3 little letters GM is counting on nowJanuary 23, 2013: 9:24 AM ET
The Detroit icon is betting on the so-called 'CUV'—also known as compact sport utility vehicles—to boost its fortunes.
By Doron Levin, contributor
FORTUNE -- Anti-SUV fervor has cooled since its peak in the late-1990s. The Hummer is no more and Ford's vaunted Explorer is now a crossover, rather than a truck-based model. Big vehicles like the Chevrolet Suburban and Nissan Armada still ply U.S. highways—though in smaller numbers. Meantime, a new breed of small SUV—called CUVs or compact crossovers—is taking hold. Exhibit A: Buick's new Encore, built in South Korea and now reaching U.S. showrooms.
The Encore follows on the heels of the popular Nissan (NSANY) Juke, imported from the U.K., which sold more than 36,000 units last year, up 1.3%. With a stylish exterior, high seating position and flexible cargo space, the Encore is meant to attract shoppers that might seek to downsize yet not forego luxury amenities, such as the optional heated steering.
The new product segment for Buick, while small, is meant to attract new buyers to General Motors (GM) in a year when GM's chairman is forecasting a gain in U.S. market share. Last year, GM's U.S. share fell to 17.9% from 19.6%. Financial analysts say GM must stem share loss in the U.S. to prove it has regained stability following its 2009 bankruptcy.
"We have seen a conquest rate of 50% or better for Verano," a small Buick sedan, said Lloyd Biermann, a Buick marketing executive. "We think the same could be true for Encore." Conquest is the term used by automakers to measure what proportion of buyers are trading from a rival brand, thus increasing share of market.
Jessica Caldwell, an analyst for Edmunds.com, an automotive website, said "entry SUVs are where we see and will continue to see tremendous growth as [the category] satisfies so many different life stages." Cars like the Encore "can tick so many different boxes for the average consumer" and be a substitute for minivan, pickup or compact car "if people are honest about their actual needs."
Built by GM's Daewoo affiliate in South Korea, the Encore is similar to the Opel Mokka, a model of rising popularity in Europe. It starts at a retail price of about $25,000 and can cost more than $30,000 with all optional equipment.
At the North American International Auto Show, Honda (HMC) displayed what it called an Urban SUV concept, a swoopy looking model the Japanese automaker will bring to the U.S. in 2014. Built on the same architecture as the Honda Fit in Mexico, the new model is about nine inches shorter than Honda's compact and popular CR-V.
The category is hot in Europe as well, a new Peugeot mini-SUV expected at the Geneva Motor Show in March. IHS Automotive told the Financial Times that global sales of the segment are expected to rise to 2.4 million by 2020 from 700,000 in the current year.
No doubt that tightening fuel efficiency standards worldwide are playing a role in stimulating designers to create smaller, lighter designs that still will be useful—and maybe even sexy—to carbuyers.
In any event, no one will have to suffer the discredit or humiliation that the owners of behemoths once withstood, especially in cities, when pulling up to the curb in their gas-guzzling Ford (F) Expeditions or Cadillac Escalades.