Compact SUV sales expected to stall this year before big gains return

The compact SUV market in Europe is forecast to be flat this year at more than 2 million sales after years of growth as automakers replace key models and the segment pivots away from diesels toward electrified powertrains.  

After this year, however, LMC Automotive believes the segment will expand to 2.4 million units in 2021 and continue to rise annually to reach 2.8 million by the middle of the decade.  

Compact SUVs have been an economic lifeline for volume brands such as Nissan, Ford and Peugeot because of demand for models such as the Qashqai, Kuga and 3008, respectively.

Booming sales pushed the segment to become Europe's fourth largest with a 13 percent share of the entire market last year with a full-year volume of more than 2 million, figures from JATO Dynamics show. The segment's share has almost doubled since 2014. The Volkswagen Tiguan, helped by a 4 percent sales gain, passed Nissan's Qashqai to take the segment lead. The Peugeot 3008 was third.

The sales disruption forecast by LMC for 2020 is expected partly because the Qashqai will be replaced later this year and the Kuga is currently being succeeded by a new version.  

Therefore, LMC believes the 2020 sales of compact SUVs will be close to its estimate for the segment for 2019, which is 2.2 million (LMC's full-year results for Europe were still being compiled at press time). LMC also points out that 2020 sales might continue to dip for the Hyundai Tucson and Kia Sportage ahead of the arrival of their successors in 2021.

Tough task  

The biggest task facing automakers selling compact SUVs is the transition away from a heavy reliance on diesel vehicles to electrified models to better align with tougher European emissions regulations and the wishes of consumers.  

Although the diesel share for compact SUVs has fallen from 73 percent in 2015 to 44 percent in 2018, the sheer number of compact SUVs bought meant that between January and October of last year no other segment registered more diesel models, according to JATO. The Tiguan was the No. 2-selling diesel overall in Europe through 10 months of last year, trailing only the VW Golf. The 3008 was fourth in diesel sales.

Japanese automakers are leading the charge away from diesels by embracing hybrids. The Toyota CH-R was No. 6 in the segment with sales of 121,418 while the new Toyota RAV4 pushed past the Seat Ateca and Opel/Vauxhall Grandland X to round out the segment's top 10. Hybrid versions accounted for 89 percent of the CH-R's sales, and 67 percent of the RAV4's volume, according to 2019 figures from Toyota Europe.

Honda also cut diesel versions in favor of hybrids for its new CR-V. The real impact, however, will be felt next year when Nissan is expected to drop diesel offerings from the Qashqai, replacing them with its e-Power serial hybrid system.  

"We have seen a significant drop in diesel, and we are adapting ourselves to follow that trend," Nissan Europe Chairman Gianluca de Ficchy told Automotive News Europe in a recent interview, without confirming the diesel switch.

Ford will offer two diesel variants of the new Kuga, one with a mild-hybrid setup, but will also launch a full-hybrid version of its top-selling compact SUV later this year.  

Plug-in push

The other key automakers in the segment, however, are bypassing full hybrids to offer plug-in hybrid technology, which significantly cuts CO2 compared with standard hybrids but also pushes up the price due to the increased size of the battery.

PSA Group brands Peugeot, Citroen, DS and Opel/Vauxhall have already launched plug-in hybrid versions of their compact SUVs, cutting average CO2 to as low as 29g/km. Ford is also launching the Kuga with plug-in hybrid technology, and Nissan is reportedly going to roll out a plug-in hybrid Qashqai using technology borrowed from alliance partner Mitsubishi.  

The most recent automaker to announce a plug-in hybrid in the sector is Toyota, which will launch a version of the RAV4 in the second half of this year with a claimed electric range of 65 km.

VW, so far, has not announced a plug-in hybrid version of the Tiguan but is expected to launch one in the future. The brand already sells a plug-in hybrid version of the long-wheelbase Tiguan in China.

LMC flagged one risk for the sector: tough future CO2 targets could force automakers to change strategy and shift their emphasis toward more conventional cars. Even if they are electrified, SUVs remain heavier and less fuel efficient than compact hatchbacks. Buyers could be nudged to return to those cars because tougher emissions standards may push electrified SUVs beyond their price range. 

For now, however, the popularity of the sector continues unabated. JATO global analyst Felipe Munoz pointed out that the only volume brand absent from the sector in Europe is Fiat, and that's expected to change when it merges with PSA. Said Munoz: "This is a crucial segment for the mainstream players. It is an important source of sales volume and profits."