SUV Trend: Smaller Is Better

N E W   Y O R K, June 5, 2001 -- Americans have been snapping up huge sport utility vehicles for years, but now a new idea seems to be taking hold among the nation's car buyers: Smaller is better.

At least that seems to be the trend so far in 2001 based on the monthly sales figures for May released by several automakers last Friday.

Overall sales of sport utility vehicles, or SUVs, remain healthy despite a slumping car market. But inside the numbers lies a distinct pattern: sales of smaller sport utility vehicles, based on regular car designs rather than truck frames, are soaring. At the same time, drivers are beginning to shun the biggest SUVs Detroit and its competitors have to offer.

"We see it as the mainstream of SUV purchases in the future," says spokesman Wade Hoyt of Toyota, whose Highlander is one of the popular new car-based, or crossover SUVs. "We see car-based [SUV] sales increasing and the truck-based ones decreasing."

A Ford Story

Nowhere is this trend more evident than at the Ford Motor Co., the world's second-biggest automaker.

Ford has cut into General Motors' leading market share in recent years thanks largely to the success of its heavyweight SUVs. The Ford Explorer, the best-selling SUV in the country, moved about 37,000 units last month.

But sales of the Explorer — beset by questions about its safety and the announced recall of its Firestone tires — were down 17 percent compared to May 2000, while the still-larger Expedition and Excursion both dropped 22 percent. That means combined May sales of the three vehicles dropped by nearly 13,000, compared to a year ago.

Picking up the slack for the company, however, is Ford's Escape, a smaller SUV based on the chassis of the Ford Contour (a sedan the company no longer makes). Despite a series of recalls after its debut last fall, the Escape has become the best-selling crossover SUV in the country, according to market research firm J.D. Power & Associates. In May, Ford sold 13,362 Escapes.

"The newer forms are … providing an entrée for people into the SUV market," says George Pipas, Ford's manager of sales analysis. He calls the evolution of smaller sport utility products a "natural step" in the decadelong growth of the SUVs.

And plenty of automakers are rushing to cash in on the trend as well. In addition to Toyota's Highlander, which is based on the chassis of a Camry, the Honda CR-V and the Lexus RX-300 have been making a dent in the American market.

Does Mileage Matter?

So why are American drivers buying smaller vehicles? With gas prices soaring, have consumers finally grown weary of mammoth SUVs and the costly fill-ups they demand? Or are there other reasons?

With the price of gas averaging $1.70 per gallon nationwide, fuel costs would seem to be a concern, and crossover SUVs get slightly better mileage than their bigger cousins. The Escape costs $26 for a fill-up and gets 18-24 miles per gallon. The Excursion, by contrast, costs $51 to fill up and gets 12-16 miles per gallon.

Still, most people buying the crossover SUVs are former car owners, as opposed to owners of full-size, truck-based SUVs, meaning they are not getting better mileage from their new vehicles. According to Ford, just 6 percent of people buying the Escape are trading in Explorers to do so.

"Most people view gas prices as a temporary thing," says Derek Humphrey, manager of North American forecasting at J.D. Power & Associates. According to their research, the car models most frequently traded in for crossover SUVs are the Honda Civic, the Honda Accord, and the Ford Escort, all of which get much better mileage than sport utility vehicles.

Younger Buyers

Instead, Ford's Pipas sees additional, longer-term forces are at work. Crossover SUVs appeal to younger car buyers — according to Ford's research, 50 percent of Escape buyers are under 35 — who are beginning to buy cars in larger numbers, but have smaller budgets and no need for a family vehicle.

"Demographically, I don't see as much growth potential at the large end of the SUV market as at the smaller end of the SUV market," says Pipas.

Although Pipas expects that traditional SUVs "will still have a large number of buyers," he adds, "My personal feeling is the boomers are the ones who have been supporting the full-size and extra-large vehicles."

And then there is the perception among those in the auto industry that many owners of truck-based SUVs have never really taken their vehicles beyond the blacktop, and have ultimately conceded they don't need the most rugged features SUVs have to offer.

As Hoyt jokes, "Most people don't take them farther off-road than valet parking."