General Motors says that crossovers outsell cars and pickups in the U.S. retail automotive market. Here’s why that happened and what it means for you and for automakers going forward.
In its most recent sales report, General Motors highlighted its truck and crossover sales and downplayed low car sales, just as it has for many months. However, what jumped out at us was the company’s fact statement that “Industry-wide, crossovers now account for 40 percent of the retail industry, up from 37 percent a year ago.” Generally speaking, a crossover is defined as a vehicle taller than a car, with some all-weather and all-road capabilities beyond what cars usually have, and built with a unit-body construction, like a car. They differ from SUVs that are built similarly to trucks with ladder frames underneath with the drivetrain and body sitting inside and atop that rugged foundation. A Chevy Tahoe or Suburban is an SUV, a Chevy Traverse or Equinox is a crossover. Another example is that the Toyota Highlander and RAV4 are crossovers, but the 4Runner and Sequoia are SUVs.
We trust GM’s assertion because we track certain companies’ sales closely each month. Slowly, but surely the Toyota RAV4 with its 27,000 units sold in November sales is gaining on the Camry’s 31,000 monthly sales volume. What we consider a ‘family car” is now, more often than not, a crossover and not actually a “car.” Over at the premium brands, we can already see where the market is headed. The mid-size Cadillac SRX crossover is the top-selling Cadillac. And not by a little. It outsells the Escalade SUV, ATS sedan, and CTS sedan – combined. Over at Lexus, the same is true. Its RX350 crossover is the top-selling Lexus vehicle with twice the sales rate of the ES350 sedan, Lexus’ second most popular vehicle. Lexus new NX200t entered the market last year selling better than all its cars but one.
How we arrived at this situation is a combination of obvious and not so apparent reasons. One clear reason is the better utility the large rear hatch and high cargo roof offered by crossovers compared to the trunks of cars. Another is the raised up driving position of crossovers. Drivers feel more in control and feel they can view the road better in the slightly elevated seating position that crossovers offer. In parts of the U.S. where snow is an issue, drivers learn they can see over snowbanks at intersections in crossovers, but not in sedans and coupes. It is generally easier to get in and out of crossovers than cars as well. Older Americans learn this when they try their adult kids’ crossovers and then they buy one too.
Trucks are still growing in sales. GM, for example, has sold more trucks month over month for the past 20 months. Cars are what are being replaced. Crossover sales gains outpace truck growth at GM and in the broader market. Crossovers offer much of the real-world all-weather utility than SUVs and pickups do, but at a significantly lower fuel cost.
Some reasons may not be as apparent. EPA mandates have made it harder to improve sedan and coupe fuel efficiency. They are already more or less optimized for great fuel efficiency due to their shape. However, the EPA took a very complex and odd formula for fuel efficiency gains that automakers have found works better for them when they build crossovers. Subaru was the first to exploit this. Its top-selling Outback and Forester models have long been categorized as “light trucks” which have lower fuel economy targets than do cars. Automakers are also realizing that customers will pay a bit more for a crossover than they will a sedan. Buyers see the AWD and other crossover elements as having value, thus average transaction prices are a little higher.
Now that crossovers are the largest part of the retail market watch for automakers like Nissan to add more hybrid models, perhaps to its Rogue, just as Toyota did recently with the RAV4. Also, look for the mainstream automakers to boost content in their crossovers like Honda did with its surprisingly-well equipped CR-V Touring. The inevitable, and entirely beneficial, “Competition breeding excellence” we have seen in the mid-size and compact sedan market is well underway in the compact and mid-size crossover segments.