Market Tipping Away from SUVs?
15 August 2004
A new market study from Power Information Network (an affiliate of J.D. Power and Associates) claims that customer demand for SUVs is weakening.
The number of days SUVs are on dealer lots (days to turn) increased from 60 days in July 2003 to 73 days in July 2004—a 22 percent increase. Days to turn for luxury SUVs increased by 47 percent, more than double the industry rate, as these vehicles sat on dealer lots for 50 days in July 2004 versus 34 days a year ago.
Further suggesting a weakening in the SUV sector, the average SUV transaction price dropped 2 percent (or $620) in July versus a year ago, while overall new-vehicle prices edged up slightly. Luxury SUVs exhibited the most weakness, as the average price slid almost 5 percent. To spur consumer demand, new-vehicle manufacturers increased SUV incentives in July. The average total incentive expenditure per SUV in July was $3,440—up nearly 12 percent from June. This increase was almost twice the overall industry average increase.
| Power Information Network (PIN) Vehicle Transaction Data July 2004 |
New Vehicles | |||
| Jul-04 | % Change vs Jun 04 | % Change vs Jul 03 | ||
| PIN Transaction price (less rebate) |
Industry | $25,280 | 0.0% | 0.4% |
| SUV Segment | $29,183 | -0.8% | -2.1% | |
| PIN Days to Turn | Industry | 71 | 4.4% | 9.2% |
| SUV Segment | 73 | 7.4% | 21.7% | |
| PIN Total Incentive | Industry | $2,867 | 6.6% | -3.9% |
| SUV Segment | $3,440 | 11.5% | 4.7% | |
Detroit disagrees.
Detroit Free Press. Automakers scoffed at the report, pointing to higher sales this year compared with 2003, and predict no drop in consumer demand.
Even if SUV sales are slowing, they noted, sales of the vehicles are still up 7 percent for the year—nearly three times the increase in the automotive market, which is up 2.4 percent for the year.
In fact, sales of SUVs have been growing for more than a decade, from about 900,000 a year in the early 1990s to about 4.5 million last year. And automakers don’t see demand cresting yet.
“I’m just laughing,” Paul Ballew, executive director of global market and industry analysis at General Motors Corp., said of the findings. “The fastest growing category is the sport-utility category. Car sales are still declining this year. ... We, who live with the data each and every day, do not see this happening.”
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