Demand for SUVs to remain strong this year despite pandemic

Sales of sport utility vehicles in the US remained strong in April even as global car sales and oil prices fell due to a coronavirus-led demand crunch, according to consultancy Facts Global Energy.

Sales of light SUV models grew 77 per cent in April in the US while large pick-up model sales rose 20 per cent for the first time, the London consultancy said in a report.

“This [SUV] segment is particularly important for manufacturers due to its relatively high profitability,” the report said.

During the first quarter of this year, “the top three models of this segment alone [the Ford F Series, Chevrolet Silverado and RAM pick-up] together accounted for nearly half a million new vehicles on the road. We think that this segment’s dominance will continue in the medium-term, as car makers continue to focus on it, and due to CAFE standards being relaxed”.

CAFE refers to corporate average fuel economy, a standard first enacted during the oil crisis of the 1970s to improve the fuel economy of vehicles, including SUVs.

The consultancy’s view comes amid a bleak outlook for car sales worldwide after the pandemic brought about movement restrictions that kept people off the roads.

Global car sales are forecast to drop 15 per cent this year, double the decline experienced during the 2008 global financial crisis, according to the International Energy Agency.

Car sales are expected to slump by 13 million units compared to 2019 figures, with the largest declines in Europe, the US and China – all of which had enforced lockdowns to curb the spread of the virus.

However, the consultancy was more bullish on the SUV segment, expecting sales to continue in Europe.

“The trend set last year continues, with SUVs also comprising the primary growth factor in the market there,” the report said.

SUV sales in Europe rose 13 per cent in 2019 to reach 5.7 million, while the overall European car market grew by only 1 per cent.

Last year, SUV sales accounted for 37 per cent of overall car sales, with the figure expected to grow to more than 40 per cent this year.

Meanwhile in China, SUVs registered a 7.4 per cent yearon-year growth in April, despite contraction across all other segments of the economy.

The SUV share of total sales is expected to accelerate to 50 per cent this year, the consultancy said, amid growing investment by car makers in the segment and in crossover utility vehicles.

The consultancy forecast a dim outlook for electric vehicles worldwide, except in Europe where sales picked up due to car manufacturers complying with changing fuel emissions regulations.

In the US, electric vehicle sales performed worse than the overall car market.

Total car sales for the first quarter of this year fell 13 per cent year on year, while sales of electric vehicles fell by about a third.

“Importantly, the rise in the US last year can be attributed to one car, the Tesla Model 3, which made up half of new registrations in 2019,” the consultancy said.

Sales of new electric vehicles fell 60 per cent in China during the first quarter, outpacing the total market decline of 45 per cent.

“The downward move in Chinese electric car sales is a trend that has continued since the change in the subsidy scheme in June 2019,” the consultancy said.