March Sales: SUVs Gained, Cars Fell
March was a decent month for the auto industry. New-car sales improved 3.4%, riding a trend that began in late 2012. Since last November, auto sales have reached annualized rates not seen since early 2008, according to Automotive News data. Still, car sales fell 1.2% as popular nameplates — the Nissan Altima, Ford Focus, Chevrolet Malibu and Hyundai Sonata — saw double-digit drops. In fact, sales for seven of the top 15 best-selling cars fell.
What propped up the industry in March? SUVs.
Light-duty trucks — a group that includes SUVs, pickups and minivans — gained 9%. If you drill it down to just SUVs, including car-based crossovers, sales grew a significant 11.2%. March opened with gas prices nearing a five-month high but colder temperatures than 2012's unseasonably warm March — dueling factors for SUV sales, it would seem. But a renewed consumer advance toward SUVs, especially small crossovers, drove overall gains.
Indeed, new entrants included a redesigned Subaru Forester (up 46.2%) and next-gen Hyundai Santa Fe (up 21.6%). The redesigned Ford Escape (up 27.6%) continued to outperform last year's prior-generation. The new Toyota RAV4 stood as a rare exception, with sales down 5.1% in March. In an April 2 sales conference call, Bob Carter, Toyota's senior vice president of U.S. operations, attributed the dip to low inventory as Toyota ramps up supply of its redesigned crossover.
The small SUV segment has "been around for a while, but some automakers have not been in it [and] are getting into it in serious ways," Libby said. Shoppers enjoy "significantly higher fuel economy than the midsize SUVs, and you're getting the functionality of a crossover SUV — the high driving position, the capability of all-wheel drive."
Young shoppers, in particular, are gravitating toward small SUVs as a traditional young-shopper staple — sporty, inexpensive two-door cars — has declined, Libby added. And those shoppers continue to increase. Finbarr O'Neill, president at J.D. Power and Associates, documented the so-called "Gen Y" boom at an automotive forum in March sponsored by J.D. Power and the National Automobile Dealers Association.
"The next big bubble coming through in terms of purchasers is Gen Y, those people born from 1977 to 1994," O'Neill said. "They're a bigger part of the purchasing public. Back in 2005, less than 10% of the car buyers were Gen Y. But now — now they're in their mid-30s. They're actually going into their late 30s now. And as of 2012, they represented 24%."
Those shoppers see small SUVs as the new normal, Libby said. "The RAV4 and the [Honda] CR-V, and now the [Nissan] Rogue and also the [Mazda] CX-5 and the Forester — these are ubiquitous, they're everywhere," Libby said. "There's a certain amount of acceptance of those models now. They've become mainstream."
Smallish redesigns don't deserve all the credit for March's gains, however. Take GM's full-size SUVs: the Chevrolet Tahoe and Suburban, GMC's Yukon and Yukon XL, and the Cadillac Escalade and Escalade ESV. The group entered the market seven years ago, making them certifiably ancient, and incentives in March remained about even with year-ago levels. Yet combined sales for the group increased 25.1%.
That’s more than double the increase of SUVs at large. The SUV boom may be more of a dull roar, so to speak, but it may stick around for months to come: SUV sales through the first three months of 2013 are up 11.7%, after all. They helped drive overall new-vehicle sales in March to another monthly gain — and spurred the latest bit of positive traction for an industry that's finally on its feet again.