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Can high SUV sales continue?

Soaring demand for SUVs and crossovers drove record sales for premium automakers including BMW and Mercedes last year. But the numbers are raising concerns about the overall impact of SUVs on global warming. This is despite their modern fuel efficiency and the manufacturers’ hefty investment in producing electric powertrains. There is some speculation that demand will fall as new greenhouse gas emission regulations take hold this year.

BMW said last month that deliveries by its main luxury brand rose 2 percent to a record 2.17 million vehicles last year. It’s “X” branded crossovers now make up 44 percent of the BMW brand’s global sales.

At Mercedes-Benz, every third luxury car sold last year was an SUV or crossover. At Volvo, SUVs and crossovers accounted for 63 percent of global sales last year, up from 56 percent in 2018.

The International Energy Agency (IEA) warned in its November World Energy Outlook 2019 report, “Consumer preferences for SUVs could offset the benefits from electric cars”.

The IEA said a doubling in market share had seen emissions from SUVs grow by nearly 0.55 gigatons of carbon dioxide (CO2) during the last decade to roughly 0.7 gigatons. As a result, SUVs were the second-largest contributor to the increase in global CO2 emissions since 2010 after the power sector - ahead of heavy industry, including iron and steel, cement, aluminum, as well as trucks and aviation, it said.

There are now more than 200 million SUVs around the world, up from about 35 million in 2010, accounting for 60 percent of the increase in the global car fleet since 2010, IEA data shows. Automotive News classifies many of those SUVs as crossovers, which are based on car platforms.

“If the popularity of SUVs continues to rise in line with recent trends, this could add another two million barrels per day to our projection for 2040 oil demand,” the IEA said. Automakers across the world are investing billions in electric vehicles to try to meet tougher emissions regulations. But the jury is out on how many drivers will buy them. BMW and Mercedes say their vehicles are among the most fuel efficient available, thanks to hybrid and other technologies that are already available on the market. Both automakers say they aim to achieve new sales records this year, are preparing to launch fully electric crossovers - the BMW iX3 and Mercedes EQC - which they say shows a commitment to a cleaner future.

Efficiency gains

While acknowledging the growing popularity of SUVs, the German Association of the Automotive Industry, or VDA, said much of the demand is for more efficient models.

“Only just under 5 percent of SUVs are large luxury class vehicles. The market success of the SUV segment is mainly due to the model offensive in compact and medium-sized SUVs, with correspondingly lower fuel consumption,” says VDA.

The newly registered SUVs of German group brands have reduced their CO2 emissions by 35 percent since 2008, it added. BMW plans to launch 25 hybrid and electric cars by 2023, with more than 12 models being fully electric versions.By 2025, half of all its cars are expected to be hybrid or electric vehicles, it says. Daimler-owned Mercedes expects half of its sales to be hybrid or electric by 2030, with Europe reaching the 50 percent mark in 2025. Automaker driven?

Peter Fuss, a partner at EY (Ernst & Young Global), said German automakers pushed sales of higher-margin SUVs last year ahead of the introduction of more stringent European clean air rules in 2020. In the fourth quarter of 2019 there was an unusually large rise in commercial registrations in Germany, Italy and Britain compared with figures for private consumers, in a sign that automakers were pushing certain models into the market.

“From January 2020 onwards, new car fleets need to adhere to limits so as not to face large fines,” says Fuss. “We will not see the same growth rates in this segment as we did last year.” Electric-car registrations are expected to take off in mid 2020, says Fuss.

But that will depend on drivers being prepared to buy them, and perhaps also on how cheaply automakers are prepared to sell them. Source: Automotive News Europe.