SUV sales continue to shift downward: Rolling resistance, speed ratings and LT/P-metric mix of OE tires could be affected

Oct. 1, 2005

The traditional, truck-based SUV segment has seen better days.

From a peak of five million units sold in the year 2000, sales of big SUVs are expected to drop to 2.5 million this year.

As SUV sales continue to fall due to soaring gas prices and other factors, the mix and type of original equipment tires that come on these vehicles also may change.

Gassed out

The drop in sales of large SUVs has been somewhat gradual, according to George Pipas, Ford Motor Co.'s United States sales manager.

In 2003, industry-wide sales fell 4% from previous-year numbers. The decline slowed to 2% in 2004. Sales continued to slowly slide during the first six months of 2005. "However, sales of these vehicles rebounded during June and July when employee discount promotions for Ford, General Motors and DaimlerChrysler were offered," says Pipas.

"Consumers responded to these offers in record numbers. But based on data we saw in August and the data coming behind it, it appears that this sales burst was largely pull-ahead."

As a result, Ford has not changed its long-term forecast for the segment, says Pipas, who adds that soaring gas prices are expected to accelerate the decline in sales of big SUVs during 2006.

"Gas hovered between $1.90 and $2 from the second quarter of 2004 to the first quarter of 2005. Then it increased to about $2.25 in the second quarter of 2005. Now, we're seeing another step up" to $3 per gallon and beyond.

"Who knows where it will go from there? If gas prices were to stabilize at that high level, we might see another fairly large decline in this segment during 2006. But if we see prices recede and level off at $2.25, perhaps we'll return to a more modest decline."

But overall, the damage caused by high gas prices already has been done. Sales of traditional SUVs have fallen 9% year-to-date, according to Pipas.


Crossing over

The price of gas isn't the only reason why fewer people are buying big SUVs. The growing popularity of crossover vehicles and changing consumer demographics have had something to do with the trend as well.

"In 2000, there were 1.5 million crossover vehicles sold in the U.S.," says Pipas. That number climbed to nearly two million last year. There are more than 30 crossover nameplates on the market.

The wants and needs of SUV buyers also are changing. Baby boomers are getting older, "and the older members of that generation are becoming empty nesters. They don't need the capacity that they once needed."

Sharon Basel, General Motor Corp.'s general manager of product communications for full-size trucks, believes the "leveling off" of traditional SUVs will continue. "We don't see that segment growing much anymore."

However, there always will be a segment of consumers who want the amenities of large SUVs, regardless of gas prices or demographic shifts. "We don't see those wants going away," she says. "Typically, with full-size SUVs, loyalty to a particular brand or model is very strong."

Kevin McCormick, manager of sales and dealer communications for DaimlerChrysler, agrees. Many large SUV owners aren't as worried about gas prices as non-SUV owners might expect them to be, he says.

Tire changes?

As SUV sales continue to fall, auto manufacturers may re-formulate their attitudes about the tires they specify for these vehicles.

"Rolling resistance is not a performance parameter that the aftermarket thinks much about, but the OEMs think about it a great deal," says Tom Chubb, vice president of marketing for Michelin North America Inc.'s Michelin Automotive Industry Division.

"As the price of fuel goes up, they will be looking to save gasoline everywhere they can." Improvements in rolling resistance could lead to speed rating changes. "Typically, as you go up in speed rating, you need to increase the internal reinforcing compound of a tire. When you do that, you also drive rolling resistance up. We might see OEMs specify lower speed ratings in order to save on rolling resistance."

Chubb doesn't believe tire sizes will be affected by declining SUV sales. "Over the years we've seen a gradual evolution toward larger tire sizes and not all of that has been the result of larger vehicle sizes." Most size changes, he says, have more to do with aesthetics.


Declines in SUV sales will not have an enormous impact on the OE tire mix, says Mike Martini, president, consumer OE, Bridgestone Firestone North American Tire LLC. But as sales edge down, "I think there will be some pull-back in the number of LT tires we sell to the OEMs. Large SUVs in the past have used LT tires. There may be more P-metric tires."

Even if this happens, Martini says LT tires are not going away. Demand for them -- especially in medium- and heavy-duty applications -- always will be high. "The pickup truck segment is still going strong."

Goodyear Tire & Rubber Co. doesn't believe OE tire changes "will be much of an issue," according to a company spokesman. "We go with the flow in terms of OE supply and what (vehicle manufacturers) need."

Up and then back down: OEM numbers show SUV trend

Vehicle manufacturers' employee discount programs contributed to a sudden, mid-summer spike in the sales of big SUVs.

In July, Ford Motor Co.'s SUV sales grew 8% over previous-year numbers. (This jump included a 4% increase in sales of the company's popular Ford Explorer and Ford Expedition models.) But the spike didn't last long. By the end of August, Ford's SUV sales had fallen by 33% as gas prices shot up.

"There's no question that demand for traditional SUVs has been affected by rising gas prices," says Steve Lyons, Ford group vice president, North American marketing, sales and service.

General Motors Corp.'s SUV sales followed a similar trend. Up 22% in July, they fell 11% in August. The sales spike in July was the direct result of GM's wildly popular employee discount consumer sales program, says Sharon Basel, GM general manager of product communications for full-size trucks. And while August sales reflected inventory depletions, "we are basically adjusting our forecast downward to reflect (escalating gas prices).”

On a broader scope, year-over-year, it appears that Toyota Motor Corp.'s SUV sales are trending downward. In July 2005, Toyota sold 48,507 SUVs versus 50,939 during July 2004. In August, the company sold 46,290 SUVs versus 47,068 during the same period last year.

And the fall-out from Hurricane Katrina could have further impact on SUV sales, according to GM officials. "With prices topping well over $3 a gallon (at press time) in most regions of the country, it is reasonable to expect at least some impact on the national economy, including the automotive sector," says Basel.


Crowded market: SUV selection grows

Consumers may not be buying as many traditional SUVs as they used to. But those who are still interested in the vehicles have more options than ever, according to Kevin McCormick, manager of sales and dealer communications for DaimlerChrysler.

"When (our) Dodge Durango came out in 1997, there were maybe 10 SUVs on the market," he says. "There weren't a lot of competitors.

"Nameplates that used to dominate the segment eight years ago now have to work harder to maintain their customer base. Customers have a lot more choices."