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Affluent consumers appear to be growing weary of truck-based luxury SUVs, according to a report in the June 6 issue of Automotive News.
U.S. sales of traditional body-on-frame SUVs from luxury brands, a popular style of tow vehicle, dropped 24.2% in May.
Sales of the Lincoln Navigator, for instance, fell 32.0% from May 2004 while the Cadillac Escalade dropped 41% and the Lexus GX 470 declined 12.9%.
Until now, luxury SUVs – among the auto industry’s most profitable vehicles – largely had been immune to the sales problems of mainstream SUVs. Rising gasoline prices and a customer shift to car-based sport wagons hurt mainstream SUVs through the spring.
But the tide may be turning. High-ticket buyers also are embracing sport wagons, also called crossover vehicles.
George Pipas, Ford Motor Co.’s sales analysis and reporting manager, says consumers’ preference for car-based sport wagons is the strongest factor in the decline of luxury SUV sales.
“Why wouldn’t you expect to see some of the same developments in this segment that you do in the other segments?” Pipas asks. “The boomers are buying them, and the boomers are getting older.”
A study by the Power Information Network, a division of J.D. Power and Associates, supports that notion. Almost 20% of traditional luxury SUV owners who purchased or leased new vehicles in April switched to crossovers, J.D. Power reported.
Power also said automakers increased customer cash rebates for traditional luxury SUVs by 5% in April. Overall, industry rebates declined in April.
Though higher gasoline prices have hurt mainstream SUV sales, the price spike is less likely to play a role in the luxury segment, Pipas says. Buyers who can afford a $50,000-plus luxury SUV probably can afford $2.25-a-gallon gasoline.
While the May decline is striking, one month’s data are insufficient to prove a steep long-term drop in luxury SUVs, Pipas says.
But the falloff is painful for automakers. Luxury SUVs contribute rich profits. For instance, luxury SUVs deliver an estimated $8,000
in operating profit per vehicle to General Motors, according to a report by Goldman Sachs analyst Robert Barry.
And the segment had grown strongly, from 98,672 U.S. sales in 2000 to 208,975 last year.
Not every nameplate faded last month. Sales of the Hummer H2 and Land Rover LR3 remained healthy in May. And although sales of the Infiniti QX56 declined 7.3 percent in May, they are up 68% through the first five months of the year.