European sales of small SUVs projected to 'grow like crazy'

European sales of small SUVs in 2018 are poised to surge beyond the segment's typically strong growth, as new models persuade consumers to switch from traditional hatchbacks at a faster rate.

Analyst firm LMC Automotive expects an additional 400,000 sales to be tacked on to last year’s 1.4 million in the region as new small SUVs from Volkswagen Group, Citroen and Opel/Vauxhall each look set to break the 100,000 sales mark in 2018.

In the first three months, the VW T-Roc, Citroen C3 Aircross and Opel/Vauxhall Crossland X entered the charts in sixth, seventh and eighth places, respectively, each reaching sales of more than 25,000 during the quarter.

Meanwhile, the heavily revised Dacia Duster leapfrogged the Opel/Vauxhall Mokka to take third place with sales of 46,571, behind the leading Renault Captur and second place Peugeot 2008.

Just outside the top 10, the recently launched Seat Arona posted strong sales of 17,696 to put it just ahead of two more newcomers, the Kia Stonic and Hyundai Kona.

"The market has skyrocketed," Ponz Pandikuthira, head of product planning for Nissan Europe, told Automotive News Europe. "We are projecting for the next four years it will grow like crazy, about 40 percent up, with all kinds of nameplates coming in."

The appeal of the cars – with their compact dimensions, high seating position and youthful image – will push the market to just shy of 2 million in 2019 and up to 2.3 million in 2022, LMC Automotive predicts.

"The automakers are committed to flood the market" to meet demand, said Sammy Chan, an LMC analyst.

New models that are set to shake up the segment, according to LMC, include the VW T-Cross, the long-awaited small SUV that will sit beneath its larger T-Roc stablemate when it arrives this year.

Next year Skoda will launch its small SUV based on the Vision X concept seen at this year's Geneva auto show. It will replace the discontinued Yeti. Skoda says it has "ambitious" sales targets for the car – which, like the Seat Arona, is built on the MQB A0 platform of parent company VW Group.

Ford makes changes

One of the most important models to launch will be a Fiesta-based Ford SUV, likely in 2020, according to LMC Automotive. Ford misjudged consumer tastes in Europe with the 2014 launch of the EcoSport small SUV, which was largely unchanged from the model developed for Brazil.

Ford, however, has since overhauled the EcoSport to better suit more demanding European customers and recently switched production to Romania from India.

As a result, sales of the EcoSport rose 29 percent in the first quarter to put it ninth in the segment’s rankings. For the next model, Ford will be hoping for a repeat of the dominance the automaker enjoys with the Fiesta, which is Europe's No. 3-selling small car.

Juke loses ground

Nissan arguably defined the sector when it launched the Juke in 2010. But the aging model suffered the biggest decline of any of the models in the top 10 during the first quarter, falling to 10th place from fifth during the same period last year with sales down 27 percent. A new Juke is expected soon, possibly next year, which will broaden the appeal of the car.

"Customers are much more demanding," Nissan's Pandikuthira said. "For the next Juke, we're going to cater for a wider audience than we are used to."

He promised the new Juke still will have its "edgy" appeal but won't be quite so polarizing in its looks. It will also have more space and "much more efficient" engines, Pandikuthira said.

More choice, more profit

Some manufacturers plan to double up in the segment, as VW is doing. LMC predicts that Hyundai and Kia will launch a second version of the Kona and Stonic, respectively, in 2019, while Renault plans a second Captur to be made at its plant in Valladolid, Spain, starting next year.

The desire to launch more models is driven by their ability to generate profit. "They’re mostly based on the regular subcompacts but selling for higher prices – that's a crucial factor," said Felipe Munoz, global analyst for JATO Dynamics.

The average selling price for a small SUV in Germany is 23,386 euros, compared with 17,317 for a small hatchback, according to first-quarter data from JATO.

Diesel decline

The increasing unpopularity of diesel is not affecting the soaring demand for small SUVs. Instead, buyers are switching to gasoline. In 2013, diesel's share of the segment was 56 percent. In the first quarter this year, that number had fallen to 33 percent, according JATO Dynamics. Alternative-fuel vehicles accounted for just 0.4 percent of sales in the first three months.

Despite the off-road image the cars borrow from, the segment is almost all two-wheel drive. Just 12 percent of models sold in the first quarter were all-wheel drive, a drop from last year.

You can reach Nick Gibbs at ngibbs@crain.com.