Thought sales of big, expensive SUVs and pickups were on life support? It would seem that reports of their death have been greatly exaggerated as sales for some of the largest, thirstiest luxury models, including the Cadillac Escalade ESV, Mercedes-Benz GL, and Toyota Tundra have shown a surprising resurgence.
"There are buyers for whom, that's the vehicle they still want, for what their needs are, and gas prices won't deter everyone," says Stephanie Brinley, senior manager for product analysis at Tustin (Calif.)-based AutoPacific.
For the entire U.S. auto industry, light trucks still constitute more than 50% of sales, and the vehicles are on track to regain in 2007 the market share that was lost in 2005 and 2006. That share growth includes, but is not limited to, a growing number of car-based crossover vehicles that look like trucks but drive more like cars.
Light-Truck Sales Recovery
In fact, sales of most big, luxury sport-utility vehicles are up this year, like the Land Rover Range Rover, along with several large (and expensive) SUVs from nonluxury brands, like the Chevrolet Suburban, according to AutoData in Woodcliff Lake, N.J.
Overall, sales of light trucks—that is, excluding medium and heavy trucks, like big delivery trucks and 18-wheelers—were down 2.6%, to about 7.8 million year-to-date through November, AutoData said. But cars were down slightly more, including planned cuts in rental-fleet sales, which affect cars more than light trucks. Total car sales were off 3% year-to-date, to about 6.9 million, AutoData said.
Given high gas prices, some of the change in truck sales reflect a logical shift out of medium and large SUVs and into small SUVs like the Jeep Wrangler. The Wrangler also was totally redesigned in the fall of 2006, including the first-ever four-door model, the Wrangler Unlimited. With December numbers still to be tallied, 2007 Wrangler sales already have broken an eight-year-old full-year sales record.
Sales of small SUVs, the segment that includes the Wrangler, totaled 301,625 year-to-date through November, an increase of 22.7% vs the year-ago period, according to AutoData.
At the same time, the midsize SUV segment was down 13%, to 1,027,831 (BusinessWeek.com, 12/14/07), and large SUVs were down 7.8%, to 510,417, AutoData said. That includes a drop-off not only for the Chevrolet Tahoe, but also import-brand models like the Nissan (NSANY) Armada and lame-duck Toyota (TM) Sequoia, which is being replaced with an all-new model based on the new Toyota Tundra pickup.
Luxury SUVs Flourish
Meanwhile, luxury SUVs were scarcely down at all: just 0.9%, to 201,472, AutoData said. "For a high-dollar car, people with that level of discretionary income can absorb gas fluctuations," says Brinley of AutoData.
To be sure, big discounts are also helping to move many of the big trucks that are selling well this year. For instance, through Jan. 2, General Motors (GM) is offering zero-percent financing or $4,500 cash on leftover 2007 Cadillac Escalade EXTs, or $1,000 cash on 2008 models. The Escalade EXT is a full-size, four-door SUV with a pickup bed in the rear.
Those incentives can help pay for a lot of gas—just not as much as they could a year ago. According to the American Automobile Assn., in late December the price for regular gas had climbed about 64¢ per gallon from a year ago, to the current national average of just under $3 per gallon, with California and New York averaging more than $3.20 per gallon.
Light-truck share of the U.S. market peaked in 2004, at 54.2% of light-vehicle sales, according to Automotive News sales figures. That was also the year gas prices first spiked above $2 per gallon.
Light-truck share shrank to 53.1% of the U.S. light-vehicle total in 2005, then to 50.9% in 2006, the lowest level since 2002, Automotive News said. Light trucks first broke 50% of the U.S. market in 2002, according to the publication.
The Demand Didn't Wane
This year's sales results show that many shoppers never stopped wanting big SUVs. With high gas prices, some of them may have needed an extra push in the form of incentives, while others can simply afford it.
And after all, says Brinley, people wouldn't buy big trucks at all if the only thing they wanted was good gas mileage. "People who have chosen to buy those vehicles understand higher gas prices," she says. "They know that going into it."
See BusinessWeek.com's slide show for a look at all the surprising sellers in the luxury SUV and pickup category for 2007.