When It Comes To Cars, Americans Are Living Large – CleanTechnica

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One maxim of the sales game is this: “Find out what customers want, then give it to them.” In some cases, manufacturers create demand where none existed previously through the wonderful world of advertising. A perfect example is the Ford Explorer.

There were plenty of off-road vehicles before it came along — the International Harvester Scout, Ford’s own Bronco, and the original Jeeps, but they all had one thing in common. They were built on a conventional truck chassis, which meant solid axles front and rear. Many readers may never have experienced such crude devices. They were tough, they were rugged, and they were about as comfortable as the buckboards early settlers used to get their produce to market.

The Ford Explorer changed all that by plunking a passenger car body on top of a truck chassis — in this case, the Ford Ranger pickup — which had one significant upgrade over earlier pickups, namely independent front suspension. That one improvement gave it a much smoother ride than those earlier four-wheel drive vehicles.

The Explorer touched a nerve in the American psyche. It reminded people of those rugged vehicles like the Scout and the Jeep, but rode more like a traditional sedan. Ford followed up the success of the Explorer by building the Expedition on the F-150 pickup truck chassis, and then trotting out the Excursion based on the F-250 platform.

From a marketing perspective, the Explorer was brilliant. Take a dead simple ladder frame chassis that cost very little to manufacture, gussy it up with passenger car components, call it a sport utility vehicle, and sell it for far more than any Ranger model ever did. It quickly became a major profit center for Ford, and both GM and Chrysler piled into the newly created SUV space with models of their own.

The only complaint from early SUV owners was that their vehicles rode like trucks, which was no surprise since they were built on a truck chassis. Tire manufacturers soon learned how to make tires for this new class of vehicles that looked rugged but rode more softly than the normal truck tires fitted to those vehicles initially. Manufacturers softened spring rates and damper settings to suit the tastes of their customers, then added leather interiors and other upgrades to make them more car-like.

Then some smart marketing types noticed how popular those new SUVs had become and decided to back-fit the ride and comfort features of the SUVs to the trucks that spawned them in the first place. As a result, the four-door pickup truck emerged and quickly became the new standard in America, with all the creature comforts Detroit knew how to provide.

For years, some have expressed concerns about how trucks and SUVs got bigger and heavier. Automakers have learned to make them with front grilles that look like the Exxon Valdez coming down the road. Any notion of pedestrian safety has gone out the window as the urge to build larger vehicles with that “in your face” arrogance Americans adore has taken over the industry.

The biggest of the big SUVs hit a peak about 20 years ago with the Hummer — the gargantuan beast made by GM that looked a lot like the military vehicles people had grown accustomed to seeing in news reports from Iraq. But their popularity faded as high gas prices and a renewed interest in fuel economy began to affect the buying decisions of many Americans.

Fuel Economy & Regulatory Credits

Another restraint on monster vehicles was the fuel economy standards imposed by the federal and some state governments. Those rules required manufacturers whose vehicles exceeded the limits to buy credits from others who had them to sell. For many years, one of Tesla’s primary sources of income came from selling regulatory credits.

Now the current administration has decreed an end to that scheme, leaving manufacturers to build the biggest, heaviest, least efficient vehicles they can with no financial penalty. That, of course, is a blow to Tesla and other EV manufacturers.

SUV Sales Are Soaring

Bloomberg reports today that sales of gargantuan seven (and eight) passenger vehicles are soaring. It attributes the increase to more American families with three or more children needing room to tote the kidlets and all their accoutrements here and there, and that certainly is part of the answer. But another piece of the equation is that automakers have also been relieved of the need to buy regulatory credits to offset the poor gas mileage and high emissions associated with those vehicles.

“Ford’s Lincoln Navigator is having its best year since 2007 and its recently redesigned Expedition just had its best third quarter US sales since 2005. It’s the same over at GM, where the Cadillac Escalade is on track for its best year since 2003. Chevy and GMC’s behemoths — the Tahoe, Suburban and Yukon — are selling at a 23-year high,” it says. Edmunds estimates that some 700,000 of those enormous beasts will find their way to new owners this year.

Bloomberg Intelligence analysts estimate GM sells its full size SUVs for an average price of $74,375 and that each sale generates average earnings before interest and taxes of almost $7,500. It expects GM to fatten its bottom line every year by over $2 billion, thanks to increased production of big SUVs and pickup trucks while pulling back on building electric vehicles, which have much smaller profit margins if they have any at all.

Ford CEO Jim Farley said recently his company now has a multi-billion dollar opportunity to redeploy the money it used to spend to purchase emissions credits to producing more highly profitable internal combustion engine vehicles. “We anticipate a meaningful reduction in federal requirements next year,” Farley said last week during Ford’s quarterly earnings call. “We are adjusting our product mix accordingly.”

The High Price Of Low Fuel Economy

There was much weeping and wailing and gnashing of teeth over the price of electric cars for many years, but there is nary a whimper of protest about the cost of these gargantuan vehicles.

Wealthy households with a median income of $248,000 are the biggest consumers of these new four-wheeled leviathans, according to Strategic Vision. That’s more than twice the $118,000 median household income of new car buyers in general and just behind luxury car buyers, whose income averages $278,000 a year, Strategic Vision says. Millenials also see large SUVs as safe, powerful, rugged, and family friendly, its research found.

“Ultimately, the popularity of big SUVs turns on Americans’ love of large. From homes to TVs, steaks and stores, US consumers tend to default to a more-is-more mantra,” according to Bloomberg. Joseph Yoon, an analyst for Edmunds, put it this way. “We go to giant warehouse stores to buy giant boxes of things with our big dogs in the backseat. It’s part of the American lifestyle. We drive on big roads that we share with big rigs and other big trucks. Americans love large cars.”

Yoon is undoubtedly correct, but as Reuters is reporting today, demand for gasoline in China, where motorists tend to drive more in October, was down about 9% compared to 2024. The decrease is attributed to the number of electric cars on the road in China and access to a robust charging infrastructure throughout the country. The lower demand for gasoline is based on an analysis by Sublime China Information, a consultancy based in China.

“The sagging holiday demand is symptomatic of the broader decline in Chinese fuel use stemming from wider EV adoption, heralding the approaching end of its decades-long role as the main driving force of new global oil demand,” Reuters reporters Sam Li and Lewis Jackson wrote. The research unit of state oil company Sinopec expects demand to fall more than 4% overall this year compared to 2024.

There seems to be a lot of magical thinking in America by many of its major corporations. We suppose any company can be forgiven for wanting to maximize profits, but there are more and more instances of China surging ahead in renewables and the electrification of its transportation fleet while the US is happily paddling backwards into a fictional past that no longer exists, if it ever did.

Canada is contemplating a reduction in the tariffs it imposes on cars imported from China, and even though attitudes along the border between the US and Canada have hardened of late, doing so will put pressure on US automakers. Farley and company may be celebrating today, but a reckoning is in the offing that could alter their assumption that they can continue making larger, heavier, thirstier vehicles forever with no consequences. There are consequences aplenty awaiting them in the road ahead.

Hat tip to David Littlejohn for bringing the Reuters news to our attention.