China’s (and America’s) Booming SUV Market

Cadillac Escalade at the 2014 NYIAS
Cadillac Escalade at the 2014 NYIAS

Chinese SUV sales grew a staggering 49 percent last year. Let that sink in for a second – in 2014, we are again talking about SUVs as a booming sector of the auto industry.

This shift can in part be attributed to China relaxing its one child policy, with bigger families needing more room to accommodate little ones. Chinese customers also value the ruggedness, comfort, and versatility of bigger cars, and continue to embrace with open arms the 69 new SUV models introduced in 2014. The trend doesn’t appear to be slowing down either, as China’s current level of SUV sales only accounts for around 14 percent of the country’s auto market. Compare that with the West’s 35 percent average, and you get some giddy auto analysts predicting plenty of room for growth.

The news gets even better for SUVs. In the US, where gas prices have leveled off to “reasonable” levels and the Prius craze has forced truck efficiency technology into hyperdrive in recent years, Americans are again hungry for big cars. Over the past year, the US has seen gains of 10 percent in the SUV and truck space, with no sign of slowing in the near future.

This shift towards SUVs is particularly interesting for the US because we have seen a similar scenario before in the aftermath of the 1970s oil crisis, but this time the eco-trend is permanent. Instead of companies ditching the compacts and hybrids the moment gas prices went back to relatively normal levels, the eco-friendly car segment continues to grow. Maybe not at the same rate as the late 2000s, but still definitely growing.

In part, governments are now dictating fuel economy standards for car companies’ product portfolios, but average consumer eco-consciousness for the sake of eco-consciousness has definitely taken hold. Today, companies are producing cars for the US that have fuel economies from 15 to 50 miles per gallon, with a healthy number of customers making up both ends of the spectrum.

In the 2000s, everyone was ditching their SUVs out of necessity because no one could afford gas, and (US) automakers scrambled to make more fuel efficient cars because every consumer segment was screaming for them. With the recession mostly behind us and gas prices steady, companies must now broaden their strategy to include less gas-price sensitive consumers that have gotten off the hybrid, eco-friendly wagon in favor of their beloved SUVs. This is good news for most companies, as SUVs typically produce the largest profit margins, and it’s also a segment in which American automakers are historically very good at competing.

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