Forget Sedans, Compact Crossovers are the New Industry Growth Drivers

Source: Honda

One of the major themes at this year’s Los Angeles Auto Show was car connectivity. Not only how cars are becoming increasingly connected to their external environments, but how we as drivers become increasingly bonded with our vehicles in a more natural and everyday way. But also apparent at this year’s show is how seriously automakers are taking the subcompact SUV segment. This wasn’t so much a major theme as it was an underlying current, but the growth in the market is evident in the future plans of multiple companies.

Fiat, Mazda, and Honda all introduced new competitors to the segment between Wednesday and Thursday at the show. Fiat introduced the new 500X, a 500-inspired soft-roader; Mazda brought in the CX-3 to slot in below the CX-5; and Honda introduced the Fit-based HR-V that will offer utility-minded buyers a larger, higher-up version of the popular hatch. Also on display was the Chevrolet Trax — together, they’ll join the likes of the Nissan Juke, Subaru Crosstrek, and Mini Countryman.

Small SUVs have become the fastest-growing segment for most automakers, at least the ones who compete in the space, often posting double-digit gains in year-over-year comparisons. It’s hard to deny America’s love affair with SUVs. Earlier this year, the utility overtook the sedan as the most popular vehicle in the U.S. largely due to the explosive growth of subcompact crossovers.

Essentially, these are little more than inflated, higher-riding hatchbacks. Most — if not all — are built on the frames used to underpin smaller cars, rather than the platforms used to support the larger SUVs. The HR-V, for instance, is built on the same underpinnings of the Fit city car, rather than the CR-V. Likewise, the 500X is built on one of Fiat Chrysler’s smallest utility platforms, and the CX-3 built on a car chassis, not the one that supports the much larger CX-9.

Source: Justin Lloyd-Miller/Autos Cheat Sheet

What’s interesting is that these cars are not all that much larger than most well-endowed hatchbacks. The Volkswagen Golf, for instance, boasts 93.7 cubic feet of passenger space for the four-door model. The Mazda CX-5, though, features 103.8 cubic feet, and the CX-3 will more than likely see that figure shrink. Similarly, the Subaru Crosstrek XV offers 97.5 cubic feet, despite the compact crossover designation.

Historically, America has never been all that taken with hatchbacks. Make them slightly larger and lift them, though, and the resulting vehicle becomes a sales sensation. It’s not one that has gone unnoticed by the luxury segment, either. Mercedes-Benz now offers the GLA, which at 17.2 cubic feet of cargo space beats out the Golf by just 5 cubic feet. It competes with the Audi Q3, and rumor has it that BMW is working on a similar vehicle based on the 2 Series.

No matter the segment, the sales momentum of small SUVs is a constant. Take Buick, for example: a soft-luxury brand that slots between Chevrolet and Cadillac. Its growth has primarily been driven by the Encore, which in March — the completion of its first full year on the market — obliterated even GM’s expectations for its annual sales. Analysts predicted that General Motors would sell 18,500 units of the Encore in 2013; the company sold 31,046.

Unlike other regions of the world like China or Europe, North Americans tend to be more drawn to the utility aspect of vehicles and prioritize cargo and passenger space and comforts over the agility and maneuverability of the car itself. This is largely a cultural development born out of the basic layouts of the U.S. versus other regions. While European cities are notably tight-knit, with narrow streets, most of America is spread out over suburban sprawl and open spaces that don’t require the same kind of automotive dexterity.

Source: Subaru

Accordingly, sales of vehicles like the Chevy Suburban, Ford Explorer, and other large SUVs and pickups flourished, but sales of vehicles like hatchbacks and wagons waned, and many companies have stopped offering them entirely. But high gas prices forced many shoppers to reconsider and take a serious look at what they truly needed versus wanted. The real estate offered by a Suburban is tempting to many, but $120 to fill the tank is not.

The compact crossover was born out of a combination of downsizing the SUV to accommodate higher fuel prices, and upsizing hatchbacks — albeit barely, in some cases — creates a sort of hybrid utility vehicle that handles, drives, and drinks like a car. Needless to say, they’ve been a rousing success.

Despite the fall in fuel prices, don’t expect the small crossover to go anywhere. The torrid pace of sales is among the top in the entire industry, faster even than the growth for new pickups or sedans. There’s still room in the segment, too: Volkswagen doesn’t yet offer a crossover to slot between the Golf and the Tiguan, Toyota doesn’t have anything smaller than the RAV4 (though there is the wagon-like Venza, but that starts at nearly $30,000), and there isn’t a comparable offering from Dodge or Chrysler, the smallest utility offering being the Journey.

After the crossover-heavy Los Angeles auto show, it’ll be interesting to see what pops up on the subsequent Detroit and Chicago auto shows in the way of new small utilities — but we do know that the wave isn’t over yet.

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