Drivers becoming accustomed to high petrol prices a likely reason for rise in SUV sales

Five years ago, when petrol hit a United States high of more than a dollar a litre, auto industry analysts boldly predicted that enormous SUVs would vanish like the automobile tail-fin.

But now General Motors is unveiling a completely redesigned lineup of its truck-based SUVs, three-tonne behemoths that are still popular with drivers hauling around boats, campers and large families, or who like to sit high or feel safer in a heavy vehicle. The 2015 Chevrolet Tahoe and Suburban, GMC Yukon and Cadillac Escalade should reach US showrooms by March.

There are some people, especially in our market, who want a product in that segment," says Ed Williamson, part-owner of two GMC and Cadillac dealerships near Miami, where people often use the V8-powered SUVs to tow boats.

In recent years buyers have flocked to crossovers, which are car-based sport utilities that are easier to drive, carry just as many people and give better mileage. Yet there's still a lucrative US market for the truck-based SUVs, and GM controls more than 70 per cent of it.


Americans bought more than 132,000 big SUVs from GM from January to the end of August compared with 114,000 in the same period a year ago, even though the price can top can top US$50,000 ($61,000) and a fill-up can cost US$100 ($122) . With mileage around 13l/100km in city and highway driving, those fill-ups come more often than with many other vehicles.

GM executives aren't sure if this generation of SUVs will be its last. Government pollution limits and stricter fuel-economy requirements in the future could force the company's hand.

The giant SUVs became the rage in the late 1990s. Petrol mileage was of little concern with fuel at 26 cents a litre.

Nissan and Toyota joined the market with the Armada and Sequoia SUVs, trying to take a piece of Detroit's action. By 2001 big SUV sales hit a record of 917,000, says Ward's Automotive. The SUVs accounted for about 5 per cent of all car sales that year and were driven mostly by people who weren't going off-road or towing something.

"We were really in sort of a truck craze at that time," said Bill Visnic, senior analyst with the auto website. Sales were fairly stable until 2005, when petrol spiked at 79c a litre as hurricanes pounded Gulf Coast refineries. About the same time, companies figured out ways to put big people-haulers on car underpinnings. The new vehicles became quick hits.

As the recession arrived, the truck-based vehicles also drew scorn from environmentalists and large SUV sales plummeted to 228,000.

Sales of big SUVs reached 237,000 last year, up 4.5 per cent from the 2009 trough but still only a quarter of what they were in the boom years. Experts suspect drivers have become accustomed to high petrol prices.

Because they carry up to eight people, Suburbans and Yukons are more efficient than driving two cars, said Chris Hemmersmeier, chief executive of a 10-franchise dealership chain in Salt Lake City, where there's an abundance of big families and people who travel to nearby mountains.

"When you look at it in miles per passenger, it's pretty good," Hemmersmeier said.

There are still buyers who just want something big. GM's own data show that more than half of Tahoe buyers never tow anything, and only 1.3 per cent go off the road at least monthly. Only 35 per cent have children in their homes.

For GM, the business case for updating the SUVs makes perfect sense. They sell to high-income households for an average of $57,711 each, about NZ$24,557 above last year's average price of a new vehicle in the US. Analysts say GM makes at least NZ$12,278 for an SUV.

GM had already designed new engines, transmissions and suspensions for its full-size pickup trucks. Those will be used in the SUVs.

All it took was a minimal amount of engineering to make the SUV bodies a little sleeker, update the interiors and add third-row seats that fold into the floor.

GM says the new models will be more efficient than the current ones. Actual mileage won't be announced until a later date. The company unveiled the Chevy and GMC models last week, with the Cadillac to follow. No prices were announced.

With government greenhouse gas limits and rising fuel economy requirements it's possible that this will be the last generation of big SUVs.

Toyota, Nissan and Ford haven't updated their models in years.

Dealers hope GM can sell enough small cars and electric vehicles to offset the SUV's low mileage. John Schwegman, GM's executive director of truck product and pricing, said the company will see if it can meet government targets and still make money.

Visnic, the Edmunds analyst, said GM may make enough money on them to pay government fines for not meeting fuel economy requirements, similar to those that luxury and sportscar makers already pay. AP