Magazine article Newsweek

Meet the Sport Utility Lite: Carmakers Are Betting That Smaller SUVs Will Be the Next Hot Thing. (Sport-Utility Vehicles)

Magazine article Newsweek

Meet the Sport Utility Lite: Carmakers Are Betting That Smaller SUVs Will Be the Next Hot Thing. (Sport-Utility Vehicles)

Article excerpt

When dennis and kathrine kuo went car shopping last fall, they knew what they didn't want: a sport utility vehicle. Dennis, a 26-year-old pediatrics resident, disdains their sloppy handling, poor fuel economy and all-round "tiresome" feel. So he test-drove Camrys, Malibus and Accords before stumbling across a new sort of vehicle: the Honda CR-V. On the surface it looks like a sport utility vehicle, albeit a small one. But beneath the sheet metal lies the underpinnings of Honda's sprightly Civic sedan, which creates an entirely new driving sensation. "It drives like a regular car, but higher up," says Dennis. Kathrine, a graphic designer, praises its low price and stylish curves. "There's a certain element of fun to it," she says.

When the beer market went flat, brewers invented light beer. In the auto industry, there are growing signs of the boom that lies ahead: light sport utilities. As the Kuos discovered, they're radically different from the hulking, hot-selling Suburbans, Explorers and Durangos crowding highways today. Size isn't the secret: small SUVs like the Jeep Wrangler and Chevy Tracker have been around for years. What's new? This different breed of vehicles--including the CR-V, Toyota's RAV4, Subaru's Forester and the upscale Lexus RX300--are built atop car innards, instead of the heavy truck frames that form the foundation of most sport utilities. The result, says Consumer Reports auto-test chief David Champion: vehicles with SUV-like height, roominess and bad-weather prowess, but with smoother rides and better fuel economy. "Car-based sport utilities are really giving buyers more of what they want," Champion says. Dealers say they're especially popular among women and young buyers. Now carmakers from Motown to Munich are spending billions to design their own versions. "I don't think it's any secret," says Chrysler chairman Robert Eaton. "We, like many other companies, are working on them."

Make that every other company. This tiny niche, sparked by the launch of the RAV4 nearly three years ago, will soon swell to include at least a dozen models. The rosiest forecasts say the segment could reach 1 million vehicles a year by 2005--nearly as big as minivans are today. Soon-to-arrive versions range from BMW's new Sports-Activity Vehicle, which may be unveiled at auto shows in January, to Ford's yet-to-be-named mass-market model (code name: U204), which goes on sale in 2000. But Detroit has some catching up to do. The Big Three completely missed this trend, giving the Japanese a four-year head start. "Everybody thinks [Toyota and Honda] were brilliant," scoffs Michael DiGiovanni, General Motors' top market researcher, who says the Japanese pioneered this market by default: lacking the plants to build lots of regular sport utilities, they stumbled onto a hit by experimenting with car-based designs.

Although American carmakers have been too busy selling high-profit trucks to feel much regret, they do admit to a missed opportunity. Says DiGiovanni: "The advantages of being first to market are huge." Consider the auto industry's last big innovation, the minivan, launched by Chrysler 15 years ago this fall. Now every major carmaker sells one, but Chrysler still controls 45 percent of the market, thanks to loyal buyers and smart model upgrades. But J.D. Power & Associates forecasting chief Lincoln Merrihew says the Japanese won't have a similar lock on this market because they can't build enough small SUVs to remain dominant amid the flood of new models. …

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