Small SUVs set to rule US market

The family sedan's decades of dominance are coming to an end: Compact SUVs are the new family car of choice. Photo / Bloomberg

Craig and Tiffany Sollman are the kind of car buyers America's sedan makers once owned: He's 41, she's 33 and their baby boy, Micah, just turned 3 months old. The Sollmans, though, never really gave much thought to a sedan before plunking down $24,000 for a tan Toyota RAV4 sport utility vehicle.

"The ride is great, it gets good gas mileage and there's enough room in the back for baby accessories," Craig said in an email because he and his wife are too busy with Micah to chat on the phone. "My wife's best friend delivered a daughter within a month of us, and they also went out and got a Toyota RAV4."

The family sedan's decades of dominance -- starting with the Chevy Bel Air in the 1950s through the Toyota Camry of today -- are coming to an end.

Compact SUVs including the RAV4, Honda CR-V and Ford Escape are the new family car of choice.

Small sport-utes started outselling the Camry, Honda Accord and other midsized sedans last summer; this year, they will overtake traditional cars to command the largest share of the U.S. auto market for the first time, according to researcher LMC Automotive.

"Sedans used to be the bread-and-butter segment, but now compact SUVs have become the go-to vehicle," said Jeff Schuster, senior vice president of forecasting at LMC in Troy, Michigan. "There's really been a shift in taste across the board."

Driving this dramatic departure is a society that likes to ride high and live large.

The modern SUVs bear little resemblance to the rugged roustabouts of yore. They don't guzzle: A CR-V gets 33 miles per gallon on the highway. They don't rattle your bones: Many are built on smooth-riding car chassis. They're affordable: The average price is $26,400, just $700 more than a midsize car, according to Edmunds.com.

They're also more broadly appealing than the small SUVs Toyota and Honda introduced in the late 1990s. Back then, they were disparaged as "cute-utes," lacking the power and prestige of the big Hummers and Navigators Detroit was churning out.

People feel safer when they are up higher and have a better view of the road.

Today, those cute-utes have morphed -- much like flip phones begat smart phones -- into stylish models packed with the latest safety and infotainment technology.

"The compact SUV is very similar to a midsize car, only taller with more flexible cargo capacity," said Jessica Caldwell, a senior analyst for automotive-pricing website Edmunds.com.

Safety also is a driving force in this shift. Craig, who works at the local water utility in Greenville, South Carolina, said his wife feels more secure in the RAV4 because she rides above traffic.

"People feel safer when they are up higher and have a better view of the road," Caldwell said. "Whether it's true or not, that doesn't matter because that's the perception."

In this case, reality does match perception: Small SUVs have a death rate of 23 driver deaths per 1 million vehicles, compared with 35 for midsize cars, according to an analysis of federal crash data by the Insurance Institute for Highway Safety.

The SUVs have a weight advantage, "and more weight is protective in crashes," said Russ Rader, an IIHS spokesman.

There's also a safety advantage in sitting higher in the vehicle because that puts a driver a little above the point of impact.

All these attributes have given compact SUVs cross- generational appeal. Baby boomers, who spurred the SUV craze a quarter-century ago, are moving down from big rigs into the smaller models as their children leave the nest. Those children, who "grew up in SUVs," now are choosing these vehicles as they enter their baby-on-board years, said Bob Carter, Toyota Motor Corp.'s top U.S. sales executive. "The under-35 millennials are buying 'em up."

To meet demand, Toyota began importing RAV4s from Japan last year, supplementing the Canadian factory it has going full tilt. Sales of the model jumped 18 percent in 2015, pushing it past Ford's Escape to become America's No. 2 best-selling compact SUV.

Carter predicts that within five years, the RAV4 will surpass Camry -- the top-selling car in the U.S. for the last 14 years.

Honda's CR-V remains the No. 1 compact SUV, with 2015 sales totaling 345,647. It came within 10,000 of topping the Accord sedan, which finished second to the Camry in the car race.

Low gasoline prices around $2 a gallon have helped fuel the latest run on SUVs -- and are even encouraging a revival in compact pickups. But the small SUVs, with car-like fuel economy, don't depend on cheap gas to sustain sales.

"Improvements over the last five to 10 years have been remarkable," Schuster said. "There isn't a big difference now between similarly sized sedans and SUVs."

The SUVs also have shed their rough-and-ready looks for swoopy styling that borrows more from the sedans they're replacing than the off-roaders they once aspired to be.

"We've moved beyond the boxy, small SUV," said Mark Wakefield, managing director and head of the Americas automotive group at consultant AlixPartners. "It has evolved into a tall car that drives like a car and has almost no sacrifices."