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Big SUVs Brace for a Revival of Sorts

March 10, 2014

In 2008, it seemed inevitable that big SUVs would be on their way out of the market. With the global economy struggling and gas prices on the upswing, many buyers found these vehicles an impractical choice. Fast forward many years later, the large/luxury utility segment is still here and about to enjoy a revival.

On the forefront of the revival is General Motors, the automaker which dominates the aforementioned segment at 75 percent. While its Hummer brand was discontinued four years ago, it still controls the market with the likes of the Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon and Cadillac Escalade. GM will be introducing several new models that will be arriving in dealer showrooms now until spring.

The automaker started the year right with better than expected 2013 U.S. sales for the current Chevy Tahoe. According to WardsAuto, the Tahoe was the sales leader in the segment with 83,502 deliveries, a 21 percent increase from the year prior. The only other big SUV that did well was the new Jaguar Land Rover whose sales jumped 56 percent to 12,221 deliveries. The sales of all others either dropped or remained steady.

Unfortunately, like most automakers, GM struggled with the first two months of the year due to severe winter weather. However, the company is expecting its sales to recover as spring arrives and the new models hit the showrooms.

The best years for the huge SUVs were 2003 and 2004, when gas prices were low ($1.50 per gallon). When the country experienced recession and those prices shot up, the gas guzzlers seemed to be near extinction. Though the segment itself was not as big as it used to be (it is currently a third of what it once was), the large SUVs are still here and are expected to do well in the future. Overall U.S. sales in 2013 was 323,097, an 8.5 percent increase over 2012’s total sales.

Gas may not be as affordable as it used to be a decade ago, but automakers have reason to believe that their SUVs will continue to sell. They are maintaining their large/luxury utility segment not only because of potentially huge profits but also high demand in the Middle East.

Even low volumes bring considerable profit to automakers—the five-figure sticker prices ensure that the manufacturers have enough revenue. As for the demand in Middle Eastern markets like Dubai and Saudi Arabia, it is enough to keep the segment afloat. According to a GM spokesman, 25 percent of the automaker’s fullsize SUVs are delivered to the Middle East.

So what can buyers expect from other automakers in the large/luxury utility segment? In the fall, Ford will be introducing the newest versions of the Expedition and Lincoln Navigator. Nissan and Toyota will not be launching anything new, but they will continue to promote their current models: the Infiniti QX80 and Armada for Nissan and the Sequoia and Lexus LX for Nissan.

Meanwhile, GM hopes to appeal to a specific target market: affluent Baby Boomers who currently own fullsize SUVs that are old and may need replacement soon.

Photo credit: Digo_Souza/ Flickr/ CC BY-ND

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