Automakers overhaul product plans to bet more on SUVs

Tue Jan 10, 2017 12:12pm EST
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By Alexandria Sage

DETROIT (Reuters) - Global automakers are reworking their product strategies and investments for the United States to bring more sport utility vehicles to showrooms amid a sharp turn away from small- and medium-sized cars, executives at Detroit's auto show say.

Carmakers from Toyota Motor Corp (7203.T: Quote) to General Motors Co (GM.N: Quote) to Volkswagen AG (VOWG_p.DE: Quote) are adding more SUVs to their product plans, amid forecasts that SUVs and pickup trucks could soon make up two-thirds of U.S. light vehicle sales, up from 56 percent in 2015 and just under 60 percent last year.

"The shift to trucks is profound," said Mike Jackson, chief executive of AutoNation Inc (AN.N: Quote), the largest U.S. auto dealership chain.

Sedans are not only losing sales volume, but automakers and dealers are offering bigger discounts to move them out of showrooms, industry executives said. Profit margins on SUVs and trucks are fatter.

The average incentive for a midsize car in September was 14.1 percent, according to Kelley Blue Book, compared with 7.4 percent for a midsize crossover.

The shift has forced some automakers to slash production capacity dedicated just a few years ago to small cars, and put a new emphasis on designing vehicles and assembly plants that can switch quickly from building cars to SUVs.

Volkswagen's Audi unit, for example, builds a small Q2 SUV and its A3 sedan on the same assembly line, Dietmar Voggenreiter, head of sales and marketing for Audi, said in an interview. "We will always have an SUV and a sedan" on the same production line, he said.

Automakers are bringing SUVs into segments that previously were only for cars.   Continued...

The 2017 Nissan Rogue Sport is displayed during the North American International Auto Show in Detroit, Michigan, U.S., January 9, 2017.  REUTERS/Rebecca Cook - RTX2Y6SJ