While Utility Vehicles Are Nowhere Close to Peaking, a Study Reveals Signs of Saturation and Struggle

Let’s get one thing clear right off the bat: unless otherwise stated, the “SUVs” mentioned in automotive studies refer to all utility vehicles, regardless of unibody or body-on-frame construction.

Utility sales surpassed passenger car sales in the U.S. in 2016 and never looked back. There’s an ever-growing number of them out there, and, with automakers now straddling segments (the Mazda CX-30, for example), expect the market swamping to continue apace. In a new Cox Automotive study that contrasts today’s market with 2008’s (while taking a peak at the future), the answer to the question “Has the SUV market peaked?” is most definitely “no.”

The market has legs, but the passage of time means it’s showing signs of saturation — with a number of headwinds now buffeting automakers looking to clean up in this ultra competitive field.

After pushing above 17 million units in the past few years, all predictions point to a decline in U.S. new vehicle sales this year. Of that number, SUVs/CUVs will make up a larger part of the mix. The utility vehicle segment grew 16 percent in the last two years alone.

By 2025, the compact and midsize utility vehicle segment will amount to 47 percent of the new vehicle market, Cox predicts, up from 36 percent in 2015. Compact and midsize cars, one seen as must-have breadwinners, will shrink to 26 percent of the market.

The segment’s grows is predicted on consumer surveys. When Kelley Blue Book asked car shoppers to name the types of vehicles they were considering, 56 percent listed a mainstream utility vehicle. Another 21 percent listed a luxury utility vehicle. That places SUVs on 77 percent of the population’s new vehicle shopping list. Only 58 percent mentioned a mainstream or luxury sedan.

Greater choice (122 SUVs exist on the market, with legions more to come) spurs these sales and, while few SUV customers state that low gas prices had anything to do with their buying decision (interior volume, cargo capacity, and ease of entry/egress top the list), low pump prices certainly haven’t harmed the trend. Your average utility vehicle returned 23.7 mpg combined in 2018, up from 18.6 mpg in 2008.

It’s a market that’s getting full, too. And pricey. Between 2012 and 2018, the average transaction price of a compact utility vehicle rose 10 percent to $28,920. Midsizers saw their ATP rise 14 percent to $38,187. While the addition of luxury models helped hike the averages, some of the price inflation can be attributed to more standard features offered by automakers desperate to one-up rivals with very similar offerings. It’s in the content category where the battle will really be waged in the coming years.

This isn’t to say that some SUVs and crossovers aren’t a good value, especially when considering resale value. Sedan lessees looking to get into another car might discover that crossovers have suddenly become a compelling choice.

Still, rising prices, combined with an upward march in interest rates, represents a danger to affordability. Americans with incomes below $40k accounted for just 21 percent of compact utility vehicle sales in 2018, and 13 percent of midsize utilities. Inventories are also expanding as new model launches show no sign of slowing down, with average days supply growing steadily across the segment. True, crossovers boast greater margins than the sedans they’re based on, but the urge to give profits a haircut in the interest of incentivization is at odds with the general belt-tightening going on across the industry.

As SUV ownership rates rise, so too does the supply of used models sent to CPO lots after trade-in. When asked what type of vehicle they plan to trade in for their next SUV purchase, 41 percent of compact SUV buyers said a SUV/CUV and 48 percent of midsize SUV buyers said the same. Only 19 percent of compact SUV intenders said a sedan, a figure that drops to 13 percent for midsize SUV intenders. The greater affordability (and availability) of three-year-old utility vehicles represents another headwind for new vehicle sales.

[Images: Timothy Cain/TTAC, Hyundai]