These types of vehicles are by far the favorites on the market.
The SUV boom has been a major factor in helping the auto industry withstand numerous crises in recent years. This trend has proven to be more influential than the rise of electric cars, pick-up trucks, or the growth of emerging markets.
The popularity of these vehicles has surged, resulting in a significant increase in revenue and profits for the auto industry. However, it remains to be seen whether this trend will be sustained indefinitely, or if there are potential threats to this critical segment.
Everyone wants SUV models
Excluding light commercials, SUV models comprised nearly 42% of global new vehicle sales in 2021. Consumers worldwide purchased approximately 31.9 million of these cars, representing a 13% increase from 2020. This growth is particularly remarkable when compared to other segments; passenger cars (segments A to F) experienced a 1% increase, and pick-ups saw a 3% increase.
The factors contributing to this SUV boom are well-established. These include:
- a broader spectrum of products, ranging from small (A-SUV and B-SUV) to the most extravagant (F-SUV),
- an increased number of electrified models,
- the belief that the elevated driving position provides a greater sense of safety,
- SUVs are more convenient for older drivers as they are easier to enter and exit.
Based on preliminary data, it appears that SUVs represented approximately 45-46% of global passenger car sales last year. Notably, there was robust growth in countries such as the UK, India, Germany, Mexico, Indonesia, Turkey, Malaysia, Vietnam, South Africa, Thailand, and the Philippines. However, SUV demand declined by 7% in the United States, which is the second-largest market globally, and by 2% in China, the largest market, where sales totaled 10.4 million units.
The threat
The swift expansion of the SUV segment may face challenges due to increasingly strict regulations related to pollution and vehicle weight.
Despite significant advancements in emissions reduction, SUVs remain weighty vehicles that necessitate larger engines. JATO emissions data reveals that, between 2020 and 2021, all SUV categories (with the exception of luxury models) decreased their average emissions in Europe. Nevertheless, the average CO2 emissions for SUVs are still 107.9 g/km, which is substantially higher than those of urban, utility, compact, or even E-segment cars. Specifically, urban, utility, compact, and E-segment cars have average CO2 emissions of 76.9, 97.7, 97.6, and 100.8 g/km, respectively.
If the discrepancy between SUVs and other vehicle categories persists, governments in regions such as Europe may begin to impose penalties on SUVs, not just for emissions-related reasons, but also for space. An SUV is always more extensive and weighty than a comparable car. In Europe, for instance, SUVs are 27% heavier than compacts, whereas in the United States, they are 22% heavier than sedans.
Imposing higher taxes on SUVs may significantly reduce demand and pose a considerable threat to the profitability of manufacturers. Currently, automakers are enjoying record profits due to their ability to weather the semiconductor shortage by prioritizing SUVs and electric vehicles, which are the easiest to sell.
SUVs have also played a crucial role in financing the massive investments required by manufacturers to transition from internal combustion engines to pure electric vehicles. The electrification plans announced by various brands in Europe, the United States, and Asia cannot be realized without the funds generated by gasoline and diesel SUVs.
When considering potential bans on heavier vehicles, will the authorities consider the importance of the fact that gasoline and diesel SUVs have generated significant cash that has funded the electrification plans announced by brands in Europe, the United States, and Asia?