More differentiation, more technology and a new platform for a venerable SUV family as General Motors (GM) launches the latest generation of this highly profitable model line.
IHS Automotive perspective | |
Significance | General Motors (GM)'s full-size SUVs are high margin vehicles, even though today's range sells in less than half the volume of peak years. While this segment was hit hard by the recession sales have been increasing with the economic upturn and there remains a loyal group of buyers for this vehicle type. |
Implications | GM's continued investment in full-size SUVs represents an ongoing opportunity to maximise the investment in the full-size pickup architecture, as well as to retain this vehicle type's loyal owner base. The GMC models command a higher price and speak to a slightly different buyer than the Chevrolets do; maintaining both families only increases GM's revenue and profits. |
Outlook | While overall sales are not forecast to increase dramatically with the arrival of this new generation in spring 2014, MSRP and average transaction prices should come up, as the new models offer more technology. By servicing a relatively conservative buyer, GM can leverage the existing suite of technology and infotainment systems, rather than using the SUVs as a introduction point for new features. |
General Motors (GM) introduced their all-new full-size SUVs today (September 12). The Chevrolet Suburban and Tahoe were introduced in New York, while the GMC Yukon, Yukon XL, and Denali were introduced in Los Angeles. These SUVs carry on their relationship with the pickup family, and move to the K2XX platform (note: The Cadillac Escalade will be introduced at a separate event in October).
Greater attention has been paid to exterior styling differentiation, though the interiors maintain the existing level of similarity. GM says that the full-size SUVs do not share a single body panel with the full-size trucks, in an effort to deliver better differentiation from the trucks, but also from one another. Designers looked for exterior elements that could be shaped to reduce wind noise, for a quieter ride. Chevrolet has described the SUVs design as enhancing efficiency as well. GMC and Chevrolet models will be distinguished inside more by materials choices and option package bundles than any significant difference in dashboard or interior structure. In both models, more emphasis was placed on creating clever storage spaces. GM says that those who buy the longer models typically do use the extra space, contributing to the decision to offer rear-seat entertainment system for the longer Suburban and Yukon XL models.
As with past generations, the Yukon and Yukon XL share design, architecture and powertrain, but XL adds more length. In this iteration, that means a 14-inch-longer wheelbase and 20 inches longer overall. This generation makes the infotainment and passive assist safety features more in line with today's automotive landscape, including an eight-inch customisable driver display with available heads-up display (GMC, Denali trim), eight-inch colour touchscreen with MyLink connectivity, keyless start, adaptive cruise control, optional front park assist but standard rear park assist and rear vision camera, and heated steering wheel.
Advanced driver aid systems include forward collision alert, lane departure warning, side blind zone, lane change assist, rear cross traffic alert, and front and rear collision mitigation braking. The full-size SUVs also (finally) add a fold-flat third-row seat, with an optional power assist. The current generation had been criticised heavily for not succeeding with a fold-flat third row, which was common to the segment at introduction.
Two engines will be offered for the GMC vehicles, the standard new 355bhp 5.3-litre EcoTec V8 introduced with the trucks are standard for Yukon and Yukon XL. GMC's with the optional Denali package get a 6.2-litre V8. Chevrolet Tahoe and Suburban buyers only have the 5.3-litre V8 and both use the six-speed automatic transmissions. Under the skin, the SUVs take a stronger frame and wider rear track, third-generation magnetic ride control, and new electric variable-assist power steering. Sales begin during the first quarter of 2014; production is at GM's Arlington, Texas, facility.
Outlook and implications
For GM, the timing is extremely good in bringing the updated product to market. The market is on the rebound and the economy is improving, with sales of the company's full-size SUVs increasing throughout 2013. IHS Automotive forecasts sales of about 230,000 globally in 2014 for all four products – Chevrolet Suburban and Tahoe, GMC Yukon, and Yukon XL – with about 84% of the volume set for North America. The vehicles launch in the first quarter of 2014, and 2015CY sales are expected to take a bump before settling into a relatively stable range of 230,000 to 240,000 units per annum (upa). While a far cry from the SUVs peak year of 531,867 back in 2002, this volume is capable of delivering a profitable product line.
The second-biggest market will be the Middle East, with nominal sales in Europe and South America, and none in China. Sales are not forecast to take a significant long-term jump, however. But these are extremely profitable vehicles for GM, even with this generation's extensive differentiation and added equipment and development costs. Among the ways that GM manages costs on a program like this is that none of the technology being introduced on the SUVs is new to GM. While the systems need to be calibrated for these products, this isn't a segment often used for proving out new technology. This generation is no different. It is likely that GM will see MSRP and average transaction prices come up with the new model.
The new SUVs go on sale in the first quarter of 2014, and are very likely to be featured in Chevrolet's return to Super Bowl advertising (see United States: 27 August 2013: Chevrolet returns to Super Bowl advertising). For GM, the full-size SUVs, a range which will be rounded out with a Cadillac Escalade being introduced in New York, offer the opportunity to leverage scale and volume to offer highly profitable vehicles that a specific customer set is very loyal to. Based on the K2XX platform of the full-size pickups, the profit margins and pricing on the SUVs enable these to deliver additional revenue to GM's income even in lower volumes than they are expected to see. The behind-the-scenes measures GM has taken to improve its basic cost structure will be of assistance here as well.
In terms of the package introduced today, the SUVs seem to have added an appropriate level of technology, and introducing this off-the-shelf GM technology to the SUV customer adds to the value proposition GM is setting for Chevrolet. As described to IHS by Mary Barra, GM's senior vice-president of global product development: "Chevrolet has always been a value brand. It's a true value at every point, every segment. Chevrolet will have value in each of our segments, will have an offering that is meant to aspirational and attainable. It may not be the most expensive technology, but it is going to be functions and features that a person gets in the car and says, 'Wow, this is really cool'" Looking at the content for the new Chevrolet Tahoe and Suburban, Chevrolet has artfully applied existing technology without adding to the development cost of the SUV with brand-new features or technologies. The GMC versions are typically dressed a little nicer, with a little higher MSRP, and deliver on the company's "Professional Grade" promise.