Small utility vehicles' big payoff

Jeep's Renegade. Photo credit: BLOOMBERG

Tiny crossovers and SUVs could be immune to America’s long-standing love-hate relationship with small cars. We love ’em when gasoline is expensive and shun ’em when it’s cheap.

But gasoline is cheap right now, and the new crop of tiny SUVs and CUVs such as the Nissan Juke and Buick Encore is off to a fast start. U.S. consumers are gladly paying thousands of dollars more for rugged-looking small vehicles that offer the ability to haul gear and a slightly higher ride height and seating position.

And the cherry on top for automakers is the low investment required to create a small utility from the bones of a subcompact or compact car. Take the new Chevrolet Trax and Mazda CX-3, for example. Their underpinnings are derived from ordinary, entry-level small cars -- the Chevrolet Sonic and the Mazda2.

The budding segment already includes the Encore, Trax and Juke, and will be followed soon by the Jeep Renegade and Fiat 500X. The CX-3 and the Honda HR-V, based on the Honda Fit, will be launched this summer.

According to forecasts by IHS Automotive, mini utility sales in North America will grow from 153,085 vehicles in 2013 to 184,646 by the end of this year -- about a 20 percent increase.

Automakers typically spend about $1,500 more per vehicle to build a crossover or SUV body on the same platform as a small car and are charging -- and getting -- at least $5,000 more for the crossover/SUV.

That isn’t pure profit because there is additional content needed to convert a car into a crossover, says IHS Automotive Senior Analyst Stephanie Brinley. The vehicle’s suspension system has to be reworked for a higher ride height, and an all-wheel-drive system has to be integrated into the vehicle.

The Chevrolet Sonic’s base price is $15,070, while the crossover built on the same platform, the Chevrolet Trax, has a base price of $20,995. Both prices include shipping.

Add luxury touches such as a leather interior and a more prestigious badge to the same basic vehicle, and the profits get fatter. Pricing on the Buick Encore, also based on the same Gamma platform as the Sonic and Trax, starts at $24,990 and can cost more than $31,000 fully loaded.

“Leveraging platforms is key to profitability,” says Brinley. “SUVs development has long ago shifted away from a truck platform into a car platform that gives people the ride height that they want, the usability they want and the utility without the harsh ride of a truck.

“What we are really seeing in this small C and B segment is an application of that to a smaller segment. It’s an evolution of the same trend. And it is also a response to what people want to buy,” she added.

More small utes coming

Two companies that are strong in utility sales, Ford and Toyota, don’t have mini utilities in the United States -- yet. Ford is expected to add the EcoSport, built in four plants and available globally, except in North America, to its U.S. lineup.

That vehicle could be here as soon as 2018-19, according to IHS. Ford isn’t commenting.

“As the market grows with new competitors, we’ll be looking closely at that segment,” Ford spokesman Mark Schirmer said.

Bill Fay, group vice president and general manager of the Toyota Division, understands the appeal of small utilities and says Toyota is eager to jump into the segment.

“It’s an interesting little shift in the marketplace,” Fay told me at the recent Chicago Auto Show. “We’re busy trying to get out ahead of it. I think there is a lot of value in that segment. It offers a lot of utility, both in four-wheel or all-wheel drive. There’s a lot of content and value for the customer in the segment.”

Hyundai also is planning to enter the segment.

Despite its quirky styling, Nissan’s funky Juke is a hit, with more than 38,000 sold last year. Fred Diaz, Nissan’s senior vice president for U.S. sales and marketing, says the polarizing styling may have cost the company a few buyers, but the Juke’s appeal is its capability, which is fueling growth in the segment.

“Everybody loves a utility vehicle. Some people love cars. When you give ’em a cross between the two, it’s perfect,” Diaz said. “It rides higher. I have a better command of the road. I have all the utility I need, room for my family and great mpg. It makes all the sense in the world why the shift is happening.”

Chevrolet Sonic sedan

• Base price: $15,070

• Cargo capacity: 14.9 cubic feet

• CUVs spawned: Buick Encore, Chevrolet Trax

• Base price: Buick Encore: $24,990; Chevrolet Trax: $20,995

• Cargo capacity: 48.4 cubic feet

Honda Fit

• Base price: $16,470

• Cargo capacity: 16.6 cubic feet

• CUVs spawned: Honda HR-V

• Base price: $19,500 est.

• Cargo capacity: 58.8 cubic feet

Fiat 500X/Jeep Renegade

• 500X base price: $20,900

• Cargo capacity: 50.8 cubic feet

• Renegade base price: $18,990

• Cargo capacity: 50.8 cubic feet

Mazda2

• Base price: $15,540

• Cargo capacity: 13.3 cubic feet

• CUVs spawned: Mazda CX-3

• Base price: $21,000 est.

• Cargo capacity: 50 cubic feet est.

Nissan Versa sedan

• Base price: $12,815

• Cargo capacity: 18.8 cubic feet

• CUVs spawned: Nissan Juke

• Base price: $21,075

• Cargo capacity: 35.9 cubic feet

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