It is no secret that buyers are gobbling up SUVs and crossovers, nor is it that automakers are introducing new and redesigned models. Take a look at the New York Auto Show this week where a number a new models (Toyota RAV4 and Subaru Forester) and concepts (Lincoln Aviator) made their debut.
According to automotive consultancy firm LMC Automotive, there are currently 63 mainstream crossover and SUV models, and 53 luxury models. By 2023, LMC is projecting 90 models for both mainstream and luxury. But this prompts a question - how much is too much?
“I think everyone has read the same tea leaves - right now there seems to be insatiable demand,” said Cadillac president Johan de Nysschen to Reuters.
“Everyone is going into these segments with compelling new entries and that means there are going to be winners and there are going to be losers.”
Already, there are signs this boom could be heading downward. LMC Automotive is forecasting a slow growth for SUVs and crossovers in 2018 and continuing through 2025.
“There are still some legs left to grow in the SUV market, but growth is slowing and will eventually level off. This is a bright spot in the market, which is why everyone is flocking to it with new product,” said Jeff Schuster, LMC’s senior vice president of forecasting.
A key reason comes down to the large number of SUV and crossovers that will be going off-lease and entering the market, proving a less expensive option for buyers. Cox Automotive forecasts that 40 percent of the roughly 4 million nearly new vehicles expected to come off lease this year will be SUVs and crossovers. The number is expected to rise to 44 percent.
“Now that you’re seeing more SUVs starting to come off lease, that will automatically put pressure on new SUV pricing,” said Karl Brauer, executive publisher forKelley Blue Book.
There are those who don't buy this argument though. Sam Fiorani, vice president of global vehicle forecasting with AutoForecast Solutions says there is still room to grow if automakers dive into different niches such as sporty models and limited editions.
“The market is not yet saturated and there are all kinds of niches that have yet to be filled. We’re five or 10 years from even thinking about market saturation.”
Various automakers claim there is always more room for products, provided they can stand out.
“There are clearly a lot of entrants, but we are going to differentiate ourselves with a completely different look to our brand," said Lincoln president Joy Falotico at the New York Auto Show.
But Karl Brauer points out a simple fact: “Simple math suggests that you’ll have more models with lower volume.”
“You can’t have that many SUVs on the market and have all of them grow volume. Some of them are going to have to give,” explained Brauer.
Source: Reuters
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