Korea's 1-2 punch in the battle of the big crossovers

LOS ANGELES — Kia's muscular Telluride has elbowed into the three-row crossover segment with gusto, becoming the latest newcomer to disrupt a bastion of growth and profits amid a softening sales climate. And Kia's corporate sibling, Hyundai, is warming up for the fight with the Palisade, threatening a free-for-all for once-safe incumbents.

"With cars falling to the wayside, automakers have shifted their marketing strategies away from purely size-based comparisons and are instead honing in on how features within their SUVs accommodate different lifestyles, such as third-row space, or off-road capabilities," said Jessica Caldwell, executive director of data strategy at Edmunds.

"Customer loyalty and brand perception are looser than ever before, so this is probably the best time for the Korean automakers to jump into the ring."The handsome Telluride captured 10,965 sales in its first two months of availability in the U.S. and became the automaker's fastest-turning model in the nation last month, according to Bill Peffer, vice president of sales and operations for Kia Motors America. The Georgia-assembled crossover accounted for more than 10 percent of the brand's sales in April, at 5,570 units.

While that's a small fraction of the large-crossover class, analysts say, its an impressive early showing for the Telluride, which becomes another fierce contender facing segment leaders such as the Ford Explorer, the Toyota Highlander and three General Motors models.

"Up until a year and a half ago, give or take, if you produced an SUV, that's pretty much all you had to do," said Karl Brauer, executive publisher of Autotrader and Kelley Blue Book. "It didn't have to be a great SUV, or a perfectly styled SUV. Now, there's so many SUVs that the market is saturated with them," he said.

In addition to the Telluride, and the Palisade that goes on sale this summer, all-new crossovers include the Subaru Ascent that showed up for the 2019 model year and the Volkswagen Atlas that arrived as a 2018 model. Despite the burst of activity, analysts said, there's still plenty of upside for the Korean newcomers.

For the first four months of this year, the Ascent sits in fifth place in sales and the Atlas in sixth place, behind the Explorer, Highlander, Chevrolet Traverse and GMC Acadia. The Buick Enclave and the Telluride round out the top eight. The Honda Pilot, with sales this year just shy of the Traverse's, is a midsize crossover, another segment facing disruption from new players, including the reborn Honda Passport and Chevrolet Blazer.

Despite the increasing segment fragmentation, there is good news for the large-crossover sales leaders: The segment in 2018 grew 11 percent to 935,337 U.S. sales, and that momentum has continued this year with sales rising 10 percent in the first four months, as consumers flocked to a category bursting with fresh and affordable models, especially in lower trims. The Telluride starts at $32,735, including shipping, and has a V-6 engine and automatic emergency braking. The pricing of the Palisade has not yet been announced.

Rivals such as Ford and Toyota are not resting on their laurels. However, with a new-generation Explorer going on sale this summer, and the redesigned 2020 Highlander expected in showrooms in December, brand loyalty and positive media buzz for the reworked models are likely to keep them very competitive, analysts said.

But for now, it's the Telluride's chance to shine. It has racked up some early media awards and a wealth of positive reviews for its rugged styling, relatively luxurious interior and bang-for-buck that Kia is known for. Those accolades can help a new player in the large crossover space to capture first-time buyers to the brand. The Kia Sorento is in the midsize segment.

"New models that are well done — the Telluride being an extremely good example right now — will do well because they're the new hot model, but that hotness starts to cycle quicker because there's so many new ones," Brauer said.

A case in point is the Palisade, which is mechanically similar to its platform mate but is going in a different styling direction. Where the Telluride is rugged with an off-road vibe, the Palisade is meant to be more of a near-luxury cruiser. For Hyundai, it's also a new world of opportunity to draw first-time customers into dealerships as part of its all-in crossover strategy.

But it also sets up a fight with its Korean cousin that depends partially on whether the three-row utility segment can continue to grow, lifting all boats. If not, the elbows are going to be thrown at both friend and foe as Kia defends its market position.

With the Palisade, "I think it's going to be pretty much the same story that you're hearing about the Telluride for the Hyundai," Brauer said, hedging a little. "Even if the Palisade and the Telluride are identical in every other way, the styling of the Telluride gives it a slight edge over the Palisade."