DETROIT (Bloomberg) -- Baby boomers emptying the nest and their adult offspring starting families are driving demand for sport utility vehicles, which will account for two in five new auto sales in the U.S. by 2020, according to Ford Motor Co.
Americans will buy a record 5 million SUVs in 2015, fueled by low gasoline prices, cheap car loans and a desire for high-riding big rigs that can haul plenty of people and possessions, according to Kevin Schad, brand manager for the Ford Escape. Sales of SUVs and sport wagons are up 16 percent this year, according to researcher Autodata Corp. And they account for almost a third of auto sales in the U.S., Schad said.
Ford is giving its top-selling SUV, the compact Escape, a facelift to beef up its styling, quiet the cabin and enhance technology offerings in a bid to appeal to both the boomers and the millennial generation. Ford raised the hood and broadened the shoulders to make the Escape look less like a wagon. And it installed software that lets drivers unlock, start or locate their vehicle with a smartphone.
“The two largest cohorts in America are evolving into different life stages, which, ironically, require the same vehicle,” Schad said in a preview of the new Escape last week. “Millennials are evolving into a life stage where they’re starting to settle down and have families and they need more space in their car. Baby boomers are looking for a vehicle that supports the reality of some of their physical disposition.”
The freshened Ford will be on display at the Los Angeles Auto Show, which opens this week. Other SUVs at the event include Jaguar’s first, the F-Pace, the Bentley Bentayga and Cadillac’s XT5, which replaces the SRX. Toyota is also refreshing its compact RAV4, including a hybrid to the lineup.
Boomers who pioneered the SUV a quarter century ago “feel more comfortable on the road” in them because they ride high and are easier to get into and out of than low-riding sedans, Schad said. Millennials who grew up in the back seat of SUVs see them as the family car of the modern age. And now that they are having children, millennials are moving out of small sedans and into SUVs, he said.
New family car
The return of the SUV has caused car sales to plummet. Family sedans like the Toyota Camry and Honda Accord and small cars like the Ford Focus were considered “the heart of the market” a few years ago, Schad said.
“Well, that was thrown out the window when the compact SUV segment surpassed both of those segments last year to emerge as the No. 1 segment in the industry,” Schad said. “And we haven’t seen that growth slow at all this year.”
Ford is looking to capitalize on that growth by offering the Escape with two new fuel-efficient turbocharged engines and a suite of safety technologies such as forward-collision warning and adaptive cruise control that maintains a set distance from traffic ahead.
In a nod to tradition-minded boomers, Ford restored knob controls on the dashboard for the radio and climate control system. The automaker has been dinged in quality surveys for switching to a balky dashboard touch screen.
The Escape is the second-best-selling small SUV on the market, behind the Honda CR-V. That is the SUV segment where Ford sees the most growth potential as boomers and millennials increasingly turn to those roomy rides.
“The compact SUV is the epicenter of growth,” Schad said. “That segment has really taken off since the economic downturn and industry recovery in 2008 and 2009 and doubled sales.”