News Column

Big Demand Once Again for Big SUVs

August 25, 2014

By James R. Healey, USA TODAY

Sales of the 2015 Cadillac Escalade have been brisk as General Motors struggles to keep up with demand. (GM)
Sales of the 2015 Cadillac Escalade have been brisk as General Motors struggles to keep up with demand. (GM)

Three months after launch, Cadillac still struggles to deliver its redesigned high-price, high-profit 2015 Escalade SUV to dealers promptly.

Initial demand has been greater than Caddy's ability to quality-check the leather, spokesman David Caldwell says. "We just closed the order bank (for the current period) and have three times as many orders as we can supply."

The Cadillac hiccup illustrates the hot demand for what were considered obsolete not long ago -- big, truck-based SUVs, especially from Detroit makers.

Dealers and Cadillac say the Escalade situation is better since the brand added more people to monitor quality of the hand-sewn leather trim and arranged for more delivery trucks to get the big SUVs to lots. At worst, buyers now are waiting two months for vehicles instead of being able to buy them right off dealer lots, as nearly all U.S. buyers insist on.

"There's still a little wait, but only 1% or 2% of our customers" forgo the purchase, and "most of our customers wait," says George Virgen, sales manager at Martin Cadillac GMC in Los Angeles.

The redesigned Escalade went on sale in May, and sales in July were more than double those a year earlier in an overall new-vehicle market that's up 9.1%, according to Autodata.

Meanwhile, Ford's sales of its big Expedition SUV, refreshed for 2015 and with a standard turbo V-6 replacing its V-8, jumped 59.3%. And GM's other big truck-based SUVs, the Chevrolet Tahoe and GMC Yukon, also redone for 2015, each posted sales gains of about 50%, Autodata says.

Imports with generally older designs did worse, underperforming the market. Exception: Infiniti's QX80, up 22.1%.

There still is room for growth. Big, traditional SUVs topped at 5.6% of the market in 2002, and even with the current spike are 2.1%, according to Edmunds.com.

Despite awful fuel economy (16 mpg in combined city/highway use is typical) the SUVs are used for everyday tasks. Top uses, according to a TrueCar.com anaylysis: shopping/errands (32.2%), commuting (25.3%) and taking kids to school (15.2%).

Most are bought in Texas (19.6%). Beyond that, the spread evens out, according to an analysis by Edmunds.com: California (6.9%), Florida (5.3%), New York (4.6%), Michigan (4.3%). Fewest: Washington, D.C., which buys so few it's listed as 0%.

Big SUVs are based on the chassis and drivetrains of the companies' full-size pickups, so they are comparatively inexpensive to develop but can sell for high prices and profits. GM's inability to satisfy demand leaves money on the table at a time GM is trying to fatten profits to make up for $2.4billion it subtracted from first-half earnings to cover recalls.

The Escalade is built at the Arlington, Texas, factory, which is running three shifts, often six days a week, so there's no way to simply increase production.


For more coverage on the automotive industry, please see HispanicBusiness' Auto Channel



Source: Copyright 2014 USA TODAY


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