SUV Shootout at $35,000

TUSTIN, Calif., Dec. 20, 2002; AutoPacific, Inc. today releases the results of an analysis of the United States sport utility vehicle market showing that the number of SUV entries has increased from 33 entries in 1996 to 53 in 2002 and that another 12 have or will be introduced in the 4th Quarter 2002 through the 1st Half of 2003. By the middle of 2003, there will be 63 SUV nameplates on sale in the US (Kia is temporarily dropping its Sportage small SUV and Isuzu is replacing the Trooper with the Ascender). Much of this growth is from car-based SUVs clustered closely around the $35,000 mark.

It has obviously been impossible for competition to ignore the success of the Lexus RX300 that was introduced in 1998. Over that five-year period, Lexus has sold over 340,000 RX300s with little competition. Sales are now in the 75,000 units a year range.

Beginning with the 2002 model year and extending through 2003, the arena Lexus formerly had to itself will become extremely crowded. There will be new SUVs positioned just above the Lexus and new SUVs positioned directly on the RX and then new SUVs with base prices substantially lower than the Lexus, but when loaded with equipment prices increase into the lower end of the Lexus price range.

Remembering that Lexus will have a new RX330 in early 2003, Lexus is seemingly ready for this onslaught of competition. Lexus even has the more expensive mid-$40s GX470 to compete in the market. The only direct competitor to the RX prior to late 2002 was the Acura MD-X (50,000 units a year), a large car-based 7-passenger SUV that has been selling at a premium since it was launched in late 2001.

The Volvo XC90 has been launched to rave reviews. Large, macho and safe, the XC90 was selected as the Motor Trend SUV of the Year for 2003. XC90 is one of the competitors positioned right on the RX and has a sales target of 48,000 a year. Volkswagen will launch the Touareg in the 1st Half of 2003 with a sales target of 35,000 units a year. This luxury SUV has received strongly favorable write-ups from its first public showing at the Paris Motor Show in October, 2002. Pricing has not been set on Touareg as yet, but guesses are its base price will be in the $35 - $45,000 range.

Attacking the $35,000 mark from below are the Honda Pilot, Nissan Murano and Mitsubishi Endeavor. Endeavor a mid-sized car-based SUV with distinctive styling and pricing beginning around $25,000. Think of Endeavor as a Toyota Highlander competitor that can be loaded up to the mid-$30s. A little more expensive than Endeavor (we think) is the Nissan Murano with a powerful V6 and CVT. Again, Murano can be loaded up to compete with the low end of the RX330 lineup. Nissan completes its one-two SUV punch with the Infiniti FX45 - V8 powered SUV positioned in the upper $30s.

Where the Lexus RX previously had only one or two direct competitors, more are being introduced and the field will immediately become viciously competitive. Will all this competition stimulate sales in the $35,000 to $45,000 range? Or is the pie too small for all these good entries to get the sales they are forecasting for themselves?

AutoPacific's analysis shows that 15% of 2002 model year car and truck buyers paid more than $35,000 for their vehicle and 25% of SUV buyers paid more than $35,000 ... mostly in the Luxury and Large SUV categories. That's about 2.5 million vehicles and about 1 million SUVs that were priced above $35,000. With Volvo and Volkswagen entering the market at or above the $35,000 mark and other SUVs being added by established SUV makers like Infiniti (FX45), Lexus (GX470), Lincoln (Aviator) the SUV market above $35,000 will have to grow by about 25% to support these new entries.

The shootout is on and barroom brawl rules are in effect.

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