Ultra-luxury Automakers Find Traction With Six-Figure SUVs

August 03, 2018 by Jaclyn Trop, @jaclyntrop

It may sport quilted leather seats, a winged badge, and the signature “B,” but there’s no question the Bentley Bentayga resembles a souped-up station wagon.

Starting at $229,100, the Bentayga launched two years ago, pioneering a new, ultra-luxury SUV segment. The W12-powered behemoth has since proven so popular that the marque is now launching a smaller, V8-powered version, starting at $165,000.

Mark Del Rosso, president and chief executive of Bentley Americas, calls the Bentayga his favorite Bentley, a surprising admission from the leader of a company that’s staked its century-long reputation on sleek grand tourers and race cars.

The Bentley Bentayga V8 wheel

The Bentley Bentayga V8 dashboard. (Photo: Jaclyn Trop/Trucks.com)

He plans to buy one when he retires because his three teenage sons need the extra space, Del Rosso said last week at a launch event for the Bentayga V8 in Portland, Ore.

The demand for more passenger and cargo room only partly explains why the U.S. is in the midst of an SUV craze. Now that utility vehicles and sedans achieve comparable fuel efficiency, customers face fewer barriers to upsizing. The elevated driving position coupled with extra elbow room and cargo space spell robust sales that could eclipse the sedan market within the next five years.

“The higher seating position offers a much more commanding view of the road, and that makes drivers feel safer and more secure,” said Ed Kim, vice president of industry analysis for AutoPacific. “SUVs are easier to get in and out of due to their higher seating height and rooflines.”

“That’s important, especially as aging baby boomers still make up the biggest chunk of the new vehicle marketplace,” Kim said.

No brand is safe from the pressure to build larger vehicles. Ford announced earlier this year that it would scale back on building sedans to devote more resources to developing and marketing crossovers. Rolls-Royce will deliver its Cullinan — the market’s most expensive SUV, starting at $325,000 — this fall.

Edmunds estimates that SUVs will comprise 46 percent of new vehicle sales this year, up from 42 percent last year.

While there will be plenty of automakers that continue to compete for the roughly one-third of sales that cars still account for, the pipeline of products headed toward the market underscores how automakers across the board are focusing on higher-margin SUVs,” said Jeremy Acevedo, manager of industry analysis at Edmunds. “Competition will peak in the next few years as more and more SUV offerings saturate the market.”

Consumers have been enamored with SUVs’ utility since the original Ford Explorer in the 1990s, Kim said. “The seating position afforded by the high roof proportions is much more natural and chair-like.”

“Drivers in most SUVs don’t sit with their legs stretched out horizontally as in most passenger cars. Then there is the inherent utility and flexibility offered by the 2-box shape and folding seats, offering practicality that no sedan can match,” he said.

The Bentley Bentayga V8 interior

Interior of the the Bentley Bentayga V8. (Photo: Jaclyn Trop/Trucks.com)

The luxury end of the market especially has gone into overdrive. After the Bentayga, the introduction of the Maserati Levante and Jaguar F-Pace swiftly reinvigorated the brands’ lineups, vaulting to bestseller status within months. The $200,000 Urus, which launched earlier this year, is expected to do the same for Lamborghini. Aston Martin is counting on its DBX crossover, due in 2019, to help double its companywide sales.

The 600-horsepower Bentayga “immediately set a benchmark for what a performance SUV should be,” said Goncalo Fernandes, a technical consultant for Bentley.

Where the W12 flagship is the “powerful big brother,” the smaller SUV is more youthful and playful, Fernandes said. The V8 model, due in dealerships later this summer, delivers 542 horsepower and slightly slower 0-to-60 performance.

With a louder exhaust and quicker reaction time, “it does deliver that performance in a slightly more useful manner,” Fernandes said.

The Bentley Bentayga V8 on the road

The Bentley Bentayga V8. (Photo: Jaclyn Trop/Trucks.com)

Bentley is able to shave nearly $65,000 from the smaller Bentayga’s starting price in part because its powertrain was developed with Volkswagen Group sister brands Porsche and Lamborghini. The lower price point is expected to attract new customers.

Many luxury automakers would have scoffed at the thought of slapping their name on a body that resembles a station wagon more than a sports car. But the boom benefits the brands whose sales stalled during the recession. They set higher prices, and therefore achieve higher margins, for utility vehicles compared with similarly sized sedans.

“The difference between comparably sized cars and utility vehicles is manageable and often a worthwhile payoff for having a vehicle that a consumer believes fits their lifestyle better,” said Stephanie Brinley, an analyst with IHS Markit.

Shoppers have sustained interest in mainstream SUVs, as well. AutoPacific estimates that SUVs will constitute 52.5 percent of the U.S. market by 2023. Emerging SUV subsegments comprising subcompact utility vehicles including the Ford EcoSport and Honda HR-V, are fueling much of that growth. Several new nameplates, such as the Lexus UX, are scheduled to debut in coming years.

Meanwhile, the global market for luxury SUVs is expected to grow at an even faster clip, with market research firm Technavio estimating a compounding annual growth rate of 25 percent through 2021.

Currently, high-end, low-volume SUVs like the Bentayga and Urus make up less than 1 percent of sales in the U.S., according to IHS Markit data.

Analysts say that stable gasoline prices play little role in whetting consumer appetite. “Even if fuel prices were to destabilize, SUV demand will not likely wane much,” Kim said. “Consumers will simply downsize to more fuel-efficient SUVs. They will not go back to sedans, which would force them to give up the practicality and utility they have come to expect.

“We have not even hit peak SUV yet,” he said.

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