Robin Ajello


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