Brace yourself. We're nowhere near peak SUV.
Just as Land Rover and Mercedes-Benz unveiled their own new sports utility vehicles at the New York Auto Show last week, Rolls-Royce is testing drivetrains for its so-called “Project Cullinan,” a prototype all-wheel-drive suspension model that will be sold by 2018. Experts say it could cost as much as $400,000.
The Rolls fits right in with the $200,000 Land Rover Range Rover SV Autobiography. That’s the one with a 550-hp supercharged V8 engine that can hit 60mph in just over 5 seconds. It's the one that sets a high bar for the crossover its sister brand Jaguar says it’ll introduce by 2017.
And it fits in with the $218,000 Mercedes-Benz G65 AMG, which has a hand-built V12 engine that pulls in a whopping 621 horsepower. The G65 AMG is the fourth AMG model to cross the $200,000 threshold.
These days, super-expensive SUVs—all of which cost more than a Ferrari—are far from a passing fad.
“There is plenty of space to play in, here, and plenty of money,” Kelley Blue Book analyst Akshay Anand said. “Traditionally ultra premium buyers have been relegated to sports cars or sedans. But when there is so much wealth floating around, it was only a matter of time when truly major SUVs would come in to satisfy those needs.”Join the Club
In fact Rolls’ SUV is late to the game when you consider that Bentley started touting plans for a $200K-plus rig as far back as 2012. The Bentley Bentayga will finally see showrooms in 2016.
Similarly priced offerings like the Lamborghini Urus, Aston Martin DBX, and Maserati Levante are slated for production in 2017, 2018, and beyond.
And considering the ravenous appetite American, Asian, and Middle Eastern buyers have had in the past decade for large vehicles in general, it was only a matter of time before the SUV market would push past the $200K ceiling. Once ultra high net worth individuals identify a car they want, there’s not much distinction between whether they pay $200,000, $300,000 or $400,000 for it. Bloomberg defines ultra high net-worth (UHNW) individuals as those who possess net assets of at least $30 million; there are more than 211,000 of them globally today.
“They say I want what I want, and I am going to spend what I want for something unique,” Kelly Blue Book's Anand said.
Barring economic catastrophe that trend will continue.Bigger Car, Bigger Expenses
When it comes to extremely priced SUVs, there is plenty of money to be made.
The simplest reason is that trucks and SUVs deliver better profit margins than sedans and coupes. Their size and prestige demands a price premium. But they also offer a wider range of pricing: you can buy the Range Rover Evoque for $41,000 or the Range Rover SV Autobiography for $200,000. By contrast, the span between variants of the BMW 3-Series sedan hovers around $20,000.
Even more significantly, the sheer size of SUVs mean they allow more opportunities for upgrades and bespoke treatments on top of their multi-layered variant range. Covering a Bentayga in a rare hue of kid leather and imported cashmere will necessarily cost thousands of dollars more than doing the same for a Continental coupe—it’s a question of size. Think of it like owning a Great Dane versus a Chihuahua: The big dog’s very existence requires a bigger kennel, a bigger collar, a bigger leash and bigger food bowls. All of which require more materials, which cost more money, and, for automakers, more profit.Status Symbol
What’s more, the shock of the high price can actually help a brand’s image, especially if it’s trying to reach thought leaders and trend-setters. Coltrane Curtis, the founder of Team Epiphany, a firm that advises companies like Nike how to appeal to young, cool creatives, said he expects the new cars from Mercedes and Land Rover to be very popular.
“They’ll sell, for the right kind of buyer,” Curtis said at dinner this week in New York. He is the mastermind behind Cadillac’s successful Public School NYC show during New York Fashion Week this past January. “I’d get one myself if I could afford it—or if I can get an approval from wifey.”
Every executive from Rolls, Bentley, Aston Martin, Lamborghini, and the rest of the lot with whom I have spoken about this in the past year has said the exact same thing. They point to (relatively) stable fuel prices, increasing global wealth (Bloomberg has discovered more than 40 new billionaires in China alone over the past two months), and the simple fact that big vehicles signify top-tier status in most countries worldwide.
In fact, they say, these elite SUVs should have come a lot sooner.
“Our customers have been asking for an SUV for years,” one exec told me privately at his marque’s SUV debut. “It’s almost like we can’t make it soon enough.”
