GM Fast Tracks Full-Size SUVs, Will An Important Issue Be Missed?
General Motors is accelerating its schedule to replace its full-size SUVs.According to a story in the Wall Street Journal, the large SUVs from Chevrolet and GMC will have replacements ready by 2014. This is a much as five years ahead of the former replacement schedule, and now the new SUVs arrive only one year after the full-size truck lineup is overhauled.
The next generation Chevrolet Tahoe and Chevrolet Suburban as well as GMC Yukon and Yukon XL were given the fast track at GM as sales of large trucks and SUVs have picked up after a two-year lull. The September sales figures support this theory of a recovered truck market as all three Detroit automakers show significant gains in truck sales. Ram (by Dodge) sold 22% better this September compared to 2009, Ford trucks are up 43% this year, and GM's truck-only GMC brand reported a 42% improvement in sales. The added truck/SUV sales are being credited as sign of a recovering economy and an ease of the $4.00 per gallon gas scare from two years ago.
While it may seem like GM's quick move to invest in large vehicles shows it forgot to learn any lessons from the rising gas prices a couple of years ago, GM is just exercising good economics. Large trucks and SUVs are very profitable and are two of the last market segments that the domestic brands have a sales stronghold. If the Americans want large SUVs, then it is good business for GM to provide these vehicles (environmental/social responsibility can be left for individual debate.)
But long-term success is built on providing not only what the consumer wants, but also what the consumer needs. Americans traditionally return to large vehicles when we feel a gas crisis is over. This shows when outside factors are not present, we have a preference for full-size vehicles. So the true long-term winner may be the company that recognizes when a gas crisis hits, we would likely rather have a fuel-efficient full-size vehicle than any other alternative.
The key for consumers is to watch the full-size SUV market carefully over the next few years. By the time the new Tahoe/Suburban/Yukon trio is on the street in 2014, Ford will have likely added the F-150's EcoBoost V-6 to the Expedition. Also, Chrysler will have had plenty of time to equip the new Durango with its two-mode gas/electric hybrid system (which it developed jointly with GM, BMW, and Mercedes.) These versions of the full-size SUV should be good for a somewhat economical 20+ mpg.
The problem with the hybrid SUVs as well as the EcoBoost system is that they add significant cost to the price of a vehicle. Currently a Chevrolet Tahoe Hybrid costs about 20% more than a comparable standard gas-powered Tahoe. Dodge's last Durango Hybrid (2009) added a 13% premium to the SUV's base price. While there has been no announcement about an Expedition with EcoBoost, the turbo system adds about 15% to the price of other Ford models. That kind of extra cash is significant enough to cancel out any of the fuel cost savings for consumers who do not plan to own a vehicle past a few years.
Soon one of Detroit's Big Three will piece together a consumer-friendly package of a full-size SUV that offers decent mileage without sacrificing too much power or affordability. The question is will GM have its eye on this kind of vehicle while the company is getting its SUV program on the fast track?