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General Motors Company (GM), Ford Motor Company (F): Why the 2015 Chevy Suburban Is a Big Deal

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GM unveiled the redesigned 2015 Chevy Suburban last week. The new Suburban and its Chevy and GMC siblings will arrive at dealers early next year. Photo credit: General Motors Company (NYSE:GM).

We all know that about 10 years ago, big SUVs were hotter than hot. And we all know that market has since faded.

Changing tastes and economic factors like rising gas prices have led many former SUV drivers to choose more efficient, more car-like vehicles instead.

That’s why the automakers now push “crossovers”, vehicles that have some of the utility of an old-school SUV, but that drive more like a car, and get more car-like gas mileage.

So with that said: How big a deal are the latest old-school SUVs, the all-new Chevy Tahoe and Suburban?

They’re a bigger deal than you think
Let’s put it this way: If General Motors Company (NYSE:GMspun them off in a separate business, just those two Chevy SUVs plus their GMC and Cadillac cousins, that business would be a member of the Fortune 400.

As Bloomberg noted, this business is roughly the size  of a company like Campbell Soup Company (NYSE:CPBor The Hershey Company (NYSE:HSY)’s – all by itself. It may not be 2004 anymore, and General Motors Company (NYSE:GM) has put a lot of money and effort into more fuel-efficient offerings in recent years, but those big SUVs are still a big moneymaker for the General.

General Motors Company (NYSE:GM)’s chief financial officer, Dan Ammann, said last week that the U.S. market for full-sized SUVs is still around 250,000 vehicles a year – and GM controls almost three-quarters of it. Through August, GM has already sold about 125,000 Tahoes, Suburbans, and GMC Yukons in the U.S. – and these all-new models could help sales pick up.

After all, it’s not like the competition in this segment is as fierce as it was a decade ago.

The biggest players in a still-sizable market
The main competition for the Tahoe and Suburban and General Motors Company (NYSE:GM)’s Yukon twins comes from Ford Motor Company (NYSE:F), just as it always has – but Ford’s Expedition hasn’t had an update in almost seven years, and fewer than 25,000 have been sold this year through August. (Ford is expected to release an all-new Expedition for the 2015 model year.)

Toyota Motor Corporation (ADR) (NYSE:TM) and Nissan Motor Co., Ltd. (ADR) (PINK:NSANY) have entries in this segment, the Sequoia and Armada – but those sell in even smaller numbers than Ford Motor Company (NYSE:F)’s Expedition, and neither has had a recent update.

The loaded 2015 GMC Yukon Denali will likely be one of GM’s most profitable vehicles. Photo credit: General Motors.

So who is buying these big SUVs nowadays? People who need them: Folks with big families, folks who tow big trailers (think boaters, or horse enthusiasts), folks who live in areas where the off-road capabilities of a big SUV are important, and even some government agencies. Tahoes are a favorite of some rural police departments.

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