Detroit Report: Ford Predicts Explosive CUV Growth

Photos

Sales of traditional, truck-based sport utility vehicles have declined by double digits - 13.5 percent overall, dropping by 400,000 units for 2005. (Photo: Trevor Hofmann, American Auto Press)

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. (Photo: Joseph Cabadas, American Auto Press)

Car-based CUVs, such as the Ford Freestyle or the Toyota RAV4, have different attributes that appeal to many more people. (Photo: Ford Motor Company)

Since 2000 when there were only 14 crossovers on the market, 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. (Photo: Mazda U.S.A.)

The best selling crossover in the U.S. is the Ford Escape at 153,000 units, now available with a gasoline-electric hybrid drivetrain. (Photo: Ford Motor Company)

A new Aviator CUV, based on the Ford Fusion platform, will be replacing Lincolns small sport-ute for the 2007 model year. (Photo: Ford Motor Company)

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.

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