Drivers rethinking vehicle choices amid high gas prices
The Buffalo News ^ | 10/2/2005 | By MATT GLYNN News Business Reporter
Smaller, more fuel-efficient vehicles are gaining favor with buyers around the country
Higher gas prices are influencing buying decisions in the showroom, auto industry experts and local auto dealers say.
Some drivers are trading in full-size SUVs and trucks for smaller vehicles with better mileage, after pump prices rose dramatically about a month ago.
No one is saying the SUV's day is over. Instead, customers seem to prefer switching from a full-size SUV to a smaller one.
"I don't see a lot of people going from an SUV to a four-door sedan," said Tony Daily, general manager of Towne Automotive Group. Those customers still want the space that a SUV provides, such as for taking kids to a sports practice, he said.
Daily also said he has seen "more aggressive" buyers of fuel-efficient Hyundais; August was the dealer group's best month yet for Hyundai sales.
Sales of big SUVs are soft, he said, which has led to some attractive prices for them on the used-car lot. But small SUV sales are strong, with high demand for vehicles such as the Ford Escape.
At Don Davis Honda, customers are taking particular interest in the restyled, fuel-efficient Civic, said Roy Raynor, sales manager.
Honda's hybrid versions of the Civic and Accord are also getting attention, he said. "Our inquiries have probably quadrupled."
Many customers of Don Davis Autoworld, which includes a Pontiac and GMC dealership, are trading in large SUVs and older, less fuel-efficient cars, he said. The rise in gas prices to $3 per gallon has been a driving force in the activity, he added.
"It really put a surge into the market," Raynor said.
Figures compiled by the Power Information Network show that smaller, fuel-efficient vehicles are gaining favor with buyers around the country.
In August, compact cars accounted for 15.6 percent of all vehicles sold, compared to 13.6 percent the year before, according to PIN, a unit of J.D. Power and Associates. Sales of what PIN classifies as "premium compact cars," such as the Chevrolet Cobalt, Toyota Corolla, Ford Focus and Honda Civic, increased 20 percent in August from the year before.
While soaring gas prices have shocked American motorists, Tom Libby of PIN said he doesn't expect drastic changes in vehicle-buying habits unless two things occur: gas prices reach $4 per gallon, and remain at that level for at least a year.
Consumers have been conditioned to believe that gas prices will eventually fall, so prices would have to stay exceptionally high for a long time to cause widespread changes in buying, said Libby, senior director of analysis at PIN. Without those factors, Libby anticipates more modest shifts, like migration to smaller SUVs.
No one can say for sure where gas prices are headed, but pump prices have retreated a bit from early September's record highs, when Hurricane Katrina struck. On Friday, the average gas price in Western New York was $2.91 per gallon, according to the AAA; that was still 45 percent higher than a year ago.
George Hoffer, a Virginia Commonwealth University professor who tracks the auto industry, says high gas prices are only one of several factors that will influence auto sales this fall.
He also points to fewer vehicles left over from the previous model year due to "employee pricing" programs, a preoccupation with hurricanes, and an industry effort to shift vehicle pricing away from incentives.
"I think this fall will be the most topsy-turvy new car market that we've seen in a decade," Hoffer said.
While the question of whether high gas prices would hurt SUVs has attracted lots of attention, Hoffer said the market for the largest SUVs had already peaked in the early 2000s. Smaller, "crossover" vehicles that borrow some traits from SUVs have gained strength, he said.
Michael Hudson, consumer advice editor at Edmunds.com, agrees that consumers' fascination with hulking SUVs had passed. As for the impact of the price spikes on sales of big SUVs, Hudson said: "It doesn't help."
Vehicles such as the Toyota Prius hybrid have emerged as "stars," he said; Hudson noted a Toyota executive recently commented that the automaker is measuring its supply of them in hours, instead of days.
Drivers moving out of large SUVs are favoring smaller "crossover" vehicles that borrow some traits from SUVs, since they still want a vehicle with some size, Hudson said.
As for fuel-saving alternatives to large SUVs, Hoffer said customers tend to overlook some options. "I think Americans grossly underestimate the fuel efficiency of the midsize car and the midsize minivan," he said.
Automakers have to worry about not only the impact of gas prices, but the pace of overall sales. General Motors, Ford and DaimlerChrysler are all wrapping up their "employee pricing" programs, and while the programs generated robust sales at the outset, they lost steam down the stretch.
American automakers are also coming to grips with the effect of higher gas prices in their vehicle lineups.
Ford is promoting the fuel efficiency of its new 2006 vehicles, and says that by 2010 it will offer hybrid versions of more than half the vehicles in its lineup. GM plans to have a full-size SUV hybrid in 2007.
GM has rolled out some hybrid pickups and is planning to market full-size SUV hybrids starting in 2007. |
