Luxury SUVs Just Did Something We've Never Seen Before

By John Rosevear Markets Fool.com

Ponder this for a minute: In 2016, luxury sedans were outsold by luxury-brand SUVs. SUVs accounted for 55% of luxury-vehicle sales in the U.S. in 2016, according to figures from Edmunds.com. And Edmunds' analysts think that number will probably rise to 60% in 2017.

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It's the first time ever that we've seen luxury SUVs outsell traditional luxury cars. It's further evidence that a seismic, generational shift is under way in Americans' -- and the world's -- automotive preferences.

A dramatic shift in buyerpreferences

That shift in buyer preferences has been unfolding for a few years now in the broader automotive market, not just in the United States but also in Europe and China. But 2016 was the year in which that shift hit the U.S. luxury-car market in a big way. (Maybe I should start saying "luxury-SUV-and-car market.")

Audi's SUV sales rose almost 18% last year, paced by a 61% year-over-year gain for the big Q7 crossover. Image source: Audi AG.

Overall, the market for luxury vehicles in the U.S. was roughly flat in 2016. But when we sort the luxury brands' 2016 versus 2015 sales results by cars and SUVs, we see that "sales were flat" isn't anything like the whole story. The following chart shows how 2016 sales compared with 2015's for car and SUV models at each of the major luxury-vehicle brands.

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Brand Cars SUVs Overall
Acura (21%) (1.3%) (8.9%)
Audi (6.4%) 17.7% 4%
BMW (14.5%) 2.7% (9.5%)
Cadillac (1.7%) (3.6%) (3%)
Infiniti (16.9%) 23% 3.6%
Lexus (20.5%) 12.5% (3.9%)
Lincoln 7.9% 12% 10.4%
Mercedes-Benz (11.4%) 14.5% 0.4%
Porsche (10%) 13.9% 4.9%
Volvo (4.5%) 35.7% 18.1%

Data sources: Automotive News and the individual automakers.

Look at the dramatic year-over-year shifts at brands such as Mercedes-Benz, Audi, and Volvo. Also look at Porsche: The iconic brand is known for its sports cars, but SUVs made up 64% of its U.S. sales last year.

Even those figures don't tell the whole story. Officials at Toyota's (NYSE: TM) Lexus brand say their SUV sales would have been even higher, but supplies were limited. Sales at General Motors' (NYSE: GM) Cadillac were held back by the fact that it has just one crossover SUV right now, though it has several more coming to market over the next few years. AndFord's(NYSE: F) Lincoln brand had an all-new sedan model, the well-received Continental, in 2016, but its SUV lineup's sales growth stilloutpaced its cars' year-over-year gain.

Britain'sJaguar Cars brand also deserves special mention. Jaguar's U.S. sales soared last year, up 116%. Part of that growth was driven by Jaguar's new XE and XF sedans: Its car sales were up 47% from a year ago.But a big chunk of that growth was driven by the brand's first-ever SUV, the F-PACE. The F-PACE didn't exist in 2015 -- that's why I didn't include it in the chart -- but it became the brand's best-seller in 2016, accounting for a whopping 32% of Jaguar's U.S. sales.

Jaguar didn't even have an SUV in 2015 -- but in 2016, its new F-PACE accounted for almost a third of the brand's U.S. sales. Image source: Jaguar Land Rover.

What's driving all of this? Edmunds thinks that the increasing number of female luxury-vehicle buyers has a lot to do with the trend. Just over 41% of luxury vehicles sold in the U.S. in 2016 were sold to women, up from 37% in 2011. And 60% of women who bought a luxury vehicle in 2016 bought an SUV, versus 52% of male luxury-vehicle buyers.

Why more and more buyers are choosing SUVs over sedans

It's not hard to understand why car-buyers in general are choosing SUVs over sedans in growing numbers. Today's SUVs are very different from the truck-based gas hogs we remember from the early 2000s. Modern "crossover" SUVs are based on car-style unibody architectures, rather than the kind of frames used for pickup trucks.

Modern crossover SUVs drive, ride, and handle much more like cars than like trucks, while retaining the cargo capacity, upright driving position, and (not always, but often) the off-road capability we associate with truck-based SUVs. They also get much better fuel economy than those old beasts, thanks to their modern car-like powertrains.

This isn't just about low gas prices, either. The shift in buyer preferences toward crossovers was already well under way before the sharp drop in gas prices we saw unfold in late 2014.

Low gas prices certainly aren't hurting crossover SUV sales today. But even if gas prices start to rise again, it looks as if this sales shift is here to stay.

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John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.