One Consequence of America's Increasing Fondness for Crossovers? Automakers Laughing All the Way to the Bank

Perhaps we oversimplify it. Perhaps we don’t.

Take one Honda Fit or Chevrolet Sonic or Mazda 2, alter the exterior body panels, clad the wheel arches or bumpers in a modest amount of black plastic, periodically route power to the rear wheels without any fancy AWD systems, elevate the roofline, and increase ride height just a bit. Use a typical small car engine, the same transmissions, and many of the same interior bits.

The result: HR-V, Trax, CX-3. Call it a crossover. Dare even to call it an SUV.

And then, according to Kelley Blue Book, charge customers $7,700 more for the privilege.

The fact that automakers are now routinely selling more SUVs/crossovers than cars is only part of the equation. Utility vehicle market share now stands at 41 percent in the United States. Through the first half of 2017, that means SUVs/crossovers outsold cars by roughly 350,000 units.

But as KBB’s Jack Nerad tells Automotive News, “A taller vehicle isn’t significantly more difficult to manufacture than a shorter vehicle such as a sedan.” Thus, a hefty percentage of those 350,000 additional sales came with little extra cost to manufactures and a whole lot of extra cost to the customer.

With average transaction prices of $24,411 in June 2017, subcompact crossover transaction prices weren’t just higher than subcompacts. They were 19-percent higher than the ATPs on compact cars, according to KBB, and very nearly on par with midsize car transaction prices.

Move one rung up the ladder to compact SUVs/crossovers such as the Nissan Rogue, Honda CR-V, Toyota RAV4, and Ford Escape and average transaction prices rose 1 percent, year-over-year, to $28,355 in June 2017. That’s 39-percent higher than the ATPs on the compact cars with which many of these vehicles share a platform and 13-percent higher than the ATPs on the midsize cars with which we so often assume they compete.

Then there are the midsize SUVs and crossovers such as the Toyota Highlander, Honda Pilot, and Ford Explorer, vehicles that require $37,572 expenditures on average, a substantial 2-percent year-over-year increase in the average transaction price in the segment. That’s 50-percent more than the ATP on a midsize car; 9-percent more than the ATP on a full-size sedan.

U.S. auto sales are down 2 percent through the first-half of 2017, but SUV/crossover volume has actually grown 6 percent, year-over-year, compared with 2016’s record results. It’s the car sector, with the much lower cost-to-customer, that’s bringing industry-wide volume down. Compared with 2016, car volume is down by roughly 422,000 units in early 2017.

Thus, as automakers lose 70,000 passenger car sales per month, automakers pick up about half that many SUV/crossover sales, plus about 8,500 full-size pickup truck sales per month, as well.

Trading deeply incentivized purchases of $20,465 compact cars for sales of $24,411 subcompact crossovers or $28,355 compact crossovers ain’t bad at all. And for the few automakers that make hay off $46,811 full-size pickup trucks, well, that’s gravy.

[Images: General Motors]

Timothy Cain is a contributing analyst at The Truth About Cars and Autofocus.ca and the founder and former editor of GoodCarBadCar.net. Follow on Twitter @timcaincars.