Automakers race to meet sizzling demand for performance vehicles

Performance car and truck sales are on a tear in the U.S.

Despite ever-tightening emissions laws and fuel economy requirements, sales of high-performance models in the U.S. have outpaced global growth since the teeth of the recession in 2009, according to Dave Pericak, director of Ford Performance.

"Performance vehicle sales around the world continue to grow -- with sales up 70 percent in the United States and 14 percent in Europe since 2009," Pericak said.

Demand for some vehicles is so white hot that automakers can't keep up: Dodge recently announced it was suspending new orders for its 707-hp Challenger and Charger Hellcat models until it could validate orders and fulfill its backlog. And at the New York auto show, traditionally a bastion of luxury car reveals, automakers touted performance models in virtually every segment, from the affordable Ford Focus RS to the new McLaren 570S supercar.

It's not just a desire for magazine covers and 0-to-60 bragging rights driving this trend; automakers and analysts say performance cars are good business. They offer fat profit margins and draw different, younger buyers who can spend more, and they cast a high-performance halo on an automaker's more prosaic offerings.

These models also can serve as highly motivating "passion projects" for engineers and as test beds for technologies. As Pericak put it, Ford has a heritage of performance models that "serve the much larger, far more important goal -- which is to drive innovation throughout our entire company."

Tim Kuniskis, head of Dodge and SRT, says the Hellcat models have wildly exceeded expectations, with 9,000 orders placed as of mid-March, when order-taking was suspended.

"Both of them have been on fire," Kuniskis said. "We're up over 90 percent on those cars [since the crisis]. If you look at Charger, we're up about 90 percent. If you look at Challenger, we're up 95 percent at retail.

"We saw this a long time ago, and that's why we started to move in this direction."

Performance models long have been a part of European automakers' playbooks. But as U.S. automakers improve their balance sheets, the trend is picking up speed anew in Detroit, says Larry Dominique, executive vice president of industry solutions for TrueCar.

"Some brands like BMW, Mercedes and Audi have had a long history of these derivatives. For the domestics, it is more of a 'rediscovery.'"

Quantifying the trend can be problematic.

"Sales of the specific variants are hard to discern because most of them are trims or derivatives of the core model," Dominique said.

Automakers often decline to provide trim-level sales metrics. But given the growing number of variants, Dominique believes "we can assume these variants are selling well and actually accelerating."

Sales of premium high-performance cars such as the Chevrolet Corvette and Jaguar F-Type have risen through April. Growth in 2014 was driven by the new seventh-generation Corvette (up 101 percent over 2013), but even aging models were up. Nissan's GT-R saw a 16 percent sales uptick, and the Dodge Viper climbed 29 percent, in part because of a price cut.

In larger-volume sales waters, American pony cars likewise enjoyed a solid 2014. Ford Mustang and Chevrolet Camaro sales both climbed 7.1 percent, and the Dodge Challenger eked out a 0.3 percent gain. This is despite the sixth-generation Mustang and Hellcat Challenger models not going on sale until the end of the year.

"Those [cars] are always a pretty good barometer of performance cars in the larger market," notes Karl Brauer, senior director of insights at Kelley Blue Book.

According to Ford's Pericak, the Blue Oval's high-performance buyers "are younger and better educated than the average buyer." In particular, Ford's Fiesta ST and Focus ST have done an impressive job of conquesting young buyers from other companies. "Over 65 percent of ST customers come from outside the Ford brand," with millennial buyers purchasing ST models at twice the rate of other Blue Oval products, Pericak notes.

They're also more affluent, with 30 percent of ST buyers having household incomes in excess of $100,000. Those strong numbers have helped Ford build a case to bring the Focus RS, which debuted in March at the Geneva auto show, to the U.S.

Just how much these sporty versions of mainstream products cost to develop remains a closely guarded secret. But analysts say the effort is well worth it. As Eric Lyman, vice president of industry insights for TrueCar, notes: "The incremental cost to develop a performance variant is a very cost-effective way for automakers to drive revenue."

A typical list of improvements for performance variants includes power upgrades, firmer suspension and bigger wheels and tires. Aesthetic changes typically include body kits, special badges and unique paint colors.

But automakers don't necessarily have to touch the powertrain to court performance buyers.

In milder sports models such as the Nismo variant of the Nissan Juke, a few bolt-on parts and special trim pieces can still add thousands to the bottom line. The Nismo features retuned suspension and steering, along with 18-inch wheels and a body kit, and costs $25,655 with shipping -- a 22 percent increase over the $21,075 Juke S upon which it's based. Both are powered by the Nissan 1.6-liter, inline-four engine with turbo-charging and direct injection, making 188 hp and 177 pounds-feet of torque.

The Juke Nismo RS adds 27 hp and includes bigger front brakes and Recaro seats for $28,845 with shipping, a 37 percent increase over the base Juke S.

The margins tend to get even thicker as the vehicles get more luxurious. BMW's X6 crossover starts at $60,550 with shipping for its 300-hp X6 sDrive35i model; its 567-hp X6 M sibling costs $103,050 with shipping, a 70 percent increase.

"It's very inexpensive to develop a performance model," says Dave Sullivan, manager of product analysis for industry research firm AutoPacific. "The development time and the cost of tooling is far less [than the rest of the vehicle]. It's too easy to not do, too easy to ignore."

Yet this sales momentum seems to fight the tide of rising corporate average fuel economy standards, along with automakers' continued need to project environmentally responsible images.

Selling hybrids and electric cars alongside high-horsepower V-8 coupes and sport sedans may seem contradictory. But it's part of being a big automaker, one observer says.

"A full-line manufacturer is akin to Baskin-Robbins with its 31 flavors," says Reilly Brennan, executive director of the Revs program at Stanford University, which funds students studying the past, present and future of the automobile. "They have to be very good at things that appear to be diametrically opposed."

Consumers may consistently rank fuel economy near the top of their wish lists when seeking out a new vehicle, but buyers clearly prioritize performance, too.

According to Stephanie Brinley, senior analyst-Americas for IHS Automotive: "What that really means is consumers want the most fuel-efficient version of whatever it is they want to drive, but that isn't necessarily a 'green' car."

Because high-performance variants don't tend to make up a large percentage of a given vehicle's sales, their impact on CAFE scores is often minimal. And with clever tuning, some models don't suffer fuel economy penalties at all.

This trend toward more performance vehicles can yield a payoff for future conventional models as well. Performance cars and trucks' higher price tags can more readily absorb the r&d costs associated with new technologies, many of which trickle down into mainstream models. As Brauer notes, "It's never a bad thing when car companies are trying to come up with the most efficient way to generate more horsepower."

Yet it's not just about adding power. Lightweighting not only benefits dynamic attributes such as handling and acceleration, it also pays dividends in fuel economy.

BMW has invested extensively in carbon-fiber manufacturing, with its i8 hybrid sports car being a primary beneficiary. But the lightweight woven material also is being used in BMW's i3 city electric vehicle, and it's widely expected to find increasing usage in the automaker's mainstay models, including the upcoming 7-series sedan.

Despite plenty of doomsayers just a few years ago, the industry's trend toward more performance models isn't abating.

AutoPacific analyst Sullivan sums it up: "A few years ago, the government was coming out with new CAFE standards, and everyone was saying, 'We're all going to be driving these small cars with three-cylinder engines. Nobody will be able to drive a pickup truck, and nothing will make sense.'

"And here we are with Hellcats. Who would've ever thought?"