I disagree strongly, that's a
very U.S. centric view - while SUV sales have indeed been increasing in the U.S., where roads are generally wider, gas prices are much lower and high earners tend to have their own garage space, in Europe it's not such a strong trend, both large SUVs and mid-size SUVs are still only a tiny percentage of the market:
European sales 2017 Premium Large SUV segment - carsalesbase.com
"Sales of premium large SUVs in Europe declined in 2017 after three consecutive years of explosive growth during which 100.000 annual sales were added. A lack of new products may be responsible for the slowdown which caused sales to slip 6% to 270.000 units, or
1,7% of the overall European car market, down from 1,9% in 2016."
European sales 2017 Premium Midsized and Compact SUV segments - carsalesbase.com
Sales of midsized premium SUVs in Europe continue to boom with a fourth consecutive year of double digit growth, of which the last three years showed at least 20% growth. In 2017, the segment grew by 21% to a record 492.500 sales, or
3,2% of the overall European car market, up from 2,7% in 2016.
So yes, even in Europe SUVs are a nice growth segment, especially when gas prices are not super high - but the real money comes from sedans and compact cars.
Oil prices are another factor: SUV sales tend to go down when gas prices go up sharply - a larger car has worse fuel economy.
So IMO it was the right decision to start with the sedan form factor:
- it's easier to sell in Europe and other regions with old cities and dense urban traffic,
- but it's also cheaper to make and thus easier to scale up to larger manufacturing output.
Even in the EV space, with 50% of Tesla's market being the U.S., there's no clear shift of SUV vs. sedan, if we look at Tesla's recent sales of S vs. X there's no real shift in demand, the last 4 quarters were 50%/50%:
Code:
2017/Q3 14,065 11,865
2017/Q4 15,200 13,120
2018/Q1 11,730 10,070
2018/Q2 10,930 11,370
2018/Q3 14,470 13,190
2018/Q4 13,500 14,050
In 3 quarters there were more S sales than X sales, and in 3 quarters there were more X sales than S sales, with the total unit count favoring the S a bit more, which is also an effect of its slightly lower entry price (S starts at $85k, X at $88k, 3.5% more expensive).
The shift towards SUVs in the U.S. is:
- in part due to consumer preference (a larger, taller car is more practical),
- in part due to more road and parking space,
- in part due to lower oil prices and improving ICE car fuel economy reducing the 'pain at the pump' factor,
- in part due to lackluster sedan offerings on the domestic U.S. market.
While it's no doubt SUVs will become more popular as EVs drastically improve fuel economy, my guess is that the 50-50% equilibrium shown by Model S/X sales is probably the natural preference of customers globally, all other things equal. Sedan sales are no way going to zero - as the Model 3 has shown it already.
In fact as Tesla walks down the price ladder consumers tend to become
more price sensitive, and the fundamental cost difference between SUVs and sedans will shift demand more towards sedans as we go to $35k cars and below.
