Automakers hosted press conferences at the annual New York Auto Show around March 28, to show their new wares, most of which will become available some time in 2018, although some not only until 2019. In comparison to other auto shows, there were precious few exotic concept cars, and the new vehicles were either real production cars or thinly veiled almost production-ready previews of what will arrive in the market within approximately a year from now.
What kinds of vehicles were shown? The vast majority of what was shown were SUVs – small, midsize, mass-market and premium-luxury alike. Electric vehicles? Yes, two – and both were crossover-SUVs. Sedans and hatchbacks? Really only two completely new, and two more that might fit the definition? Pickup trucks? One concept.
The most refreshing aspect to the 2018 NY Auto Show was that the vast majority of the new vehicles shown were high-volume models, many of whom sell anywhere between 40,000 to 400,000 a year in the U.S. alone. In other words, these new models are most relevant to the broadest layers of the U.S. consumer landscape.
Looming in the background, and talking to automaker executives in the hallways and over coffee, there are major concerns about the U.S. market from two related angles:
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Affordability. The cars are becoming too expensive. The average price right now is approximately $36,000. The biggest competitor to buying a new car is buying a used car. This is slowing down the new sales market.
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Fuel economy mandates. The U.S. federal government and the California-led ZEV (zero emissions vehicle) state consortium are mandating draconian fuel and emissions rules that are impossible to square with consumer preferences and profitability. Something must give or the automakers will soon be swimming in red ink. More about this later.
The other observation is that, now more than ever, automakers are simply well managed and therefore keep coming out with increasingly competitive products. The products are so benchmarked against each other on all aspects of the equation:
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Improved quality, reliability and durability (QRD).
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Longer warranties and new purchase, lease and long-term rent options.
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Improved styling and keeping up with trends.
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Improved engine power and efficiency.
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Improved interior design and features.
This includes satisfying the U.S. market demands to supply more SUVs and pickup trucks. They now constitute approximately 66% of the U.S. market unit sales in recent months. Sales of smaller cars and sedans are falling, overall a little over 10%, but in some cases by as much as 30%-45% year-over-year.
Probably the biggest regret of any automaker in the market right now is from General Motors (NYSE:GM), which surely must be regretting that it dumped the Hummer brand a decade ago. Can you imagine how well a lineup of large doomsday-militaristic Hummers would be selling right now, preferably with a 6.2 liter V8 and at least 550 horsepower? This is what people want to buy right now – not some little electric car.
All that said, let’s look at what was really revealed.
The Toyota RAV4 is among a trio of “compact-but-not-tiny” SUVs that are the best-selling non-pickup trucks in the U.S. these days. The other two are Honda CR-V and Nissan (OTCPK:NSANY) Rogue. They all sell approximately 400,000 units per year in the U.S. In Toyota’s case, the RAV4 is made in Canada and Japan.
The all-new RAV4, which goes on sale this fall, marks a radical design departure from the outgoing generation. Unlike the relatively generic look, the new generation takes on the far more square-ish look of the Toyota 4Runner. It’s very attractive, in my opinion. The interior was very pleasing in its ease of use. There’s little doubt that the RAV4 will continue to top the U.S. non-pickup truck sales charts.
Toyota Corolla Hatchback: here.
From the Audi (OTCPK:VLKAY) A7 to Tesla (NASDAQ:TSLA) Model S, hatchbacks have made a bit of a comeback in the U.S. market in the last half decade. Subaru was always there. With this all-new Corolla hatchback, Toyota brings to market a Corolla generation that looks a lot more sophisticated and upscale than any recent Corolla. It also has an entirely new gearbox, which should enable a new type of ultra-smooth start. It goes on sale no later than this summer.
Cadillac’s third SUV also is its smallest. With GM having pioneered the segment with the Buick Enclave, which became a runaway success, the Cadillac XT4 is a very different beast. It really doesn’t look that small, except behind the rear wheels, where it’s cut off a bit abruptly.
The XT4 also has a new type of infotainment control, which I look forward to testing before the end of this year. The other instrument controls are also a lot easier to use than all the other Cadillacs, with their never-pleasing touch controls. It’s easily the best Cadillac cockpit yet. This one will be a huge winner in the market, I think.
Going up directly against the Cadillac XT4 will be the Lexus UX. I did not get the opportunity to examine this interior, but judging by Lexus’ more recent ones, the textiles will be warm and comfy. What Lexus needs to sort out is its horrible infotainment system, which has riddled all of its other cars in the last couple of years when competitors have moved to Android (NASDAQ:GOOG) (NASDAQ:GOOGL) Auto and Apple (NASDAQ:AAPL) CarPlay.
All that said, what people will note immediately is the exterior. As with most other recent Lexus cars starting with the NX, it’s polarizing. I thought at least that it looks better than the RX, so I’ll reserve judgment until I get to spend time with it in the wild. I’m cautiously optimistic.
Lincoln (NYSE:F) Aviator: here.
This is Lincoln’s version of the next-generation Ford Explorer, which is due in 2019. Everyone who saw it was in admiration of its stunning exterior and interior. While I find that the interior has far too many glossy (chrome) surfaces, it is supremely elegant in a Buckingham Palace Royal sort of way.
As for the exterior, it manages to combine a very practical square shape, especially in the rear, with exceptional balance and beauty. I was stunned. It truly is an American Range Rover. While I didn’t get to try it for myself this time, Lincoln assured me that the third row was going to fit unusually tall adults. I look forward to putting that to test as soon as they have a production vehicle available to examine.
The Lincoln Aviator is on an all-new platform, and will come in a plug-in hybrid variant as well. I’m very bullish on this one, despite the glossy interior detailing.
Subaru Forester: here.
With 178,000 annual sales in the U.S., the Subaru Forester alone is 3.5 times as large as Tesla’s U.S. sales in 2017. It’s become a most respectable volume car. Not nearly as large as the likes of Toyota RAV4 or Nissan Rogue, but still – the Subaru Forester is a bigger seller than most people realize. As with most other Subarus in the U.S. market, it has all-wheel drive as standard, unlike many competitors in this class.
This all-new Forester generation follows the pattern of the Impreza and Crosstrek. They both became all new generations 9 and 18 months ago too – but in all of these cases it’s hard to tell the difference on the outside. It’s almost impossible to come out with an all-new car and keep the exterior so similar, but Subaru has done it again.
As for whether that’s good or bad is a different matter. I think it’s good. Furthermore, if the Forester now gets the kind of dramatically improved interior/infotainment as the Impreza and Crosstrek got in the last 9-18 months, the Forester will truly be very competitive again. Buyers like the airy greenhouse and high ground clearance. It’s a most practical body.
Jaguar i-Pace: here.
Jaguar’s first EV is a global-midsize crossover with all-wheel drive as standard that arrives in the U.S. in the third quarter of 2018 and in Europe in June. It starts at $70,495 and holds the particular distinction of being Tesla’s first direct premium competition. This will make for some epic side-by-side tests.
Perhaps almost as significantly, Waymo (GOOG) (GOOGL) announced that it will start testing a Level 5 autonomous capable version of the i-Pace later this year and deploy 20,000 such units from 2020 to 2022. That’s a really big deal, and complements Waymo’s deals with FCA (NYSE:FCAU) and Honda.
Honda Insight: here.
On the heels of the Toyota Prius and Hyundai Ioniq, Honda tries to tie the fuel economy crown with the all-new Insight, which is based on the Civic. It hits the market later this year, and Honda has promised a 55 MPG rating for city driving, with the highway rating being announced before the car goes on sale.
I was very impressed with the seating comfort and cockpit ergonomics. It’s definitely more like the Civic than the Accord, and that’s a good thing. As much as I love the Hyundai Ioniq’s interior, this seating position was even better. It’s hard not to be bullish about this car. Considering that the larger Accord hybrid, which arrived in U.S. dealerships March 23, starts at $25,990, this slightly smaller Insight model, should obviously be priced even less.
Hyundai Kona EV: here.
This 250-mile range all-electric “SUV” looks to be a most attractive entry in competition for the practical EV buyer. I say “SUV” because it’s front-wheel drive only, and the dimensions of the car are not all that different from the Chevrolet Bolt EV.
However, it looks different than the Chevrolet Bolt EV. In fact, it looks completely different. It’s got the stance, shape and cues of an SUV. The interior also is nicer than the Chevrolet Bolt EV, whose interior shapes and colors are not its strongest suit.
The Hyundai Kona EV should be on sale in Asia and Europe by the third quarter of 2018 and in the U.S. by the fourth quarter of 2018. Price has yet to be announced, but the Chevy Bolt EV’s $37,495 should be an obvious target for the Kona.
Hyundai Santa Fe: here.
Other than being all-new, the Hyundai Santa Fe has one particular distinction that brings it into focus. It’s Hyundai’s first diesel in the U.S. There aren’t that many diesels – or for that matter SUV diesels – on sale in the U.S. market right now, especially outside Jaguar Land Rover. The main competition here will be Chevrolet, GMC and later in 2018 hopefully also Mazda.
Of course, there’s also the Hyundai Santa Fe’s sister car, the Kia Sorento, which will get the same diesel engine. On the Hyundai side of the equation, this first version of the Santa Fe is the strict two-row version. The old three-row will continue to sell for a bit, until it too gets replaced by a larger (longer) three-row version, hopefully also with the optional diesel engine.
The Hyundai Santa Fe sold 133,171 units in the U.S. in 2017, barely up from 2016 but still a very significant product. The new generation looks terrific, which you couldn’t say about the outgoing generation.
Hyundai Tucson: here.
The mid-cycle refresh of the Tucson is important because it was Hyundai’s fastest-growing nameplate in the U.S. market in 2017 by a wide margin. It was up 28%, hitting 114,735 units. The Tucson also plays in the highest-volume U.S. segment, together with the two-row Santa Fe, mentioned above. Individually, they don’t come close to the Toyota RAV4, Honda CR-V and Nissan Rogue volumes, but taken together they make Hyundai into a major player in the small to midsize SUV market.
Acura RDX: here.
The all-new Acura RDX is the most attractive new non-NSX Acura seen in memory. It’s a “center of market” compact SUV that fits right inside the hottest segment in the new car market right now.
Perhaps the most interesting aspect of the all-new Acura RDX is the new infotainment control system. It’s a touchpad that seems similar to what Lexus has been trying in a few cars in recent years. Considering that I find the Lexus system one of the very worst in the market today – no, make that THE worst – this had better be a lot better. I did not get a chance to try it, but should be reporting on it once I get time behind the wheel some time later this year.
Nissan Altima: here.
Sedans are an endangered species. Sales are down at or little over 10% on average, but with more than a few nameplates down over 30%. With that as background, and that the Altima still sold 254,996 units in the U.S. in 2017, down 17% from 2016, this all-new Altima still manages to bring a couple of most exciting selling points to the table.
First, the Altima will offer all-wheel drive. The only other major competitor to offer optional all-wheel drive is the Ford Fusion (Subaru Legacy offers mandatory all-wheel drive in the U.S.).
Second, the Altima will come with the same variable-compression engine that powers the Infiniti QX50. It replaces the previous 3.5 liter V6 engine. In the Infiniti QX50, this engine yields 27 MPG in blended city/highway in front-wheel drive mode, but should obviously do a lot better in this sedan body. Speaking of front-wheel drive, for whatever reason this “miracle engine” is only available in front-wheel drive.
Volkswagen Atlas Tanoak concept: here.
Volkswagen made a pickup truck out of the Atlas SUV, and said they are considering it for production, but had not made a decision yet. I think they should do it, but here’s my advice: What the market wants is something that looks as retro, doomsday, militaristic and macho as possible. I think VW would have a shot at the pickup truck market with something that looks a lot more like that.
Don’t get me wrong, the Tanoak concept looked pretty good. The problem is that the competition also is very strong. You have to offer something that’s new and different. Most people I ask about what they want in a pickup truck, want what I described above. Hopefully VW can make something for that void in the market.
Volkswagen Atlas CrossSport Concept: here.
This is a shorter two-row version of the three-row Atlas that begun sales in May 2017. VW had hinted about this model variant for a while now, and a 2019 production date has been confirmed.
The CrossSport is 7.5 inches shorter than the Atlas, all coming from the rear overhang. VW also talked about a variety of new powertrain possibilities that will be coming to the Atlas lineup, so clearly the current V6 is not going to be the main offering when this goes on the market in 2019. Look for more emphasis on a 4-cylinder turbo, and the possibility of a plug-in hybrid variant for production, eventually.
Disclosure: I am/we are short TSLA.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: At the time of submitting this article for publication, the author was short TSLA and long GM and GOOGL. However, positions can change at any time. The author regularly attends press conferences, new vehicle launches and equivalent, hosted by most major automakers.
Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.
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