Subcompact SUVs Like VW's T-Cross Are Hot Sellers In Europe

Europeans might be divided in their views on President Donald Trump, but they agree wholeheartedly with America’s embrace of SUVs and are buying more and more even as they get smaller and smaller.

SUVs started out as huge, expensive, high, go-anywhere utility vehicles like the Jeep Cherokee, Toyota Land Cruiser and Range Rover and have become progressively more popular as smaller, cheaper versions hit the market. In the U.S. there is a huge market now for little subcompact SUVs like the Chevrolet Trax, Buick Encore, Jeep Renegade and Honda HR-V. Europe too has mirrored this growth, and sales of small SUVs are now closing in on market leadership.

According to carsalesbase.com, European sales of small SUVs are likely to beat 2 million by the end of this year, just behind the leading group–family cars like the VW Golf and Renault Megane. That’s closing in on a market share of 15%. Last year small SUV sales rose nearly 40% to just under 1.9 million, led by the Renault Captur.

Typically, SUVs in this small category are front-wheel drive only.

Volkswagen is so convinced this is the future of car sales, not content with its T-Roc currently topping the sales charts ahead of the Captur, Dacia Duster and Peugeot 2008, it has now introduced a slightly smaller, cheaper SUV called the T-Cross, which is likely to be an even bigger seller in the same segment.

There is a major reason why European carmakers are pushing small SUVs. This is because the European Union is forcing carmakers to produce ever more fuel-efficient vehicles. The regulations are so harsh—by 2021, each carmaker must produce fleets of cars with an average fuel economy of the equivalent of 57.4 miles per U.S. gallon, increasing to an improbable 92 miles per U.S. gallon by 2030. And that explains why this new T-Cross, VW’s smallest “SUV” so far, is powered by a 1 liter, 3-cylinder engine.

That conjures up a vision of an underpowered apology for an SUV. But the reality is different and truly remarkable. This turbo-charged T-Cross—you can currently choose between the 114 hp automatic gasoline version I drove or a 94 hp one–runs along very nicely. Performance on the road is fine. Given that the whole point of the T-Cross is efficient motoring, its fuel economy was disappointing. VW claims the equivalent of 38.1 miles per U.S. gallon but I managed only 30.1 mpg, in very favorable, mainly country-road driving. Prices in the U.K. start at about $19,000, after tax.

But the T-Cross, like its slightly bigger sibling the T-Roc, won’t be appearing in the U.S. VW is developing a larger version for the U.S. market, the Tarek. The Tarek is already on sale in China, and U.S. versions will appear probably in 2021, although this envisages manufacture in Mexico, which looks uncertain at the moment. Last week President Trump imposed a 5% tariff on Mexican imports into the U.S., which could rise to 25% if the immigration issue isn’t settled.

“(The Tarek) is larger than either of those two models and smaller than the Tiguan and will have stronger appeal to entry-level crossover vehicle buyers in this market. The new Tarek will be a global small SUV model developed for markets that prefer larger entry-level vehicles, namely China, where it is called the Tharu, North America including Mexico, South America, and Russia,” said Ed Kim, vice-president, industry analysis with consultants Auto Pacific.

It’s just as well the small SUV segment is growing fast because European manufacturers need to find small vehicles which can make money. An unintended consequence of ever tighter fuel efficiency regulations is that small cars that sip fuel will be priced out of the market because the cost of making them clean wipes out what are already painfully thin profit margins.

VW has already said that by 2030, it will be unable to make little cars like the Up and Polo.

Small SUVs are quite a bit more expensive than small cars, so it is worth investing in the technology to make them more fuel efficient, and they might well be profitable even with electrification.

“Small SUVs are the fastest growing segment right now in Europe,” said Felipe Munoz, global automotive analyst at JATO Dynamics.

“They are very popular and can take more costs. They use the same platforms (basic engineering) as small cars but manufacturers can charge higher prices and make some money. As the popularity of regular city cars and compact cars falls, this will also help with absorbing the increasing costs of electrification,” Munoz said.