Luxury SUVs are incredibly lucrative for auto manufacturers at the moment. But how long can this bubble last?
During the recent launch of the BMW X5, representatives revealed that the the company’s large luxury SUV is responsible for a third of all its sales. Considering the seemingly ever increasing number of models that BMW offers, that is a rather astonishing bit of information. Small wonder, then, that they haven’t strayed too far from the winning formula when creating the latest version of the X5.
Similarly, Porsche’s often maligned (at least by Porsche purists) but ever popular Cayenne accounts for more than half of the company’s annual sales every year. And, of course, Porsche is now also adding the smaller Macan to its SUV range, which means that by the end of this year SUV sales will more than likely account for two thirds of Porsche’s total sales.
It’s hard to believe, but not that long ago, the luxury SUV segment was a small and very niche segment. For quite a while (a few decades in fact) the Range Rover had the segment all to itself. In the late nineties, however, BMW and Mercedes-Benz released the X5 and the M-Class respectively, and the segment started to mushroom.
Fast forward to today, and the luxury SUV market is no longer a standalone segment. Buyers can now choose from sporty luxury SUVs, compact luxury SUVs, mid-size luxury SUVs, large luxury SUVs, proper hardcore luxury SUVs and even a couple of luxury crossovers. The segment has splintered into countless little subdivisions.
Land Rover now offers the Range Rover, Range Rover Sport and the Range Rover Evoque. Mercedes-Benz has the M-Class, G-Class, GL-Class, GLK (overseas) and now the GLA. BMW has the X1, X3, X5 and X6. Audi has the Q3, Q5 and Q7. Then there are also other luxury players such as Lexus, Infiniti and, of course, Porsche.
And if you think that’s an awful lot of vehicles aimed at the luxury market, you’ll be shocked to hear how many additional models are on the way. Land Rover is apparently busy preparing sporty RS models of its Range Rover Sport, and its sister company Jaguar is busy with its own SUV. Mercedes-benz is reportedly busy preparing a coupe/SUV that can take on the X6. BMW is preparing its X4 for release. Audi reportedly wants to build a Q-car sporting every single digit from 1 to 8. The Q1 is definitely coming, and the Q8 seems like a certainty as well. As mentioned earlier Porsche is adding the Macan to its line-up.
With so many luxury SUVs being sold, other luxury automakers are unsurprisingly also eager to throw their hats into the ring. Lamborghini has green-lit the Urus SUV for production, and Bentley is also going ahead with its SUV. To top it off, Rolls Royce (the epitome of luxury) is also seriously considering an SUV.
Why is this market booming? Well, America has always been fond of large luxury vehicles, and companies such as Audi, BMW, and Lexus do good business in the US. But the new emerging markets have probably had the biggest influence. Affluent buyers in Asia and the Middle East love luxury SUVs. They don’t want sportscars – they want luxury 4x4s.
The question is, though, how long can this boom last? How long before the bubble pops? Yes, companies such as Land Rover, Merc and BMW have had great sales for a number of years, but up until recently, the competition wasn’t too intense. At least, not in comparison to other sectors of the market.
Now everyone seems to have gone a bit mad. How many models can the market sustain globally? Is the luxury SUV market truly large enough to sustain all those models? We’ll have to wait and see, but it seems like quite a gamble. The global economy still isn’t in great shape and the oil price remains high and volatile. Times remain tough. Yes, the top 1% still have money to spend on luxury SUVs, but that luxury pie now needs to be split into a lot of slices. If the health of the economy, or the popularity of the SUV, should start to take a dip, a lot of manufacturers might be left without a slice.