Look for the new kid on the block to grow into a big bully in four years.
Car-based wagons with sport-utility character - such as the Lexus RX 300 and Subaru Legacy Outback - are in their infancy today. But most major automakers are rapidly developing vehicle hybrids that blend the most desirable attributes of cars and light trucks.
The explosion of these new vehicles, called sport wagons, will hit North America by 2002, shaking up both the conventional passenger car and light-truck markets.
Early sport wagon sales indicate that compact sport-utilities, such as the Ford Explorer, are especially vulnerable to the new wave of vehicles.
'Most manufacturers have some sort of hybrid on their drawing boards right now,' said Bo Annvik, vice president of product planning and business development for Volvo Cars of North America Inc. 'This segment is going to increase dramatically.'
The new breed promises hefty profits. By using existing car platforms, assembly plants and engines, automakers shave development costs.
The automakers also see significant export potential with the vehicles. Drivers in Western Europe and Japan prefer vehicles that are nimbler and more fuel-efficient than conventional sport-utilities.
The new entries are coming in a range of size and price classes, potentially churning up markets as diverse as entry-level cars and luxury sport-utilities.
The Subaru Forester, Volvo V70 XC, Toyota RAV4, Honda CR-V and Lexus RX 300 are early examples of the genre.
The 2-year-old RAV4 shows the potential of the new breed. Sales reached 56,709 in 1996 and 67,487 last year.
The new breed of vehicle is more 'user-friendly,' says Lexus General Manager Bryan Bergsteinsson.
'I think there is a love/hate relationship with some traditional SUVs,' Bergsteinsson says. 'People love the image and the sportiness. They don't love the fuel economy, handling, ingress and egress. The RX 300 speaks to all of those issues.
'What the customer really cares about is the benefit the vehicle offers them,' Bergsteinsson said. 'It has a commanding drive position like an SUV and the secure feeling that goes with that. There is a lot of interior function and versatility and a sporty image. But they understand it is easier to get in and out of, has much friendlier handling and better fuel economy.'
Volume projections for sport wagons are imprecise because of the infant state of the category. But industry executives and analysts agree that a high-volume category is being created that cuts across a range of prices from $12,000 starter entries to $40,000 luxury vehicles.
'All major manufacturers are working on them,' said Lincoln Merrihew, director of product advance at J.D. Power and Associates. 'The potential is huge.'
Lexus predicts that sport wagons, such as the RX 300, will match sport-utility sales within 10 years. Currently, about 25 percent of RX 300 sales are derived from the traditional sport-utility market, Bergsteinsson said. Lexus plans to sell at least 20,000 RX 300 units in 1998.
Today, the first generation of sport wagons is nibbling at the traditional sport-utility market, particularly compact sport-utilities.
Subaru, which pioneered the genre when it introduced the 1996 Legacy Outback 'sport-utility wagon,' says the Outback has siphoned sales from conventional sport-utilities.
'It is coming right out of the compact SUV segment,' said Tim Mahoney, director of marketing for Subaru of America Inc. 'We are seeing the sport-utility category as a whole moving, perhaps, into a phase of maturity.'
The top five alternative models considered by Outback purchasers are the Ford Explorer, Jeep Cherokee, Chevrolet Blazer, Toyota 4Runner and Honda CR-V, Subaru said. Sixty-five percent of Outback buyers are lured away from competing makes.
'Customers want the nimble handling and sense of control in these vehicles,' Mahoney said. 'It comes from the car platform and the all-wheel-drive system.'
Outback drivers understand they are buying a hybrid product, Mahoney said.
'Preintroduction, when women saw the car, they saw a more substantial vehicle, and it signaled things like safety. When men saw it, they thought of being able to go skiing or camping,' Mahoney said.
PIZZAZZ FROM VOLVO
Those already in the hybrid fight know that competition is intensifying.
'We're happy we are first in our price segment so we can build the customer base,' said Volvo's Annvik.
Base price of the all-wheel-drive 1998 V70 wagon is $34,995; the XC, which stands for 'cross country,' is $37,960. Both prices include destination charges. Volvo expects to sell 15,000 XC units and 5,000 awd V70s in 1998.
'When you have owned one or two sport-utilities you are pretty tired of the ride and drive. You are pretty tired of carrying children in and out. Women are tired of jumping into the vehicle,' Annvik said. 'It's not a very practical vehicle. It is all about image.'
BIG 3: ME TOO
Automakers will continue to market conventional light trucks for buyers who demand a rugged image, off-road capability and significant towing and payload capacity.
But the Big 3, who have created and fueled North America's love affair with light trucks, are preparing to field a variety of hybrids.
Sport-utilities have thrived by conveying an image of independence, freedom and self-reliance, said Jay Houghton, marketing manager at A.T. Kearney Inc., a consulting firm. The best of the new breed will marry that image with the attributes of a stylish, contemporary passenger car.
Here are some of the sport wagons likely to come from the Big 3:
GM is investigating a sport wagon based on its Delta platform, the chassis for the next-generation Chevrolet Cavalier. Chevrolet, Pontiac and Saturn are possible badges.
Cadillac also may field an all-wheel-drive sport wagon by 2002 based on a rear-wheel-drive platform that will underpin the next-generation Catera.
Ford Motor Co.
In North America, the company is developing a sport wagon with Mazda Motor Corp., code-named U204, based on the Mazda 626 platform. The vehicle is expected to be built in the company's Kansas City, Mo., assembly plant in the 2001 model year. The Ford Contour and Mercury Mystique will be sourced in Mexico if the Kansas City plant is converted.
Ford has not confirmed the U204. It has acknowledged it is building multiactivity vehicles from its Fiesta and Focus small-car platforms. The Fiesta-based product is not intended for North America.
A Focus-based tall wagon similar to the Renault Megane Scenic may be offered in North America in 2001.
Chrysler is expected to develop by 2001 a Neon-based sport wagon loosely based on the Plymouth Pronto concept vehicle shown at the North American International Auto Show in 1997.
Pioneering the new sport wagon category is harder than developing a traditional car and truck, said Merrihew at J.D. Power and Associates.
'They don't have a standing foundation of knowledge from which they can go,' Merrihew said. 'They are looking at both the initial and long-term acceptance of these vehicles. There is more research than traditional cars and trucks.'
The right formula can produce savings in development and manufacturing and yield profitable sales.
'Car-derived SUVs borrow some of the engineering from existing sedan platforms and in some cases modify existing engines. So fixed costs are spread over a greater number of vehicles and a greater number of variants,' said Mike Robinet, managing director of CSM Forecasting Inc. in Farmington Hills, Mich.
'Those manufacturers that can best leverage their development over many variants can best support their margins and/or gain more market share by lowering prices,' he said.
A common platform also leads to savings in manufacturing.
'There is greater plant utilization,' Robinet said. 'Manufacturers are more flexible and are able to build both passenger cars and these vehicles on the same line. If one body style is more in demand, they are better able to react to the shift and capitalize on it.'
The danger, of course, is creating a product that excites neither car nor truck owners.
Says Merrihew: 'If you like spaghetti sauce and I like chocolate and we mix them together, we come up with something that satisfies no one.'