Transportation Deployment Casebook/Life cycle of Sport Utility Vehicles (SUVs)



The Sport Utility Vehicle, or SUV, is defined by the United States Department of Transportation as a light truck which is historically built around a traditional truck chassis. SUVs are often equipped with a mix of off-road performance technologies, with many containing four-wheel drive and towing capacity of pickup trucks. SUVs tend to display high clearance, boxy bodies, and a high H-point compared to compact vehicles. SUVs have roots to contemporary personal pickup trucks as well as military vehicles, and began to gain consumer popularity in the 1990’s in North America. United States sales of all types of SUVs increased by 70% from 1994 to 1999, based on sales data from the Bureau of Transportation Statistics.

SUV Origins
SUV’s have roots to the 1930’s, where vehicles with high axle clearance used for off-road travel and the attribute of having an enclosed rear cargo area were used by government officials. Although most original SUVs were based on off-road ability, not all early SUVs had four-wheel drive capability; the Chevrolet Carryall Suburban was originally offered as a real-wheel drive only vehicle. SUV brands like Jeep, Hummer, and Land Rover are based from military vehicles that were used for this purpose. The concept of the more rugged and higher clearance vehicles originated from World War I and II. In an attempt to market their concept to American families after World War II, Willys-Overland created the Jeep Wagon in 1948, among other box-based models. The popularity of post-War baroque models seen in the station wagon and contemporary passenger vehicles led to the original SUV’s inability to attract regular consumers. Ironically, the Jeep Wagon led to the development of all-steel station wagons, which became the more “family-oriented” vehicle for the next three decades.



The SUV did not make a large impact in consumer purchases until American Motors bought the Jeep brand and brought it to the United States in 1969. AM modified the wartime Jeep and the failed Jeep Wagon in an attempt to market to a more urban consumer. The Jeep was the most common, although still niche-focused, SUV in the 1970’s and early 1980’s, and were still seen as impractical during this time. Jeep’s tendencies to be top-heavy and their higher rates of rollovers also contradicted their early image as a safe, family vehicle.

SUV Policy, Past and Present
A large push for corporate marketing and production of the SUV derived from an amendment to the Clean Air Act in 1970, as well as the establishment of the Corporate Average Fuel Economy (CAFE) in 1975 to increase fuel economy of passenger vehicles. The establishment of the CAFE was rooted around the OPEC oil crisis of the mid- to late-1970’s in an attempt to lessen the dependence on oil consumption in America. The first averaged fuel economy standards for regular passenger vehicles were set to be 27.5 mpg by 1985, but fuel economy requirements for light trucks were lower to accommodate for their perceived use as work vehicles. To lessen the burden on business owners who commonly used light trucks for their work, the average fuel economy requirements were set to be 20.5 mpg in 1985. Due to SUV’s large truck-based frame and heavy build, they were able to fall under the “light truck” vehicle category, and were therefore exempt from the CAFE passenger vehicle standards. Bradsher states that the federal government’s inability to raise gasoline taxes to keep fuel prices low, coupled with the SUV’s fuel economy exemption as a light truck, helped catalyze the SUV to eventually replace the car and the station wagon as the next generation of the “family car”.

SUV’s status as a light truck also helped them garner tax incentives. Since many farmers held working trucks, federal policies within the Clean Air Act assisted these farmers by reducing taxes on their depreciating trucks. Tax code regulation changes around 1984 that were meant to charge business owners for purchasing passenger vehicles also unintentionally helped the SUV rise into a large-scale market, since the tax charges were dropped if the vehicle was over 3 tons. Also, a 1990 bill to assign a luxury tax on passenger vehicles was also exempt for vehicles over 3 tons. Most SUVs in the 1980’s and in 1990 were not over this weight threshold; however, by the end of the 1990’s, many were as automakers created larger SUV models to sell through the decade.

In August 2012, automakers and the Obama administration agreed to update the CAFE standards for 2017-2025 vehicle models. The average fuel economy of the United States vehicle fleet must be 54.5 mpg by 2025, increased from an original average 34.1 mpg by 2016. Light trucks are not exempt from new CAFE standards, but SUVs with footprints 41 square feet or smaller must achieve a fuel economy of 50 mpg by 2025. The updated CAFE standards will allow vehicles to save nearly $8,000 in fuel costs over its lifetime, the equivalent of $1 per gallon of gasoline.

Structure
The SUV is usually based on a body-on-frame chassis derived from light pickup trucks used for personal and local business use. Similar to passenger vehicles, SUVs are designed and built with normal engine compartments, a combined passenger and cargo area, and front and back seating. However, most SUV’s do not have passenger and cargo area separators commonly seen in sedan and coupe bodies. Some larger models, like the Chevy Suburban and GMC Yukon, have three rows of seats commonly seen in contemporary minivans. The third row is almost always able to fold down to accommodate more cargo. SUVs tend to display high clearance, boxy bodies, and a high H-point compared to compact vehicles. Most modern SUVs have four-wheel or all-wheel drive capability, and due to their higher clearance, are commonly seen as better performing for off-road and inclement weather uses. Due to traditional SUV’s truck-based chassis, many companies used their off-road ability and large quantities of space as a main selling point, even though most vehicles were and are still not used extensively for off-road driving. Many buyers are also attracted to the SUV for its higher seating, and its perceived driver safety compared to other vehicles.

Safety & Criticism
Although often perceived as safe passenger vehicles, modern SUVs have large burdens to bear when dealing with other forms of traffic. SUVs may be perceived as safe by the driver and passengers inside, but they also increase the risks to other road users, including bicycles, pedestrians, and other non-SUV vehicles. (Berkeley) On August 9th, 2000, Bridgestone Firestone company recalled fourteen million ATX and ATX II tires commonly seen on Ford Explorers during the time. Explorer owners had complained repeatedly their dissatisfaction with the tires, and many claimed that they would come apart and cause the SUV to roll over. Federal records later showed that 271 fatalities were directly caused by the failure of the Firestone tires.

The perception of safety in SUV’s also hinders on the efforts to complete a safer road for all users. Gladwell concludes that the added height and clearance compared to compact cars allow SUV drivers to become passive, and due to this, SUV drivers usually give up 30 feet more braking distance. Drivers’ attitudes in this situation are more tuned to the idea of accidents as an inevitability rather than an avoided incident. Gladwell concludes that when drivers feel safe, they are more unsafe to themselves and road users around them. Ulfarsson and Mannering (2004) concluded that although driving behavior varies based on gender, SUV drivers experienced different behaviors and appear as risk compensation resulting from perceived SUV safety with respect to size and driver position.

In a 1998 National Highway Traffic Safety Administration report, SUV drivers were found less likely to wear seat belts and more likely to drive recklessly during their trips. The Insurance Institute for Highway Safety also revealed in a 2011 report that “pound for pound, cars almost always have lower death rates than pickups or SUVs.”

Precursors
The common precursors to modern SUVs were regular passenger cars and station wagons, also known as estate cars. Station wagons were often referred as large quantity cargo carriers, and were designed with an extended rearward roof over a shared cargo and passenger section. The station wagon’s position of having the combined cargo and passenger space with available folding seats is a common trait also seen in SUVs. Many station wagons also contained a wide use of the rear door, with some models containing hatchback abilities and some holding pull-down tailgate abilities. The hatchback feature is commonly seen in modern luxury SUVs, where the traditional truck-based tailgate is seen in personal pickup trucks. Station Wagons enjoyed a long period of consumer sales from the 1930s to the 1980s, due to their family-friendly image and their relative carrying efficiency. Like many vehicles of the mid-20th century, station wagons required a large amount of maintenance. Their common wood paneling was eventually seen as outdated, and their image for holding long road trips were viewed as wasteful beginning in the 1970’s OPEC oil crisis. Station wagon sales began to decline in the 1970’s due to the oil crisis. Since the SUV was considered a light truck and therefore did not have to conform to American CAFE standards, automobile companies began marketing the SUV much more heavily as the new “family vehicle” to reap the tax incentive and fuel economy benefits. Many American models of station wagons were phased out in favor of the SUV in the 1990’s and 2000’s; however, station wagons remain popular in Europe where emission regulations do not differentiate the car and the light truck.

Evolution, Vehicle Idealism & Growth
The post World War II mentality of automobile-based mobility captured the imagination of many consumers and policymakers during the mid-20th Century. The outward expansion from the inner cities to surrounding suburbs was fueled by the bustling post-war economy allowing middle-class families to own a car. The expansion was also catalyzed by the Federal Aid Highway Act of 1956, which originally granted $25 billion for new separated highways to be built across the country. Since many of the highways were constructed radially into city centers instead of circumferentially around them.

Much of the mindset of outward expansion was initiated with a humanist stigma encouraging people to be closer to nature. Owen observes that from Henry David Thoreau excursions into wilderness, the general population "natually wants to be closer to nature." Although many of the original residential suburbs were created in close proximity to original city centers, some exurbs and previously rural communities began to see suburban growth that were more distant than the first-ring suburbs commonly growing in the 1960s. The developed suburbs and growing exurbs contributed to the idea of being closer to nature, and according to Owen, away from the dirty, overly dense city.

As suburbs expanded to second and third-ring suburbs, the growing desire to be closer to natural environments led to the elevation of the SUV as a practical consumer vehicle. Many automobile manufacturers spent large amounts of money to advertise the SUV as a vehicle able to escape into nature and away from natural disasters. Automobiles spent nearly $9 billion on SUV advertising from 1990 to 2001. The advertising efforts, favorable tax incentives, and inclination for the SUV to be based on an image relating to wilderness excursions helped the automobile industry regain profits in the 1990’s.

Peak & Maturity
Profits to many automobile companies rose rapidly in the mid- to late 1990’s, with much of the profit being based on the sales of SUVs. Each sale of an SUV in the 1990’s correlated to $10,000 in profit. High labor costs in the US deterred automakers from producing compact cars during this period, and low labor costs in Japan led to many foreign companies to sell more small vehicles. Due to this, most American brands focused their attention to building and creating more profitable SUV models rather than less profitable compact cars. Cheap fuel prices throughout the 1990’s also helped sales for SUVs grow. The Michigan Truck Plant, where many Ford Expeditions were manufactured, was the most profitable factory in any industry in the world in the 1990’s

Although sales continued to incline throughout the early 2000’s, the to value based on the Bureau of Transportation Statistics data was found to be in mid-1996, where sales began increasing at a decreasing rate. Peak SUV sales occurred in 2004, and remained slightly lower but steady until 2008. Due to the worldwide Great Recession beginning in December 2007 and elevated gas prices in the summer of 2008, SUV sales plummeted 45% in 2009 and have remained lower than 2006 levels ever since. During the Great Recession, many considered the SUV to be wasteful and a relic of the excessive economic boom experienced since the 1980’s. In an interview with Wired.com, industry analyst Aaron Bragman stated that “the SUV as a lifestyle choice, as a personal statement, is dead. People are downsizing from their big trucks to smaller cars.”

Since the depths of the Great Recession and the U.S. Bailout of General Motors, automobile companies have seen a resurgence in SUV sales, although as of 2013, sales had not eclipsed 2004 levels. Lock-in constraint for SUVs are likely based around their perception of being overly large, unnecessary and wasteful. Although fuel economy on SUVs has increased in the past five years, the large footprint nature of the SUV is a deterring factor for new sales.

Auto manufacturers have combated the SUV image problem by creating more models of "crossover SUVs", which often have a smaller footprint, smaller cargo space, and better fuel economy than the traditional large SUV. Crossover sales were 36% higher in August 2013 from the previous month. Many crossovers take the best attributes from various models and craft them into a more practical, scaled down version of the larger traditional SUV. Sport Utility hybrids have become more popular since the release of the crossover SUV Ford Escape hybrid in 2004.

= Analysis =

Source: Bureau of Transportation Statistics





In this analysis, a three-parameter logistic function was used to fit the S-shaped curve of SUV sales. The equation is shown below.


 * $$S(t) = \frac{K}{1 + e^{-b(t-to)}}$$

Where:

b = Coefficient, determined from regression

K = Saturation status level constant

t = time (years)

t_o = Inflection time, where $$ 1/2*K $$ is achieved.

To analyze the data accurately, values for K and b need to be estimated to fit an appropriate model. A regression model based around a natural log derivation is useful in fitting an appropriate curve with estimated K and b values. The regression equation that was used in calculation is seen below.

$$ Y = ln(\frac{Sales}{K-Sales})$$

The regression equation was used to linearly interpolate the curved data in a logarithmic format. After matching an appropriate K value, the regression process was used to find b. Data Analysis was used in Microsoft Excel to display results based on the equation found.

Description Analysis
In this analysis of 15 observations (from 1990 to 2004), the R-squared value was 0.959, and the standard error was 194675.91. Data from 2004 to 2012 was not used in the S-curve model, as the numbers declined after the 2004 peak and therefore negatively affected the shape of the curve fit. The intercept and X variable t-statistics were -17.36 and 17.43, respectively.

The R-squared value for a goodness of fit model is desired to be as close to 1.0 as possible. Since this analysis outputted a value of 0.959, the curve fit is generally accurate with the observations provided. The t-statistic of 17.43 for the variable also illustrates good significance level at 95%, since it resides greater than 2.

Overall, the data and fit curve illustrate the birth, growth, and maturity phases of SUV sales well. Due to the Clean Air and CAFE policies unintentionally favoring SUVs, as well as the sustained low gas prices throughout the 1990's and early 2000's, Sport Utility Vehicle sales grew annually for over 20 years. Maturity began to show after the 2004 peak in sales, and although the Great Recession did impact sales significantly, signs of true maturity began before as SUV sales declined in 2005 and 2006. SUVs have seen a resurgence since the sales valley of 2009, but have yet to recover to peak levels, which could match the sales estimate curve well in the future.

= References =

= Works Cited =

Bradsher, Keith. High and Mighty: The Dangerous Rise of the SUV. New York: Public Affairs, 2003. Web.

Gladwell, Malcolm. "Big and Bad: How the S.U.V. Ran over Automotivesafety." Gladwell.com. The New Yorker, 12 Jan. 2004. Web. 05 Nov. 2013.

"History of SUVs a Tragedy of the Commons." UC Berkeley Traffic Safety Center Newsletter 2 (n.d.): n. pag. UC Berkeley Traffic Safety Center Newsletter. UC Berkeley Traffic Safety Center, Summer 2005. Web. 04 Nov. 2013.

Mannering, FL, and GF Ulfarsson. "Differences in Male and Female Injury Severities in Sport-utility Vehicle, Minivan, Pickup and Passenger Car Accidents." NCBI. U.S. National Library of Medicine, Mar. 2004. Web. 04 Nov. 2013.

Owen, David. Green Metropolis: Why Living Smaller, Living Closer, and Driving Less Are the Keys to Sustainability. New York: Riverhead, 2010. Print.

"Period Sales, Market Shares, and Sales-Weighted Fuel Economies of New Domestic and Imported Light Trucks (Thousands of Vehicles) | Bureau of Transportation Statistics." Table 1-21: Period Sales, Market Shares, and Sales-Weighted Fuel Economies of New Domestic and Imported Light Trucks. N.p., n.d. Web. 04 Nov. 2013.