GM to Honda SUVs Get Sleeker Luring Buyers to Shun Sedans: Cars

Aug 11, 2014 12:01 am ET

Aug. 11 (Bloomberg) -- When Dennis Bashaw last considered buying a sport-utility vehicle a decade ago, he saw them as gas- guzzling road hogs. So he was stunned last month to find an array of compact, smooth-riding SUVs that get good mileage.

He opted for a Honda CR-V for $26,800 that’s rated for 30 miles per gallon on the highway.

“It was such a night-and-day experience from 10 years ago,” said Bashaw, a 53-year-old pharmacist in Potomac, Maryland. “Back then, they were more basic and sparse. Now you’ve got all these entertainment options, and they’re safer than ever. It’s incredible.”

Once written off as an overindulgent relic of the pre-Great Recession world, the SUV has gone from pariah of the parkway to people’s car of choice. Led by models like Bashaw’s silver CR-V, SUVs have overtaken the sedan as the most popular vehicle type in the U.S. After decades of dominance, sedans accounted 35.4 percent of new auto sales through May, while SUVs made up 36.5 percent, according to automotive researcher IHS.

“The SUV was once seen as a premium vehicle by most consumers, but they’re a lot cheaper now than they used to be,” said Jessica Caldwell, an Edmunds.com auto analyst. “There’s still the high-end, luxury SUV, but there’s an extremely diverse range of prices since they come in all sizes and styles now.”

Traditional, full-size, truck-style, body-on-frame SUVs like the GMC Yukon and the Chevrolet Tahoe continue to sell -- now with better, though not stellar, mileage. Even so, much of the growth in this vehicle category can be attributed to the rise of compact, small SUVs.

July Demand

The comeback was evident in automakers’ July sales figures. Jeep brand SUV deliveries jumped 41 percent. The Tahoe, which was redesigned in the past year along with the rest of General Motors Co.’s large SUVs, climbed 52 percent on the month. The Ford Explorer, once synonymous with the top-heavy gas guzzlers of old, rose 32 percent.

It’s not just American automakers riding SUVs to high sales. Toyota Motor Corp., the world’s largest automaker, reported record profit in the second quarter, reflecting the strength of SUVs. Meanwhile, Bayerische Motoren Werke AG, the world’s biggest manufacturer of luxury vehicles, reported the highest profit in three years as sales of its X5 SUV rose 30 percent.

American Affinity

A recovering U.S. economy, affordable monthly payment options and newly redesigned and competitive crossover utilities have led American consumers to rediscover their affinity for the SUV, a vehicle type that provides more storage than a sedan, a higher seating position than a station wagon and better styling than a minivan.

To be sure, it wasn’t so long ago that the SUV was almost left for dead. High gas prices in 2006 clobbered demand for once-ubiquitous utilities: Ford Explorer sales plunged 25 percent while Chevy TrailBlazer deliveries dropped 28 percent. Since then, small SUVs’ share of new-auto sales has increased from 8.1 percent to 13.1 percent.

Detroit, which had become dependent on large SUVs and pickups during the previous decade, were hurt as its competitors introduced smaller, more fuel-efficient crossover SUVs like the CR-V, Toyota’s Highlander and Hyundai Motor Co. Santa Fe, as well as higher-end models like the popular Lexus RX. Even Porsche, the iconic sports-car brand, got into the game with its Cayenne, and now a smaller Macan.

Global Competition

SUVs are gaining popularity in Asian and European markets where they were once shunned, said Caldwell, the analyst at Edmunds.

“It wasn’t long ago that these SUVs, globally, were seen as these American, over-indulgent, excessive cars -- way too big for their own good,” she said. “It’s come to be a lot more popular worldwide. They’ve evolved thanks in part to global competition.”

The American companies were forced to react and either introduce new vehicles or overhaul existing ones in order to compete, said IHS Automotive analyst Tom Libby.

“These SUVs have an inherent appeal to consumers since they combine benefits you can get from having a truck or a car,” he said. “The manufacturers have had to bring out more models. So now, you have these crossovers of all sizes from all brands.”

Never Again

Angie Hurst bought a Ford Explorer last August. Once built on a large, truck platform, the model was overhauled in 2011 with a unibody chassis, like a car, allowing for better fuel efficiency while offering the size and space Hurst and other SUV buyers look for.

“I’m never driving a car again,” said Hurst, of Oak Park, Michigan. “SUVs are just a lot better. I’m a short person, so riding up high is a lot better, a lot more comforting for me.”

Russ LaBarbara, 67, said he bought a Mazda CX-5 in gray for about $27,000 in July. The Charleston, West Virginia, native said the SUV combines the space of a pickup and the comfort of a sedan while offering him the power he needs to navigate the state’s hilly terrain.

“I’m loving it so far,” he said. “These SUVs nowadays do a much better job than sedans in a lot of ways. I mean, if you’ve got a family, it’s perfect for you. You’ve got the same or better fuel economy, more space, better amenities. SUVs just make more sense now.”