By on March 27, 2019

2017 Jeep Compass Trailhawk - Image: © Timothy Cain

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.

Image: Hyundai

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]

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14 Comments on “While Utility Vehicles Are Nowhere Close to Peaking, a Study Reveals Signs of Saturation and Struggle...”

  • avatar

    I have a near-zero chance of buying a SUV for my next vehicle, unless it’s something old ‘n’ funky from the 1960s-80s.

  • avatar

    Pretty much a given that the market will be saturated, as the law of supply and demand has not been repealed.

    (picking numbers out of the air for illustrative purposes)

    Out of the 17M vehicles produced per year, say 8M are SUVs, but, because SUVs are “the thing to have”, there are 9M people wanting to buy one. Prices for the SUVs available are bid up, and the automakers pat themselves on the back for grabbing a 20-30% GP on them.

    Meanwhile, the 9M cars built are only sought by 8M buyers, so prices and margins collapse.

    Some cars are discontinued, and the plants are changed over to building SUVs, because it appears that is the thing to do to increase profits.

    So then there is supply of 10M SUVs, but still only 9M people wishing to buy an SUV. Price and gross margin collapse.

  • avatar

    More lifted station wagons than you can shake a stick at……

  • avatar

    Some manufacturers are going to in trouble if this is true. But that is the price you pay for worrying about quarterly results and the stock price.

  • avatar

    “122 SUVs exist on the market, with legions more to come”

    Sounds like close to peaking to me.

  • avatar

    People are yelling about crossover saturation and praying for a gaspocalypse to smite all the hatch/wagon infidels

    But the real time bomb is the overall market. Really put everything in context. The rate of growth in privately owned cars is outpacing population growth:

    The average age of cars on the road continues to increase- I think this year we crossed the 12 year mark. I.e. cars are more durable than they’ve ever been. Young people are not as likely to get their licenses as before, killing and possibly delaying demand. And on top of all that manufacturers are moving away from affordable sedans to more expensive crossovers (to match demand, which is what they should be doing). So everything points to a downturn.

    Cracks are already beginning to show in the crossover world. I just read an article I imagine will show up here about the slowest selling cars of 2018- the XT5 and Stelvio were on that list needing nearly half a year to move. Those were just in the bottom 26… I’m sure there are many others sitting on lots for months. When push comes to shove the weak will get culled, and this administration, for better or worse, will throw no lifelines.

    • 0 avatar

      The Cadillac and Alfa luxury models aren’t representative. Look at the lowest priced Jeeps and you’ll see where the real market is right now.

      FCA could kill it if they let Italian designers put too many curves in, but the square box Jeep still sells well at the low end, while the optioned out Grand Cherokee, slightly larger than the original Wagoneer, is seeing softening sales. The luxury segment is fairly small, but the low priced utility vehicle market is alive and well. Those 12-20 year cars on the road will have to be replaced sometime.

      Price rules. When the extra features cost too much and the sloping roofs that turned sedans into four door “coupes” reduce rear headroom, the hatch opening, and utility, the market will move back to the basic box SUV: the Wrangler.

  • avatar

    We’ll be in the market at the end of the year for a midsize 7-8 seater for our family of five. Looking at the options (no particular order) we have:

    1. Kia Telluride
    2. Hyundai Palisade
    3. Toyota Highlander
    4. Honda Pilot
    5. Nissan Pathfinder
    6. Mazda CX-9
    7. Subaru Ascent
    8. Chevy Traverse/GMC Acadia
    9. Ford Explorer
    10. Dodge Durango
    11. VW Atlas

    I’m not going to name the luxury brands that we can’t afford, but yeah, looks like the midsize segment is well covered. I definitely won’t bemoan the selection and choices, but I am hoping it equates to competitive prices and big incentives when it comes time for our purchase.

  • avatar

    “interior volume, cargo capacity, and ease of entry/egress top the list” (of reasons for buying)


  • avatar

    “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.“

    Seems very unrealistic, it’s akin to combining minivan and station wagons in the same grouping, only more absurd. I know a lot of people that want a SUV, the only crossover on their list would probably be the Grand Cherokee. Their is a very large difference between a BOF truck based vehicle and a unibody car based. Literally truck vs car. If we want to combine all segments into one sure but lumping truck based vehicles in with car based just makes no sense. I would make a bet that the buyers of SUVs do not have a large overlap with buyers of Crossovers. I.e. you don’t go to a lot looking for an SUV and leave with a crossover.

    A crossover is going to be significantly more likely to face exhaustion simply because the market is flooded with entrant that all offer essentially and generally the same product. SUVs (particularly sought after ones (solid axle)) have all carved their own segments of the market and sell to people that specifically want those vehicles and come in search of those exact vehicles.

    One is a trendy product that differs little from the transportation pods that modern cars have become, the other offers value and capability and typically is much more desirable as seen by resale.

    • 0 avatar

      Yea, resale value on those CR-Vs and RAV4s are abysmal. Dealers sit on them for months…………………….

    • 0 avatar

      Do you seriously think that most buyers know/care about the underlying chassis construction? Most of the BOF SUV’s are used as grocery-getters and commute/carpool machines, where the construction makes no difference whatsoever.

      • 0 avatar

        “Do you seriously think that most buyers know/care about the underlying chassis construction? Most of the BOF SUV’s are used as grocery-getters and commute/carpool machines, where the construction makes no difference whatsoever.”

        My suspicion is that, first, you are correct, that most people really don’t care.

        Second, what probably decides whether an SUV will be BoF or unibody is whether there is already a suitable platform in production that can help amortize development costs. A large SUV can leverage an existing BoF pickup platform, so that is what is used. A small or midsize SUV can leverage a unibody passenger car platform, so that is what is used.

        Where it will get interesting is when the passenger cars are gone, so whatever platform an SUV uses will be a bespoke SUV platform.

  • avatar

    Sooner or later everyone who wants to live their life in sweatpants is going to own a couple pairs.

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