July 9, 2014 at 10:11 am

Small SUVs claiming a larger slice of market

Ford Escape (Ford)

Automakers are learning that small is big — at least when it comes to SUVs.

Combined sales of compact and subcompact SUVs have nearly doubled since 2008, from 10 percent to 18 percent of the U.S. market, according to AutoTrader.com. Analysts predict the market will grow for at least the next few years, as young, affluent buyers are drawn to likes of the Ford Escape, Chevrolet Equinox and the even smaller Buick Encore.

IHS Automotive predicts the compact SUV segment — now at 2 million vehicles — will grow to 2.2 million in the U.S. by 2017. The compact segment includes the Escape, Equinox, Toyota RAV4 and Honda CR-V.

The forecaster believes the subcompact SUV category — including smaller offerings such as the Nissan Juke, Buick Encore and the soon-to-be introduced Jeep Renegade — will hit 500,000 in sales by 2019. In 2005, the subcompact SUV market was nonexistent.

“Sales of crossovers of all sorts have been growing significantly in recent years, but the growth in sales of smaller crossovers and SUVs has been nothing short of phenomenal,” Michelle Krebs, senior analyst for AutoTrader.com, said in a statement. “It’s easy to see why, with the segment being so versatile to meet the needs of a wide variety of car buyers. They can carry people, serve as a substitute truck or haul bigger cargo while still driving like a car.”

Compact and subcompact SUVs are considered especially good for newlyweds or 20-somethings starting their careers. That’s because they’re a bit more spacious than compact cars, but not as bulky as full-size SUVs, said Eric Lyman, an analyst with California-based industry forecaster ALG.com

“(Small SUVs) are on fire this year,” Lyman said. “This is a key vehicle in a transition phase of life. If you lose somebody at this critical stage, you potentially lose them for quite a bit of time.”

Other analysts say the smaller SUVs are so popular because they appeal to buyers of all ages.

The CR-V, Escape, Equinox and RAV4 are the four major compact SUV players, Lyman said, and each has sold more than 110,000 in the first six months of 2014.

Nissan recently redesigned the Rogue, and its sales are up 25 percent year-to-date, Lyman said.

The Subaru Forester and Buick Encore have had strong sales numbers, too.

In the subcompact category, the Juke and Encore dominate. Later this year, the Chevrolet Trax, Honda HR-V and Jeep Renegade subcompacts will provide competition.

Even the luxury brands are jumping on the compact SUV trend. Lincoln recently unwrapped its MKC, Lexus will introduce the NX, Audi will come out with a new version of the Q5 and Mercedes will introduce the GLA this fall.

“If you’re going to be a legit contender in the U.S. market, you’ve got to have a car in this segment,” Lyman said. “It’s extremely popular, it’s extremely competitive. That’s pushed a lot of redesigns so automakers can stay competitive.”

John Murphy, senior auto analyst for Bank of America Merrill Lynch Global Research, agreed that the subcompact SUV market was a growing segment.

“They could revive the quote, unquote ‘small car market’ in a way that could be profitable for the industry,” Murphy said last month during a presentation to the Automotive Press Association in Detroit. “Obviously they’re not small cars, they’re small CUVs (crossover utility vehicles). But if you get the consumer away from the idea that they’re driving a small car and get them a fairly well contented small CUV, you might have the chance to lower the market to make a little bit of money — and that could be a big thing for Honda.”

General Motor Co. will introduce its subcompact Trax SUV in the U.S. early next year as a 2015 model. The company already has had booming success with the subcompact Buick Encore, which went on sale in January 2013. U.S. sales for the Encore through June this year are up 93.1 percent to 23,657 compared to the same time in 2013, helping propel Buick brand sales.

An estimated 32 percent of GM’s new models through 2018 are crossovers, as the automaker also is expected to launch the next-generation of the Chevy Equinox and GMC Terrain in model year 2016 and 2017, according to the “Car Wars 2015-2018 The U.S. Automotive Product Pipeline,” a report authored by Murphy.

Ford doesn’t yet sell a subcompact SUV, saying it’s pleased with its two compact offerings.

“We’re seeing big demand in the small-SUV segment,” said Mark Schirmer, Ford’s North American products communications manager. “We just added MKC, and Escape continues to sell at near-record levels.”

The report expects Honda will grow a half-percentage point of overall market share by 2017, aided by the subcompact HR-V.

A Honda official earlier this year said the automaker expects the majority of HR-V buyers will be new to the brand. The vehicle will be smaller in size and price than the popular CR-V.

Although IHS expects the segment to stabilize by 2019, ALG’s Lyman predicts it will continue to do well.

“I don’t think it’s going away,” Lyman said. “There’s no substitute for functionality. I think it’s going to continue to be popular.”

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Staff Writer Melissa Burden contributed.

Chevy Equinox (GM)
Honda CR-V EX-L AWD (Honda / Wieck)