All those SUVs and crossovers Americans are flocking to buy are providing a nice windfall for automakers.
Not just because they sell so many, but because the sit-high vehicles command dramatically higher prices than cars of similar sizes. And they cost more or less the same to build.
In the subcompact, compact and midsize segments, average transaction prices for SUVs and crossovers in June ranged from 39 to 51 percent higher than sedans and hatchbacks of a corresponding size, an analysis of Kelley Blue Book data shows. Automakers have learned to build roomier vehicles — crossovers and SUVs — that retail for more but with minimal additional manufacturing cost, said Jack Nerad, executive market analyst for Kelley Blue Book.
"A taller vehicle isn't significantly more difficult to manufacture than a shorter vehicle such as a sedan," he said, noting that SUVs and crossovers "are margin builders for automakers."
That's especially welcome for auto companies as U.S. auto sales this year decline from 2016's record pace. Through the first six months, light-vehicle volume is 2.1 percent lower than the same period a year ago.
But Kelley Blue Book calculates that the industrywide average transaction price — the per-vehicle net after incentives are factored in — rose 2.9 percent in the first six months to $34,764, suggesting industry revenue is rising despite falling sales. Most of that growth was driven by consumers replacing cars with taller and more expensive vehicles, KBB analyst Tim Fleming said.
"From June 2016 to June 2017 the mix of cars dropped 4 percent," he said "That share went directly into the higher priced SUVs and trucks, which brought up the average transaction price."
Mark Wakefield, head of the North American auto practice for consultancy AlixPartners, said manufacturers can price SUVs and crossovers substantially higher than sedans, notably vehicles built on the same platform, because the taller vehicles have more passenger and cargo space.
"There's little difference in body and chassis cost," he said. "Interiors tend to have more content in crossovers and there can be powertrain differences, but the manufacturing cost differential is modest."
Typically, the bigger the vehicle segment, the bigger the edge sit-highs have over sit-lows, KBB found. Subcompact crossovers, which include such vehicles as the Honda HR-V and Chevrolet Trax, averaged $24,461, or 46 percent more than the $16,779 average for subcompact cars such as the Honda Fit and Chevy Sonic.
In midsize segments (Honda Accord and Pilot, for example), the SUV/crossover advantage over cars was $12,806, or 51 percent.
Even in the increasingly competitive compact segments, SUVs/crossovers (such as the Toyota RAV4 and Ford Escape) sold for $7,889, or 39 percent, more than compact cars such as the Toyota Corolla and Ford Focus.
Not all vehicles that share manufacturing platforms are directly comparable. For instance, KBB classifies the Ford Taurus as a full-size car, but the Ford Explorer and Flex, also built on Ford's D-class platform, as a midsize crossover.
Not only did SUVs and crossovers fetch more, they snatched market share from cars in the first half. In all three segments — subcompact, compact, midsize — car sales plummeted between 6.6 and 18 percent in the first six months, while volume for taller vehicles rose between 2.7 and 8.9 percent.
Nerad said the supply imbalance is boosting the price premium for SUVs and crossovers — for now.
"Manufacturers haven't been able to pivot as fast as the market has," he said. "That might not hold over time, but there will always be some price premium for taller vehicles."