One Consequence of America's Increasing Fondness for Crossovers? Automakers Laughing All the Way to the Bank

Timothy Cain
by Timothy Cain
one consequence of americas increasing fondness for crossovers automakers laughing

Perhaps we oversimplify it. Perhaps we don’t.

Take one Honda Fit or Chevrolet Sonic or Mazda 2, alter the exterior body panels, clad the wheel arches or bumpers in a modest amount of black plastic, periodically route power to the rear wheels without any fancy AWD systems, elevate the roofline, and increase ride height just a bit. Use a typical small car engine, the same transmissions, and many of the same interior bits.

The result: HR-V, Trax, CX-3. Call it a crossover. Dare even to call it an SUV.

And then, according to Kelley Blue Book, charge customers $7,700 more for the privilege.

The fact that automakers are now routinely selling more SUVs/crossovers than cars is only part of the equation. Utility vehicle market share now stands at 41 percent in the United States. Through the first half of 2017, that means SUVs/crossovers outsold cars by roughly 350,000 units.

But as KBB’s Jack Nerad tells Automotive News, “A taller vehicle isn’t significantly more difficult to manufacture than a shorter vehicle such as a sedan.” Thus, a hefty percentage of those 350,000 additional sales came with little extra cost to manufactures and a whole lot of extra cost to the customer.

With average transaction prices of $24,411 in June 2017, subcompact crossover transaction prices weren’t just higher than subcompacts. They were 19-percent higher than the ATPs on compact cars, according to KBB, and very nearly on par with midsize car transaction prices.

Move one rung up the ladder to compact SUVs/crossovers such as the Nissan Rogue, Honda CR-V, Toyota RAV4, and Ford Escape and average transaction prices rose 1 percent, year-over-year, to $28,355 in June 2017. That’s 39-percent higher than the ATPs on the compact cars with which many of these vehicles share a platform and 13-percent higher than the ATPs on the midsize cars with which we so often assume they compete.

Then there are the midsize SUVs and crossovers such as the Toyota Highlander, Honda Pilot, and Ford Explorer, vehicles that require $37,572 expenditures on average, a substantial 2-percent year-over-year increase in the average transaction price in the segment. That’s 50-percent more than the ATP on a midsize car; 9-percent more than the ATP on a full-size sedan.

U.S. auto sales are down 2 percent through the first-half of 2017, but SUV/crossover volume has actually grown 6 percent, year-over-year, compared with 2016’s record results. It’s the car sector, with the much lower cost-to-customer, that’s bringing industry-wide volume down. Compared with 2016, car volume is down by roughly 422,000 units in early 2017.

Thus, as automakers lose 70,000 passenger car sales per month, automakers pick up about half that many SUV/crossover sales, plus about 8,500 full-size pickup truck sales per month, as well.

Trading deeply incentivized purchases of $20,465 compact cars for sales of $24,411 subcompact crossovers or $28,355 compact crossovers ain’t bad at all. And for the few automakers that make hay off $46,811 full-size pickup trucks, well, that’s gravy.

[Images: General Motors]

Timothy Cain is a contributing analyst at The Truth About Cars and and the founder and former editor of Follow on Twitter @timcaincars.

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  • Stingray65 Stingray65 on Jul 25, 2017

    We should be happy that automakers have figured out a way to make bigger profits by offering car based crossovers - without profits they go bankrupt - except for Tesla apparently. I expect the profit difference is even bigger than the article suggests, however, because the car versions almost certainly have greater "cash on the hood" than the crossover equivalents.

  • Zackman Zackman on Jul 25, 2017

    First thing: TTAC, PLEASE fix the wiggy login issues. It's a real pain. Thank you. Now for the subject at hand: Although I prefer a nice car, I like the taller cars like my Impala - once you reach a certain age, like it or not, it is just plain easier to get in and out of. I don't have knee issues, but am feeling the effects of aging, and a tall vehicle like my car is pretty good, but taller is better, hence the CUV. I have no problem with CUVs, Wifey's 2015 CR-V isn't something I'd really want to drive for my own ride, but it gets upper 20s mpg around town, compared to my 20 mpg. I know I have to feed those 300 horses, and usually fill up every week and a half compared to every 3½ days up to four months ago, so CUVs have come a long way and are no longer gas hogs compared to 15 years ago, if I compared it to our old 2002 CR-V. Still, I've said this perhaps a few times already; when it is time to replace my ride, I'd still prefer a car, but who knows? If the OEMs are laughing all the way to the bank, good for them. Like it or not, we have come to live in a sea of taller vehicles on the road, and increasingly it's like being in an old MG Midget between a convoy of semis! Not a comfortable place to be, so I understand why the world of personal vehicles has grown taller. Might as well embrace the future for what it is.

  • FreedMike I was lucky enough to grow up in a household with the two best German luxury sedans of the time - a manual '81 733i, and a '75 Mercedes 450SE. The BMW was a joy on back roads, and the Benz was a superb highway car. Good times. And both were dramatically better than the junkheap American luxury cars Dad had before.
  • Wjtinfwb A Celebrity Diesel... that is a unicorn. Those early A-bodies were much maligned and I'm sure the diesel didn't help that, but they developed into very decent and reliable transportation. Hopefully this oil-burner Chevy can do the same, it's worth keeping.
  • Wjtinfwb After S-classes crested the 40k mark in the early '80s, my dad moved from M-B to a BMW 733i Automatic. Anthracite gray over red leather, it was a spectacular driving car and insanely comfortable and reassuring on long interstate hauls. My mom, not really a car person, used the BMW to shuttle her elderly Mom back home to Pennsylvania from Miami. Mom and grandma both gushed with praise for the big BMW, stating she could have driven straight through the car was so comfortable and confidence inspiring. A truly great car that improved through the E38 generation, at which point the drugs apparently took hold of BMW styling and engineering and they went completely off the rails. The newest 7 series is a 100k abomination.
  • Vatchy If you want to talk about global warming, you might start here:
  • 28-Cars-Later $55,218 for a new GR Corolla:"But if OTD prices get beyond 50k there are better options"That's what people were arguing in that thread.