Filed under: Toyota, Industry News, Automotive Industry, Ford, Investing
Not long ago, most SUVs were big truck-based workhorses. That has changed, as car-based "crossover" SUVs like Toyota's (TM) RAV4 and Ford's (F) Escape have soared in popularity. But those are mainstream models. What's significant is how that mainstream change is now starting to move far upmarket.
A Slew of Exotic SUVs Are Heading to Market Soon
The idea of a luxury SUV is nothing new, of course. Jeep kicked off the trend with its first Wagoneer model over 50 years ago, and Land Rover's Range Rover has been around almost as long.
But for a long time those were niche products, driven by well-to-do folks who needed the off-road capability -- and were wiling to live with the resulting compromises.
What has changed to make SUVs so popular -- even among the most well-heeled of customers?
And now, the SUV revolution is moving even further upmarket. Lamborghini, which, like Porsche, is now owned by the giant Volkswagen Group (VLKAY), has an SUV under development -- as does fellow VW brand Bentley Motors. Both are likely to share some parts and engineering with Porsche's Cayenne.
Meanwhile, Bentley's ancient rival, Rolls-Royce, now under BMW's corporate wing, has announced plans to follow suit with its own SUV. Maserati's Levante SUV is expected to enter production later this year. And Aston Martin recently showed an electric crossover concept called the DBX -- and hinted strongly that something like it is headed for production.
All these new models are likely to carry six-figure price tags -- some will be well into six figures. And it's a good bet that all of them will post decent sales numbers. Why? What has changed to make SUVs so popular -- even among the most well-heeled of customers?
"Cheap Gas" Isn't Responsible for This Latest SUV Boom
It's not cheap gasoline. That certainly hasn't hurt sales of larger vehicles, but this trend was well underway before gas prices fell last year.
What has changed about SUVs in general is that many of the old compromises are gone. Today's SUVs drive and handle like cars -- but cars with a higher seating position, more room for cargo, and in many cases better handling in snowy or slippery conditions.
TrueCar (TRUE) executive vice president Larry Dominque says that car-based crossover SUVs have become popular precisely because those old compromises have been largely engineered out. Compared to the truck-based SUVs of old, today's crossovers have much-improved handling, sleeker styling, and better fuel economy, he says -- while preserving the traditional SUV advantages of cargo space and all-weather capability.
That explains the popularity of models like Toyota's RAV4 and Ford's re-thought (read: car-based) Explorer. But why are luxury models like Porsche's Cayenne so hot?
In part, it's because technology now allows a crossover SUV like the Cayenne to have the same kind of taut handling and thrilling performance that buyers of cars like BMWs have long prized -- along with all of those SUV-ish virtues. But it's also a reflection of the much larger world market.
Aimed at -- and Supported by -- a Truly Global Market
Over the last few years, China has become the world's largest market for new cars and trucks. Outside of major cities, roads in China can still be rough. That, along with all of the advantages mentioned above, has helped make SUVs extremely popular with Chinese car-buyers.
Add in China's taste for Western luxury brands -- and luxury vehicles -- and it's easy to see where a lot of these new super-expensive SUVs will be heading.
But what's a little harder to see is that the size and tastes of the Chinese market help make the business cases for vehicles like these viable. Put another way, a Lamborghini SUV might not sell enough copies in the U.S. and Europe to make the development costs a worthwhile investment -- but once China is added in, the equation changes.
That, in the end, is why these super-expensive SUVs are coming to market: Because their makers think they can sell enough of them -- all over the world -- to make the investments worthwhile.
Motley Fool contributor John Rosevear owns shares of Ford. The Motley Fool recommends Ford and TrueCar. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
