Why on Earth Are SUVs and Trucks Outselling Cars?

Are Americans getting back to their old vehicle-buying ways as the economy improves?

John Rosevear
John Rosevear
Apr 2, 2014 at 10:33AM

Ford sold over 70,000 F-Series pickups in March. Source: Ford Motor Co.

Here's an interesting trend: PIckup trucks and SUVs are outselling cars in the U.S.

That's been true for the last seven months, despite gas prices that seem to be permanently stuck well over $3 a gallon. 

And it's true despite the fact that automakers -- including formerly truck-heavy automakers like Ford (NYSE:F) -- are offering some of the best and most appealing cars they've ever built. 

What's behind that?

Does a rising economic tide make for bigger boats?
Edmunds.com's senior analyst Jessica Caldwell thinks it's a vote of confidence in the still-improving U.S. economy. Car shoppers are more comfortable spending a bit more on their rides -- both up front, and for gasoline over time.

That certainly seems like part of it. While gas prices remain high -- as of March 31, a gallon of regular unleaded cost an average of $3.579, according to U.S. government figures -- they've been high long enough that people seem to have gotten used to them. 

Not too many years ago, gas prices like we see today would have induced a national crisis. But now, people are accustomed to paying that much. And with the economy seemingly on an upswing, many consumers might be willing to pay a bit more every month to have a bigger vehicle.

Compact SUVs like Toyota's RAV4 are selling in big numbers. Source: Toyota.

Related Articles

There's more to this trend, though. Ford sales analyst Erich Merkle regularly points to rising sales of small SUVs and crossovers -- in contrast to falling sales of compact cars. Older, empty-nest couples are opting for compact SUVs like the Toyota (NYSE:TM) RAV4 and Ford Escape in surprisingly large numbers, analysts say. 

Why? The upright configuration of a compact SUV can make it easier for older people who may have mobility issues to get in and out, for one thing. And SUVs, like the station wagons that were popular a generation ago, have more room than compact cars, whether for extra passengers or extra stuff, while still getting decent fuel economy.

So, who benefits from this trend?
Automakers with strong SUV lineups, for starters.

Chrysler's Jeep brand posted a 47% sales increase in March. Jeep's gains were helped by a new model, the Cherokee, as well as by Chrysler's generous incentives offerings -- but it's still significant.

Chrysler also posted strong pickup sales, as did Ford. Toyota's RAV4 had its best-ever first-quarter sales total, the company said, and Toyota's Highlander and 4Runner SUVs were up 14% and 53%, respectively, in March.

Given that trucks and SUVs tend to be more profitable than small cars, automakers who excel in these segments could see boosts to their bottom lines. Jeep's Grand Cherokee (up 26% in March) is one of the company's most profitable products, as is Ford's F-Series pickup (which broke 70,000 monthly sales in March for only the fourth time in seven years).

One caveat for the automakers
In the bad old days of Detroit, strong SUV and pickup sales led American automakers to skimp on investments in cars. When gas prices rose suddenly and buyers started turning toward more fuel-efficient options, Detroit was caught unprepared -- and Toyota and the other import brands reaped the benefits.

That's unlikely to happen now. Ford's emphasis on a unified global model lineup means that it should always have good small cars to sell -- because that's what sells best in many other countries. 

But for a company like Chrysler and its parent Fiat (NASDAQOTH:FIATY), which is stretching to upgrade its cars while relying on profits from Chrysler's trucks and SUVs in the U.S., there's a risk that it could be caught out if the market suddenly turns.

What do you think? Will your next "car" be a truck or an SUV? Why? Scroll down to leave a comment and let me know.