By on July 24, 2017

2017 Chevrolet Trax and Sonic - Images: GMPerhaps 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.2017 Honda CR-V - Image: HondaMove 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.2017 Ford Explorer - Image: FordU.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 Autofocus.ca and the founder and former editor of GoodCarBadCar.net. Follow on Twitter @timcaincars.

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52 Comments on “One Consequence of America’s Increasing Fondness for Crossovers? Automakers Laughing All the Way to the Bank...”


  • avatar
    NoID

    Don’t assume those AWD systems are not complex. The system on the FCA cute-utes is nothing if not “fancy,” and I dare say the GM system is likewise puttin’ on the ritz.

  • avatar
    dwford

    I’ve been saying this for years. Same platform, engines, transmissions etc, but $thousands more. Crazy.

    • 0 avatar
      random1

      And they’re often not even “disguised” like some of these examples. Golf Sportwagen vs Alltrack. Volvo V90 vs V90CC(or whatever it’s called). I mean, there’s not even drivetrain differences. Raise it an inch, make it a bit uglier by slapping some nonsensical plastic bits, charge more. I mean, you can’t blame them!

    • 0 avatar
      sportyaccordy

      How much more useful is something like a Highlander than the Camry it’s based on? You get what you pay for.

      • 0 avatar
        joeaverage

        Hatchback or wagon configuration, upright seating not on the floor, AWD, and a more robust suspension.

        Yeah the CUV is much more useful than the sedan if you are doing anything more than commuting/traveling.

        Should the price premium be so high? Maybe not.

        • 0 avatar
          zoomzoomfan

          This.

          I hate to admit it, but when travelling with baby (my wife and I have a 5-month-old), my wife’s vehicle (2013 CX-5) just holds all the required stuff (stroller, diaper bag, playpen, etc.) better and easier than my car (Mazda6) does.

          It has nothing to do with sitting upright and higher ground clearance. The hatchback body style is just more efficient when it comes to hauling things. That’s why, if they sold the Mazda6 wagon here, I’d own one. But, Americans don’t want wagons. They want SUVs. They want that efficient hatchback shape without the hatchback looks. That’s just how it is and it’s not changing, regardless of vehicle prices or gas prices.

          Most 4-cylinder CUVs get just as good gas mileage as their sedan counterparts these days, so even a surprise (unlikely) uptick in gas prices wouldn’t stave off the onslaught of Rogues, CR-Vs, RAV-4s, CX-5s, etc.

          Our CX-5 averages 27 MPG in all city driving and we’ve gotten as high as 37 MPG with it during a long trip. It’s basically a Mazda6 that happens to sit up high and make my wife think she drives an SUV. And I’m fine with that as are many, many others.

          • 0 avatar

            You require a stroller, diaper bag, and playpen.
            There is your mistake.

          • 0 avatar
            zoomzoomfan

            Not sure how to not bring those things with us when we’re going on an overnight trip with an infant. I don’t want him sleeping with us for fear of rolling over on him or him falling off the bed. Enter playpen for him to sleep in. I can’t carry him all day if there’s a lot of walking involved, especially if I have other things (shopping bags or luggage) to carry. Enter stroller. And where do I put his diapers and wipes, and bottles? In my pockets? No. Enter diaper bag.

  • avatar
    SCE to AUX

    “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.”

    This was my point about why Ford is killing off the Fiesta in the US. They just don’t need the hassle of potentially higher import barriers combined with low margins.

  • avatar
    thegamper

    YES!!!

    Thank you. Ive been saying this for quite some time. This is why there are no wagons sold in the US, because they can only charge sedan prices. Well…that and maybe a lack of buyers, but it doesn’t help when they can charge 30% more for an inch of ground clearance.

    AWD is typically a $1500-$2000 or so add on. Does everything else justify the increase in cost. No it does not. But for some reason people line up to pay it. Same holds true for Trucks. They have all the same parts as cars (mostly), their development costs are amortized over even more sales than cars or crossovers. The additional amount of steel, aluminum, leather and rubber that goes into a truck does not come close to justifying the price premium charged over a lower volume midsized sedan.

    Cha-Ching!!!! Another reason that midsized sedans may go out quicker than in the natural course. No incentive to sell them

  • avatar
    Cactuar

    It is true:

    2018 Odyssey: $34,890 (CAD)
    2018 Pilot: $40,090 (CAD)

    Almost the same vehicle but with AWD. That must be quite a nice bump in margin for Honda.

    • 0 avatar
      Pete Zaitcev

      Nowhere near the same vehicle, actually. It’s blatantly obvious in e.g. Panoche area in California, where you have to leave the Ody on the ridge roads, and can drive Pilot all the way to camp. Bottom line, repeating the silly anti-CUV hate and propaganda endlessly isn’t making it persuasive when one can actually test the vehicles in question. Only takes a 3 hour drive from San Francisco.

      • 0 avatar
        quaquaqua

        Oh pleeeease. The AWD system on the Pilot is barely capable off road. 99% of the people who own a Pilot will NEVER “go off road”. So that’s a moot point. Now, you can definitely compare the FWD Pilot and the FWD Odyssey. Same cars, wildly different prices, customers getting shafted.

        • 0 avatar
          bikegoesbaa

          So your definition of “getting shafted” is “getting the car you want for a price you a willing to pay”?

          Interesting take on it. If these customers feel like they’re getting taken on the Pilot why don’t they just buy an Odyssey? Clearly they feel like the additional price is fair.

        • 0 avatar
          joeaverage

          Barely anybody goes off road so I shouldn’t buy AWD? I’ve had two different iterations of AWD for the past twenty years. Both have been very useful in low traction on and off road situations.

          Barely anyone goes off road? Well, some of us make very good use of AWD.

          • 0 avatar
            joeaverage

            Also: do your homework. There isn’t nearly as much mechanical overlap between the Pilot, MDX or Odyssey as you think there is.

        • 0 avatar
          JohnTaurus

          “99% of the people who own a Pilot will NEVER “go off road”.”

          Not everyone lives in the concrete jungle. Lots of rual areas with poor roads.

          My cousin lives less than a mile from me, but its a dirt road that washes out and floods often during periods of consistent rainfall (like this summer so far).

          She bought a 2wd 2009 CR-V last week, it doesn’t need AWD but a bit more ground clearance and a more robust suspension help.

          Her last car, a 98-02 Accord, bottomed out all the time and began to fall apart after just a few years. Since then, she’s had an Expedition 2wd, downsized to a first gen MDX, and now has the CR-V.

          I wouldn’t choose a car-based utility, but I understand the appeal. Its more than just something people do for no reason whatsoever.

          “Same cars, wildly different prices, customers getting shafted.”
          I do feel bad for people who go to buy an Odyssey and are forced at gunpoint to spend more money on a Pilot they don’t want.

  • avatar
    genuineleather

    While I agree that there is a “crossover premium”, there are a lot of mitigating factors:
    -SUVs are often better-equipped (Pilot has standard V6, Accord does not, etc) and offer higher trim levels and features than similarly-sized cars (Ford’s Platinum trim, power tailgates, etc.)
    -Incentives are highly skewed (Pilot= little to no incentives, Accord, major incentives). If there wasn’t a tremendous over-supply of cars, this wouldn’t be such a big factor.
    -SUVs attract older, higher-income buyers who are willing to pay a premium for image and features, while compact (and increasingly midsize) cars pull in value-conscious shoppers who want a new car at a low price. As a result, a far higher percentage of SUVs are sold in top trim levels than cars, which are more likely to be the “lease special” trim.

  • avatar
    hubcap

    I understand why a couple who just downloaded baby 1.0 would want a crossover. And I know everybody has a preference and that preference usually rules the roost or at the very least has a strong showing regarding their choice.

    But, I don’t know why a swinging single would choose an HR-V/CR-V et al. over a car. Sure, there are mitigating factors and I’m looking at this through enthusiast eyes but I don’t get it.

    • 0 avatar
      kefkafloyd

      As a (not so) swinging’ thirtysomething male, you could say the same thing about me buying (or wanting) a pickup truck with some frills versus the C-segment hatchback that I currently drive.

      TBH I’d love an extended cab Canyon, but that would mean buying a GM product again.

      An “enthusiast” would buy a CX-5 anyway.

    • 0 avatar
      bikegoesbaa

      “But, I don’t know why a swinging single would choose an HR-V/CR-V et al. over a car.”

      Non-enthusiast people like to sit up high, they feel safer in a vehicle that looks tougher, and the like the practicality of a hatch back without the “cheap dork” stigma associated with an actual hatchback.

      I don’t want one, but I get why most people do. The ride like cars, handle enough like cars for casual drivers, and get almost the same fuel economy; but are regarded as cooler and more useful and generally have better packaging.

      There’s no shortage of 25-35 year old single people where I work who either drive new CUVs or aspire to do so.

      • 0 avatar
        joeaverage

        Maybe the swinging single wants to carry his stuff around – reno a house, travel, outdoor activities, etc.

        More complicated to those things with a roadster. It can be done with a trailer but…

  • avatar
    TW5

    I’ve been harping on CAFE a lot, but this is another unintended consequence. When people sell or trade-in their old sedans, the fuel economy performance of vehicles has improved so much in a short time that drivers can ditch their old sedans and get better fuel economy in a CUV.

    Anyway, the good times will probably soon come to an end. Vehicles the size of a Lexus NX will need to make around 35-36mpg combined in 8 years. The current NX hybrid makes 31mpg combined. Toyota will have to spend a small fortune upgrading air-conditioning, glazing the greenhouse, installing start-stop, and improving the hybrid system. All of the lucrative profits are being turned into R&D expenses for future models.

    In other words, you’re paying for the CAFE development work on the next-generation CUV you may or may not buy.

    • 0 avatar
      bikegoesbaa

      “Toyota will have to spend a small fortune upgrading air-conditioning, glazing the greenhouse, installing start-stop, and improving the hybrid system. All of the lucrative profits are being turned into R&D expenses for future models.”

      So you’re saying that OEMs have to develop better technology to provide more efficient vehicles?

      Not sure how that’s an “unintended” consequence of CAFE, it seems pretty explicitly intended.

      • 0 avatar
        TW5

        No, I’m saying consumers are paying an exorbitant premium for CAFE research and development expense. This is fundamentally different from the BoF SUV boom, when consumers were paying purely for the amusement and enjoyment of the investors.

        The title treated the high transactions prices as if this were 1999.

      • 0 avatar
        deanst

        The unintended consequence is that consumers move up to bigger vehicles that are as fuel efficient as their old smaller vehicles. Thus there is no fuel savings – we just get faster, bigger cars.

  • avatar
    brettc

    Stopped at the Nissan dealer last weekend to look at the 2018 Cashcow/Rogue Sport. $28K for one? What? It’s basically a lifted Versa Note with a little bit more power!

    I guess I have to hand it to the car makers for figuring out how to cash in on stupidity.

    • 0 avatar
      Dave M.

      Just spent 3 days and 1200 miles in a Rogue. I was impressed enough to sniff out potentially getting one if not a CR-V.

      5 people and luggage…maybe a tad snug for 3 in the backseat (thank goodness for two skinny teenagers), but the car handled the hills and mountains of upstate New York with aplomb. I was impressed with the overall 32 mpg at a spirited 75 mph.

      The model we had could be bought for around $25k. Not bad at all.

  • avatar
    bikegoesbaa

    You guys all know that the cost an OEM spends to develop a car is not related to what customers are willing to pay for it, right?

    “What it costs them to build it” does not determine what it sells for. This is why an OEM can sell tons of cars and still go bankrupt if “what it costs them to build it” is higher than “what people will pay”.

    Think about it in reverse. Are you willing to pay an inefficient company more for an equivalent product *solely* because their manufacturing costs are higher? I’m sure not.

    • 0 avatar
      SPPPP

      Actually, the cost of a model is directly related to what customers are willing to pay for it. The automaker can’t sell a car (and stay in business) if customers aren’t willing to pay more than the costs of development and production.

      You might say that in the long run, all cars are profitable… because all the unprofitable ones get discontinued.

      Even if an automaker gets it wrong in the short term, they will correct their error quickly, or go bankrupt.

      One other way in which the development costs and pricing power are related is that some customers aren’t willing to pay significantly more than what they perceive the development costs to be. As seen in the comments section here. This is why marketers never mention what underselling compact your new CUV is based on.

  • avatar
    Ryoku75

    This comment took SIX log-in attempts by the way, 6! And like 2-3 re submissions!

    As far as I understand station wagons have always been slightly more expensive, you paid just a tad more for extra practicality (or in rare cases ground clearance). Its not nearly as bad as “luxury” models were at a time, when you basically payed double for a nicer badge.

    For the CUV we have the AMC Eagle to thank for this, a car that was essentially a Hornet with extra wood trim, 4WD, and ground clearance. nevermind that the Eagle actually was a good off-roader as were some of its AWD competitors (even the basic Tercel wasnt bad in the mud).

    As for modern CUVs, I get why someone might want extra space (thus I’ll never get junk like the Juke), extra ground clearance is very handy as bad as our roads have become (though tall rims negate this), cant say I understand the desire for AWD when you’ll only use it for one season of the year.

    • 0 avatar
      SCE to AUX

      Yes, the web site isn’t working right today, and it’s done this before. I’ve had the same problems today. Simply refreshing the screen used to resolve it, but not so much now.

      • 0 avatar
        brandloyalty

        I’ve found recently that if I have more than one ttac tab or window open, logging on will fail. I can cure the serial failure by closing ttac tabs and closing the browser before starting over.

    • 0 avatar
      sportyaccordy

      Thankfully, other people’s car purchases aren’t for you to “get” ;)

      Much of the same complaints of irrationality could be lobbied at any purchase beyond a base Nissan Versa.

    • 0 avatar
      joeaverage

      We used our AWD to avoid getting stuck at the beach today. Watched a minivan a couple of months ago fail to exit a wet field. I used our other car’s AWD a few weeks ago to cope with mud.

  • avatar
    bluegoose

    I’ve always felt that Crossovers and SUVs hit that sweet spot between couples. A car that looks like a truck allows a man to “feel like a man” while it satisfies a woman’s safety and security requirements.

    The Utility requirement doesn’t hold as much water with me. You can get more cubes of space in a Honda Fit than you can in some of these other compact SUVs.

  • avatar
    dmoan

    This didn’t work out to well for Fiat 500..

  • avatar
    SCE to AUX

    People are demanding AWD because they’ll die without it. Subaru, Jeep, and the entire CUV/SUV segment are all cashing in on this singular fear.

    • 0 avatar
      dmoan

      Because most local towns have cut budget for salt and plows during winter times and traffic and roads are much worse . I remember a decade ago I had no problem driving my 00 civic during the winter but this day and age it is suicide.

    • 0 avatar
      Dave M.

      You’re missing the point why many of us like AWD. We don’t have snow but do have torrential downpours. My AWD is awesome in those conditions as far as keeping a sure foot on the road. It’s also great for light trails when camping or exploring.

      No one spooked me into buying AWD – I liked the way it felt during the test drive. Handling weather conditions was only a bonus. I won’t buy anything but AWD since the fuel penalty is now minimal.

  • avatar
    Thatkat09

    My sister just leased a base model Trax. Apparently it was less a month than a Sonic…go figure.

    • 0 avatar
      turbosasquatch

      Yeah, I was looking at leasing a new car but it’s often cheaper to lease the equivalent crossover because of the resale value. On the other hand, used sedan prices are crazy. 50% off on some models

  • avatar
    brandloyalty

    People are happy to pay more for cuv’s out of respect for the backs of the assembly line workers who install dashboards, seats etc.

  • avatar
    brandloyalty

    The answer to the mystery of why buyers are switching toward cuv/crossovers may be found by tallying the proportion of advertising dedicated to them as opposed to sedans. It’s easier to charge people more for something new to them and made desirable by heavy promotion, than it is for something they are very familiar with.

    Why is the truth about cars so reluctant to address the degree to which car manufacturers manipulate the population to drain their wallets? That truth might include the resulting drain on the nation’s resources such as capital. Beacuse it might pop the bubble that even this site depends on maintaining.

    The existence of $1000 molded plastic headlight clusters, no more complex than a $50 toy dump truck, is indicative of the degree of the scam.

    • 0 avatar
      bikegoesbaa

      “The existence of $1000 molded plastic headlight clusters, no more complex than a $50 toy dump truck, is indicative of the degree of the scam.”

      Want to know how I know that you don’t have any direct experience with plastic product engineering?

    • 0 avatar
      Dave M.

      The auto industry has been “upgrading” us for 100+ years. What’s your point?

  • avatar

    оk

  • avatar
    stingray65

    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.

  • avatar
    Zackman

    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.


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