The SUV market right-sizes

Much has been written about the seemingly overnight fall from grace of domestic large SUVs. GM's redesigned Tahoes and Suburbans sit unsold on dealer lots, and Ford's recently announced it will both cut production by 20 percent and slash marketing dollars on their largest SUVs before the newest models are even fully launched--almost as if cutting production to adjust for reduced demand is a new business practice. Ford, apparently, thinks it's still operating in the climate of the mid-90s.

Shifting consumer buying trends in the face of elevated gas prices has hit on the European luxury SUVs, as well. The favored rides of both the wealthy and heavily-financed poseurs everywhere, premium Euro SUVs tend to face a more fickle audience enraptured with the latest mechanical beast for shuttling kids to private schools.

In watching trends this summer, we saw BMW X5 sales make a 24.5% drop in sales year-over-year and the Porsche Cayenne sales experience a more dramatic 33.9% decrease. It can be argued that both the outgoing X5 and the Cayenne are somewhat long in the tooth, impacting their curb appeal. And while these fashion accessories are not nearly as large as domestic truck-based units, they're getting bigger.

Audi went large with their first SUV, the seven-seat, V8-powered,nearly 5500-lb Q7 launched earlier this year. Mercedes-Benz recently plus-sized with the GL-Class, an even heavier seven-seater, just as prices of their R-Class wagon-meets-SUV have already been cut to boost slow sales. (Both performed well in our testing; the results will be published in the November issue of CR magazine.)

There may always be a market for the full-sized SUV as a tow and work vehicle, but the personal market shows signs of right-sizing as buyers place fuel economy at the top of their purchase considerations. We've received lots of letters/emails with claims that people are abandoning their Sequoias in favor of a Highlander or even a CR-V. The advent of the RAV4 V6 and Acura RDX indicate that there may be a market for small SUVs with power and luxury amenities--attributes that were once the domain of larger vehicles.

With gas prices now averaging under $2.50/gallon nationwide, after a recent spike to over $3/gallon, there may be an opportunity for the full-size and luxury SUV segments to regain their sales strength before pump prices climb again. But we aren't seeing it yet.

In the end, consumer choices may be as influential in reducing national gasoline consumption as the long-deliberated, fuel-related legislation.

--Jim Travers