Posted on 10/02/2005 8:17:11 AM PDT by grundle
End of the SUV era?
With rising gas prices, shoppers are eyeing smaller models. Analysts say the trend is one reason they think sales numbers will be down.
By HELEN HUNTLEY
Published October 1, 2005
The American love affair with the SUV is souring fast. The pain of paying $70 or more to fill the tank is hurting sales and even prompting some sport utility owners to do the once unthinkable - trade them in for small cars.
"I'm seeing a lot more SUV trade-ins," said Al Leo Jr., general sales manager at Scott Buick in Pinellas Park. "I'm taking Ford Expeditions (in trade) on Saabs half the size."
Analysts say the trend is a big reason they predict GM will repor t sales were down by up to 30 percent in September, while Ford's sales were likely down by up to 20 percent. The Big Three automakers reveal September sales figures Monday.
The effect of rising gas prices also is apparent on the used-car market, where many once-popular SUV models have plunged in value the last two months as dealer inventories have risen.
"If they can afford an Escalade or H3, they don't seem to really care about gas prices," Leo said. But he said a 2002 Ford Expedition Eddie Bauer model that would have retailed for $16,000 to $17,000 two months ago is now priced at about $13,000 and "we're still not getting much action on them."
In August, 59 percent of those planning to buy or lease a new car in the next year said that gas prices had changed their minds or strongly influenced their decision, according to a monthly survey conducted by Harris Interactive and Kelley Blue Book.
"With prices for gas now skyrocketing above the psychological threshold of $3 per gallon in many areas, consumers are more interested in fuel-efficient cars than at any time in the last two decades," Jack Nerad, a market analyst for Kelley Blue Book, said in a statement.
At Suncoast Chrysler Jeep in Seminole, that interest translates into stronger demand for the PT Cruiser, which offers more fuel efficiency than heavier SUVs, said sales manager Phil Schmidt. At Courtesy Pontiac GMC in Tampa, the Pontiac Vibe and G6 are popular, said used car manager Ken Gioe. But it is the Asian automakers such as Toyota and Honda that are best positioned to benefit from the trend.
For years, U.S. automakers have emphasized trucks and SUVs at the expense of small fuel-efficient models because SUVs are cash cows, producing as much as $20,000 in profit apiece. Now some analysts are predicting SUV sales will be down by as much as 40 percent in September.
"Sales of gas-inefficient large SUVs are in a state of near-collapse this month," Burnham Securities analyst David Healy said in a note to investors. "It seems likely that the shift in the sales mix away from large SUVs will persist and continue to damage Detroit's profit margins in the process."
The companies say they're responding to the trend. Ford recently announced a plan to make gas-electric hybrid engines available in half its Ford, Lincoln and Mercury lineup by 2010. GM also says it's bringing more hybrids to market, and defends its new SUVs, saying they are by far the most fuel-efficient on the road.
The companies have had to cut vehicle production because of their declining market share. GM slashed production by 20 percent in the first three quarters of this year, while Ford has cut production by 9 percent.
Erich Merkle, senior auto analyst with the consulting firm IRN Inc., said things are coming to a head this fall because automakers can't afford to cut production and keep paying their high fixed costs for health care, pensions and labor.
Production cuts also have hurt major suppliers like Delphi, which is trying to get an agreement from the UAW and GM, its former parent, to help lower its labor costs and avoid bankruptcy. Delphi says it's saddled with unsustainable expenses, like the $400-million a year it is required to pay to laid-off autoworkers.
Not everyone, however, is ready to end the love affair with SUVs.
"A lot of people believe gas prices aren't going to hold firm at these prices," said Mike Valdes, sales manager for Bill Currie Ford in Tampa. "We're still selling the big SUVs and trucks."
Sales were strong in June and July thanks to employee pricing discount programs at the big three automakers. But to some extent, the deals accelerated the purchases of vehicles that would have been bought within the next few months anyway. Those buyers are now out of the market, contributing to the September slump.
The employee discount programs are expiring over the next few days, but a new set of incentives could be announced as soon as Monday.
--Times staff writer Louis Hau contributed to this report, which includes information from the Associated Press.
Those of us who own SUV for reasons other than showing off, will continue to fill our tanks and burn as much gas as we want, while those who bought them for ego reasons will find other ways to massage their egos.
LOL. I'm not getting rid of mine and it's only costing me about 52 dollars to fill 'er up!
Good to run into you Pukin' Dog.
The popularity of SUVs and PUs is/was a response to gov't interference with larger, safer sedans. Not just mileage standards, but also many states treating 'trucks' advantageously for licensing and tax purposes.
Agreed. After my wife's spinal fusion of one of her five herniated disks, we wouldn't feel safe in anything else, as she was already hospitalized twice after being rear-ended in a corrola and a civic.
The first time was when she was four months pregnant. She went into premature labor. She went through a lot to bring our son into this world.
If there's less threatening drivers in SUVs on the road, all the better. We're keeping ours. Consider it "insurance"...
This is obviously wrong. How do we know? Because while gas prices have gone up, they have stabilized recently. If no one changed their consumption in response to higher prices, then the price would rise to $10/gallon then $20/gallon then $100/gallon as gas producers tried to maximize their profits. But this doesn't happen.
So who is it that is reducing their consumption? Well, maybe not you. But don't assume everyone is like you.
I'll tell you who is conserving with higher prices: the lower working class. They're the ones giving up consuming gas. Whenever prices rise to match supply and demand, it's the lower classes the give up their consumption first. The same thing is happening in healthcare right now with the added problem that government subsidies are driving up the price.
- who should be conserving if they did not by an automobile in keeping with their income level. When you buy what you need, you don't cut back in using it. If you buy what you want, but don't really need, then in tough times you will cut back. Is that clear enough? If you NEED an SUV, you will buy it and use it no matter what it costs. Am I right?
DECAF! A fighter pilot who drinks decaf. No need for speed?? LOL. Actually I'd love to be able to buy a restored WWII jeep. I wonder what their MPG are.
"Those of us who own SUV for reasons other than showing off, will continue to fill our tanks and burn as much gas as we want, while those who bought them for ego reasons will find other ways to massage their egos."
I think you'reon to something here.
The folks who bought SUV's/big Pick-up trucks for work related reasons ETC. NEED these vehicles for said reasons. The folks who bought them as a "replacement for the family wagon and/or ego trip" are very likely to dump them. eg. Massage your ego wih a fuel efficient Mercedes E320 CDI {Turbo-diesel} (24mpg city/37mpg Hwy) vs Hummer H2 @ what? 20 MPG best case?
Personally, I saw this comming a LONG time ago and have a 2000 VW Jetta TDI - (Turbo Diesel) which gets 38 mpg city and 38 mpg highway (Empirical personal driving results).
LOL....add a trailer hitch to a F150 SuperCrew.....and getting hit hardly feels like anything - I know....some little Mexican guy hit me a while back.....
LOL! We just passed a law here in Florida that says you can shoot them for that (or something like that.) *grin*
Home Roaster here. I take my coffee seriously...
"Higher prices do not lead to conservation"
They will at some point. You can only stretch the plastic so far. I hear the other week that gasoline consumption actually had dropped a little for the last few weeks - they believe because of prices.
My mini-SUV Honda CRV gets excellent gas mileage. I get irritated about those new radio ads here in CA saying if you want to "buy green", get the car they're advertising. True, the people I know who bought hybrids awhile back were all liberals who were concerned about the environment. It's time for the hybrids to escape that stereotype. They should promote them as gas-saving, not "green".
"When you buy what you need, you don't cut back in using it"
That might be true if every mile driven was "needed". Given sufficient incentive (higher prices) people can and do consolidate trips, carpool etc..
I've got four kids and I currently need a new roomy SUV.
I was going to buy an Armada (8 cyl.) in September but I've temporarily stopped looking. I looked at the mid-sized SUV's but the mid-sized SUV's are not roomy enough for all of those kids.
Hopefully gas prices will come down a bit. Else, I'll probably wait a year, drive the old big SUV a little longer and then buy a similar new big SUV.
The answer to your question is yes even though I'll wait a little bit longer to buy it.
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