Customer preferences are found to evolve over time and correlate with geographical locations. Studying spatiotemporal heterogeneity of customer preferences is crucial to engineering design as it provides a dynamic perspective for a thorough understanding of preference trend. However, existing analytical models for demand modeling do not take the spatiotemporal heterogeneity of customer preferences into consideration. To fill this research gap, a spatial panel modeling approach is developed in this study to investigate the spatiotemporal heterogeneity of customer preferences by introducing engineering attributes explicitly as model inputs in support of demand forecasting in engineering design. In addition, a step-by-step procedure is proposed to aid the implementation of the approach. To demonstrate this approach, a case study is conducted on small SUV in China’s automotive market. Our results show that small SUVs with lower prices, higher power, and lower fuel consumption tend to have a positive impact on their sales in each region. In understanding the spatial patterns of China’s small SUV market, we found that each province has a unique spatial specific effect influencing the small SUV demand, which suggests that even if changing the design attributes of a product to the same extent, the resulting effects on product demand might be different across different regions. In understanding the underlying social-economic factors that drive the regional differences, it is found that Gross Domestic Product (GDP) per capita, length of paved roads per capita and household consumption expenditure have significantly positive influence on small SUV sales. These results demonstrate the potential capability of our approach in handling spatial variations of customers for product design and marketing strategy development. The main contribution of this research is the development of an analytical approach integrating spatiotemporal heterogeneity into demand modeling to support engineering design.