Detroit Report: Ford Predicts Explosive CUV Growth

Will the CUV Change the Way We Drive?

The

SUV is dead. Long live the SUV. Sales of traditional, truck-based sport

utility vehicles have declined by double digits - 13.5 percent overall,

dropping by 400,000 units for 2005. The numbers are worse for large

SUVs as sales of Ford Expeditions, Chevy Tahoes and Suburbans, GMC

Yukons, Toyota Sequoias, Nissan Armadas and Dodge Durangos have plunged

an average of 18 percent, dropping from 1 million units in 2004 to

about 800,000 today.

Although some automotive journalists and

industry analysts are writing epitaphs for the sport utility vehicle

based on the declining sales of vehicles such as the Ford Explorer,

Ford Motor Co.s U.S. sales analyst provided a different view when he

spoke to the Automotive Press Association at the Detroit Athletic Club

on Dec. 8.

Although sales of truck-based SUVs are down from

their peak of nearly 3 million units in 2000, "the total SUV market

keeps growing," said Fords George Pipas.

The growth of SUV

sales is coming from so-called "crossovers" or CUVs, which are

car-based vehicles. In fact, Pipas predicted that crossover sales would

surpass SUV sales in 2006, nearly three or four years earlier than

previous projections.

Currently, about 2.45 million

traditional SUVs have been sold through 2005 versus sales of 2.24

million CUVs, and the sales figures for those segments will flip next

year, Pipas forecasted.

Crossovers "are the competition to

traditional SUVs... but CUVs will take the last barriers to entry away

from the sport utility market," Pipas said. "In other words, some

people dont want to buy an Explorer or Expedition or a competitors

product because its too big, too hard to park, not enough fuel economy

or maybe because its got too much (height or width) or because its

too bouncy like a truck."

But the car-based CUVs, such as the

Ford Freestyle or the Toyota RAV4, have different attributes that

appeal to many more people.

"They are generally more fuel

efficient, more comfortable ride and handling, theyre not as high off

the ground," Pipas said. "So, the SUV segment in general is going to

keep growing."

There are several reasons for the decline of

traditional SUVs and the rise of crossovers, which Pipas added will be

considered "the vehicle of this decade." Vehicle sales are being

influenced by the availability of a wide variety of CUV models,

customer demographics, and fuel prices that have risen and have

remained at more than $2 USD per gallon for a long

time.

On the sales side, Pipas pointed out that crossovers

were still just a niche segment of the SUV market in 2000, when only 14

models were available and total sales were 541,000 units. This segment

only started in 1996 with the introduction of the Toyota RAV4 and was

followed by vehicles such as the Honda CR-V and the Ford Escape, while

many had sheet metal designs that made them look more like traditional

SUVs.

Since then, there are now 41 different crossover models

offered by automakers in North America, and that number is expected to

reach nearly 50 models next year.

The best selling crossovers include the No. 1 Ford Escape at 153,000 units, the Honda CR-V at

136,000 units, the Toyota Highlander at 126,000 units, the Honda Pilot

at 125,000 units and the Chevrolet Equinox at 121,000 units. While

foreign automakers introduced many of the early CUVs, the domestic Big

Three have seen double digit increases in their crossover sales as new

models have come out.

Fords CUV sales increased by 32 percent

to 300,000 units during this past year, Pipas said. Meanwhile, General

Motors has seen its crossover sales rise by 28 percent to 324,000

units, and DaimlerChryslers climbed by 26 percent to 259,000 units. By

contrast, Hondas CUV sales have only bumped up 3 percent to 365,000

units, and Toyota also saw a 3 percent rise to 288,000 units.

"So,

CUV sales will be fueled by the fact that consumers have far more

choices to choose from," Pipas said. "By comparison, the number of SUV

models peaked at 50 in 2000."

Since that time, a number of

truck-based SUVs have been cancelled, such as the Ford Excursion and

the original Lincoln Aviator, so there are only about 40 models still

available on the market.

Incidentally, a new Aviator CUV,

based on the Ford Fusion platform, will be replacing Lincolns small

sport-ute for the 2007 model year, while a spin-off wearing a blue-oval

badge, dubbed Edge, will complement the larger Freestyle. Both will

integrate Fords all-new 250-horsepower 3.5-liter V6 and equally new

six-speed automatic transmission.

Consumer demographics - the aging of the baby boom generation - also play a large role in the future of SUVs and crossovers.

The

oldest baby boomers are now 59 years old, said Pipas, 58. Many are, or

soon will be empty nesters, and the idea of using "a step bar to climb

up into the vehicle is going to have as much appeal as it did four or

five years ago."

Boomers will be looking for vehicles that are

smaller and have better ride and handling characteristics, and are

lower to the ground than traditional SUVs, and that will continue to

influence manufacturer offerings. The next car buying age group, Gen X,

only have half the numbers of the boomers.

The final factor

that has led to the decline of the traditional SUV is the high price of

gasoline over the past two to three years. Consumers are now thinking

more about fuel economy than they did during the last two decades, at

least since the oil crises of 1973 through 74 and 1980.

"In

late 2002, I was at an auto conference for investors... and said that

the best days for traditional SUVs are behind us," Pipas noted,

explaining that he was looking at the rise of the crossovers back then.

"In 2002, fuel economy was not an issue when I was thinking of the baby

boomers and what they wanted, and I dont think it is the major

sustainable issue."

What the sustained rise in fuel prices has

done is accelerate the movement of some customers out of large SUVs and

into crossovers. For example, the No. 1 vehicle that many Explorer

customers are buying, when they want to switch out of an SUV, is the

Ford Freestyle CUV.

"There are a number of people who were

buying large SUVs who didnt need them," Pipas said. But, if "they need

to haul a boat or a trailer, they might stay with their (SUV)

indefinitely."

When all is said and done, crossovers will

continue to change as "designers go crazy" and make some of them look

less like traditional SUVs, he added. But, truck-based SUVs will not

disappear and therefore will remain an important vehicle segment,

though like minivans, not as large of a segment as they once were.

Regarding

CUV styling Pipas added, "More or less, the top selling vehicles in

this category look like sport utility vehicles. The early forays into

this segment were to take a car platform and put sheet metal on it to

make it look like a sport utility vehicle... today, two-thirds to 70

percent of the volume in the CUV segment looks like an SUV then about

20 percent of the vehicles look like... station wagons. The marketing

people dont like it when I say that word, but thats what they look

like."

No matter what they look like now or will in the near

future, it not only looks as if the CUV is here to stay but

that it will become one of the most dominant automotive segments. Look

no further than next months North American International Auto Show

here in Detroit, where an unprecedented number of new crossovers and

prototypes of upcoming models will debut.