Are Sport Utility Vehicles About to Become Passe or Simply More Affordable?
Sport utility and crossover vehicles have gradually become hotter than the surface of the sun as the public has come to treat sedans with the sort of disdain usually reserved for an old high school flame. It was decent while it lasted, but now you don’t even really want to acknowledge that it was ever a part of your life.
Sales have reflected this and automakers have hurried to supply an eager market with utility vehicles. While some did not quite meet demand, and have suffered for it, others are seeing rising incentives to meet the growing inventory surplus — giving us our first indications that interest in SUVs and crossovers has its limits.
Incentives on sport utility vehicles increased $704 from a year prior to $3,663 last month, according to J.D. Power dealer data shared by Bloomberg. It’s a swell of 24 percent against the 13 percent rise for the total market average, according to publicly unavailable data from the Power Information Network.
The current model year Buick Enclave and Chevrolet Equinox are both offering four figures of incentives and they’re just the tip of the iceberg. Jeep retailers are offering $4,500 in rebates on the current model Cherokees and the Compass can be leased for under $200 a month with $2,999 due at signing. Ford offered a $199 per month lease with no money down on Escapes in several western U.S. markets. As expected, deals on outgoing 2016 model year vehicles are even better.
The Toyota RAV4 picked up almost $1,000 in additional discounts while Honda’s 2016 CR-V saw about $700 with 0.9% financing for up to 60 months or 1.9% financing for 61-72 months in some states. Meanwhile, Chevrolet has outgoing Tahoe and Suburban SUVs leaving dealer lots with no-interest loans for 72 months and thousands in potential cash returns.
After years of growth for the segment, vast discounting on favored models could be an indication that carmakers have overestimated demand as new models pour into the market and current production lines increase their output.
“There was an overbuild of SUVs,” Jeff Schuster, an analyst with researcher LMC Automotive, told Bloomberg. “The manufacturers wanted to make sure they’re not caught without SUVs to sell.”
LMC projects sport utility vehicles to grow to 43 percent of the U.S. market by 2024, that’s up from 30.7 percent when the crossover boom began in 2012.
“It’s certainly plausible to look at SUVs as 50 percent of the market,” Schuster said. “It’s not out of the realm of possibility.”
Although he doesn’t believe the current pace of growth to be sustainable. The segment grew so quickly and automakers have responded so aggressively, that the market might quickly become over-saturated.
“The competition in the SUV segment is fierce and is going to heat up even further as you have more new entries and redesigns,” he explained. “That competitive pressure will intensify as the year progresses. There’s more price pressure ahead.”
[Image: Honda]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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I need a vehicle to signal that I'm doing decent financially and that although I no longer have an STD I am not totally afraid of contracting another one.
This is more of supply catching up with demand which eventually will happen when something is in short supply the manufacturers will eventually make more of to meet the demand. I doubt that cuvs are losing their appeal as much as more manufacturers are making more cuvs and that there are more choices. Yes there are cuvs that have not had a major redesign but this might still happen if all the cuvs were redesigned. This has happened in the half ton truck market and eventually will happen in the midsize truck market as more manufacturers enter the market and production capacity is expanded.