Utility vehicles print money. Especially body-on-frame models like the Ford Expedition and Chevy Suburban. Those vehicles, just like their pickup truck siblings, are critically important to delivering a steady stream of revenue for the automakers that sell them. Even companies like Volkswagen are relying on utility sales to finance their future. Investment towards future product isn’t by any means a contemporary phenomenon. That being said, the switch to electrified vehicles is clearly a budget buster for the entire industry. Fortunately, General Motors and Volkswagen have their crossovers and SUVs to help them get through this transitional period.
2020 will see the introduction of the redesigned Chevy Suburban, GMC Yukon, and Cadillac Escalade. These are very important vehicles for the company because they dominate the body-on-frame segment while simultaneously being quite profitable. GM has a 54 percent share of the non-luxury SUV segment and a 47 percent share of the luxury body-on-frame category. According to Automotive News, Barclays estimated that 72 percent of GM’s operating profit in America comes from pickup trucks and SUVs, which average around thirty percent profit per vehicle.
Obviously, developing new body-on-frame vehicles and selling them are two different things. The recently redesigned Ford Expedition and Lincoln Navigator are eating into GM’s share in their respective segments. Ford isn’t exactly about to usurp GM as the segment leader, but they’ve been steadily improving their numbers since they introduced the new models. To counter this new threat, GM made their trio pretty big, and will debut segment-exclusive tech like optional air suspension and Magnetic Ride Control. The new models also gain an independent rear suspension for the first time ever.
“Profitable utilities now, EVs later” is basically how GM and Volkswagen are tackling things. GM’s $4 billion investment in EV development is chump change compared to Volkswagen, but it’s something.
Volkswagen is doing things a bit differently than GM, but the cadence is the same. The German automaker is spending about $12 billion dollars on EV development over the next five years and another $8 billion on other alternative energy advancements during the same period. Their crossovers have helped with their bottom line too:
VW faces heavy investments into cleaner and self-driving technologies and has increased sales share of higher-margin utility vehicles to help fund an industry-wide shift toward low-emission vehicles.
VW’s core brand gained market share this year and has increased its operating profit substantially, VW brand COO Ralf Brandstaetter said at a press event here. The brand is on track to post a record operating profit this year, he said.
Dieselgate? What Dieselgate?
GM and Volkswagen’s current situation is a picture into how pretty much every automaker will cope with the next decade. Internal combustion vehicles are vitally important in the short term. A mass market for electric vehicles is down the road, but until the industry gets there, traditional models will have to carry the water.
I remain amazed that Dodge/Ram/FCA has ignored this upper end of the SUV market from the start. With having developed such a competent and popular large pickup, my amazement increases because a Ram Gigantosaur (they would probably come up with a better name) would probably be pretty appealing.
GM had better hope that this new one hits the bulls eye because they really need it to be successful.
The 1994 Ram redesign would have been a PERFECT time for them to do this. After a UAE Sheik had this one built & Motor Trend tested it at the time I thought, this is it, now there’s no way Dodge won’t build one themselves…
I don’t know that FCA would have been as successful as everybody seems to think for three reasons.
1. There was a 1999-2001 Ram Charger built in Mexico for Mexico only but it was three door SUV.
2. The second generation Durango and Chrysler Aspen were roughly the same size as the Tahoe and Expedition but did not seem to move the needle from a market share or sales perspective. It seems that the people who are willing to spend 40,000 (in 2009 dollars) or more on one of these want quality, a decent interior, and name recognition all of which the second gen Durango lacked. The third gen Durango seems to have reverted to a first gen Durango overall shape and footprint with better build quality in my eyes.
3. The Jeep Commander, again too expensive for cheap interior and poor execution compared to Expedition and Tahoe.
If they debut a Durango XL or Grand Wagoneer based on the new Ram with its updated interior, it may be a hit. But from the 90’s to much of the 10’s the Ram was not there yet.
Full sized SUVs sold in part due to image. The 1st Gen Durango looked like someone stuck a Caravan onto the back of a Dakota (which is what they actually did for the Mexican market Ram Charger, the hatch is off the Caravan).
The 1994 Ram however, was a huge hit at the time just for it’s new “Big Rig” looks, a Suburban competitor with that face (& no Caravan ass…) would have printed money.
PS- In 1994 it was still just the good ol’ Chrysler Corporation. We’re talking pre-FCA, pre-Cerberus, pre-DaimlerChrysler even.
…and pre-whatever FCA/PSA winds up calling itself
Mexican Market “Ram Charger” AKA a Ram-Caravan mashup. Awful
@Ltd
part of me still wants to import one into Oregon when it becomes legal to do so.
Maybe FCA could throw an “Imperial ” badge on that.
I recall reading an interview with Bob Lutz.
Regarding full-size SUVs, to paraphrase, he said “we have Cherokees, we don’t have the size to compete everywhere” and to quote “let them (GM and Ford) have it”.
I think that was a logical call. Ford, and GM especially, had capacity to spare that could crank out profitable SUVs. In the 1990s, GM had TWO SUV-only plants.
Chrysler would have had to retool a car plant (a lot of money), or build a facility (more money), or deal with the challenges of building pick-up trucks and SUVs on the same line (hassle factor–also, every SUV is one less P/U).
IMO, I think Lutz and Chrysler made the right call, given what they knew.
One of the reasons GM’s SUVs are so profitable is the supply of robust, BOF SUVs is rather limited now.
Before GM’s bankruptcy, with 2 plants, GM could easily crank out 5-600k big SUVs. GM also had Trailblazers (another plant). One could buy a ‘base’ RWD Tahoe for under $30k
Today, there are no Trailblazers, 2 of the 3 plants are, one is lucky to find a ‘base’ Tahoe for $55-60k, my sense is most sticker at 75 and up, the one plant runs flat out, and GM is nicely profitable.
I’m surprised Ford, which pioneered the segment with the Expedition, has not done better. But again, the tight supply ensures high price, which means big profits. Pre-2009, Ford built Expeditions in 2 plants, in Michigan and Kentucky. Now it’s Kentucky only, a plant that also builds pick-up trucks.
The Tundra is a player too, but Toyota hasn’t pushed it aggressively. Perhaps that sense of ‘professional courtesy’? Or a certain smugness?…”we are THE top dog in many segments, we’ll let the Detroit companies keep the one thing they are good at–thirsty, heave cars”.
I agree. How was that not a thing?