Over the last decade, the automotive industry has experienced a significant shift in vehicle preferences as both consumers and organizations show increasing interest in CUVs/SUVs compared to sedans. While sedans will always be a part of OEM line-ups, households, and fleets, the CUV/SUV continues to rapidly gain popularity for both personal and commercial applications.
Shift in the Vehicle Value Proposition
The financial gap between CUVs/SUVs and sedans has narrowed considerably in terms of initial purchase price and total cost of ownership. Decreasing fuel prices, increasing fuel efficiency, combined with a meager 1.5% increase in maintenance costs compared to sedans makes the overall economics much more attractive for CUVs/SUVs. Consumers and businesses alike are taking notice of the additional space, comfort, and versatility that CUVs/SUVs offer, making for a very compelling value proposition.
OEMs on Board for Change
The trend is driving product changes at the manufacturer level. One manufacturer has decided to eliminate their line of sedans over the next few model years and focus more on SUVs and crossovers while another is slowing production and closing some of their facilities currently producing sedans. The declining demand and potentially diminishing supply for sedans is affecting the percentage of shares for van, full-size, mid-size and compact cars.
ARI’s Ordering Predictions
This shift in vehicle preference is affecting the fleet world as well. ARI’s Vehicle Supply Chain team continues to observe an increase in CUV/SUV orders and specification requests. Between 2000 and now there has been a shift in car vs. SUV orders. Years 2000 to 2009 showed a higher average of car purchases than SUVs; however, the last eight years the percentage of car orders has decreased while SUV orders have increased by approximately five percent.
This trend will likely continue into 2019 and beyond in the absence of any macroeconomic disruptions, and impacts the remarketing end of the supply chain as well. Ted Davis, ARI’s VP of North American Supply Chain, recently shared in Automotive Fleet that ARI has observed consistent growth in the SUV remarketing segment over the last three to five years. We foresee that both consumer and commercial demand for CUVs/SUVs will remain strong in both new and used markets.
It’s important to remember that sedans still fulfill important needs for both consumers and businesses looking for more compact vehicles and lower acquisition costs. While market share may be leaning toward CUVs/SUVs at the current time, substantial demand for new and used cars will continue especially as supply diminishes in future years.
Across all vehicle types, ARI anticipates that our vehicle order volume will hold relatively steady in 2019 compared to 2018. The Supply Chain team will continue to watch for any changes in fuel prices, import tariff developments, and Federal Reserve interest rate increases as possible indicators for a changing forecast.
Planning Your Next Move?
If these trends have you considering changes for your fleet, be sure to know the overall impact to your bottom line when switching up your supply chain strategy. Visit SeenItComing.com today and download our white paper on capital forecasting.