HHR wins as our love affair with SUVs ends
10-09-2005, 03:33 PM
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HHR wins as our love affair with SUVs ends
<img src="https://www.chevyhhr.net/news/hhrbet.jpg" align="left" border="0" hspace="5" vspace="2">Dealers say consumers want to trade gas-guzzling monsters for something small
SUV sales have been falling for the better part of a year, but the bottom fell out of the market last month, with sports utility vehicle sales plummeting more than 30 percent, signaling what some observers believe could mark a permanent falling out with American consumers.
"What you're looking at is a sea change in consumer preferences," Peter Morici, a University of Maryland economist who follows the auto industry, said last week after reviewing the worst showing for sports utility vehicle sales since they first hit the market in the 1980s.
While SUV sales may recover a bit if gas prices ease, "it will never, ever grow back to where it was before," when SUVs accounted for huge profits and market share for domestic automakers, Mr. Morici said.
Reports coming from all over the country say dealer used-car lots are filling up with SUVs as owners, shocked at having to pay $50 and up just to fill the tank, are trading them in for gas-sipping smaller cars.
From truck-crazy Texas to Pittsburgh, moving SUVs off the new car lot is a lot like getting a child to clear his plate of vegetables.
Friday offered an example. A late-morning tour of about dozen local SUV dealerships found nobody on hand to buy or even look at SUVs.
"People are coming in and wanting to get out of the big SUVs and into something smaller," said Don Allen Automotive Group sales manager Mike Taubes. "We have an awful lot of trade-ins on our lot and many of them are full-sized and large SUVs."
The view across the street from his office confirmed Taubes' observation. On the used car lot's front row, 10 of the dozen or so vehicles were SUVS of one kind or another.
Many believe what is happening to larger-size SUVs is what happened to big American cars after the 1973 Arab oil embargo sent gas prices soaring and consumers flocking to smaller foreign makes, precipitating what has turned out to be a permanent decline in market share for U.S. car companies. That drop-off was cemented in the late 1970s when another oil price spike and concerns about American automakers' quality-control fueled a second boom in Japanese car sales and market share.
A look at the data for the month of September tells the SUV story.
According to Autodata Corp., sales of mid-sized SUVs were off 6.7 percent for the first nine months of the year compared with a year ago, while sales of gas-hungry larger SUVs were off 16.3 percent for the same period. In September alone, sales for all SUVs were down 30.4 percent.
Even online searches for information, a way many potential buyers start their searches, has plunged for SUVs. The Web site cars.com said the number of searches for large SUVs fell more than 25 percent last month on average and even more for many specific models.
By comparison, Web interest in smaller cars skyrocketed, led by vehicle searches for the gas-friendly Honda Civic, Honda Accord, Toyota Corolla, Toyota Camry, Volkswagen Jetta and Toyota Prius, cars.com said. Sales of small cars jumped 23 percent last month from a year ago, giving the category 18 percent of the U.S. market, up from 13.6 percent in September, 2004.
Not all industry analysts are ready to write off SUVs just yet.
Tom Libby, senior director of industry analysis for Powers Information Network, a division of J.D. Power Associates, does not believe a major shift away from SUVs is under way.
Instead, he believes sales within the category are shifting out of full-sized and large SUVs to entry-level SUVs and so-called crossovers -- car-based vehicles that combine qualities of minivans, SUVs and passenger cars and often look like fancy station wagons.
Sales of small SUVs for the first nine months of the year were up 2 percent from a year ago, and sales of crossovers were up even more -- a whopping 16.6 percent, according to Autodata. Popular crossovers include Chevy's HHR, Toyota's Highlander, Ford's Freestyle and Chrysler's PT Cruiser.
They are popular because buyers can get the best of several worlds -- flexible cargo and passenger space, decent traction and comfortable ride -- without the gas mileage headaches and loss of driving ease that comes with large and full-sized SUVs.
Detroit is finally catching on to the trend. General Motors, for instance, has anywhere from seven to 14 new crossover models coming out over the next few years.
Mr. Libby cites another factor that he believes is overstating the decline in SUVs -- he noted September's big drop can be at least partly accounted for by low inventories after two months of big sales resulting from employee-pricing discounts that ended last month.
He and others also note that four of the eight full-sized SUVs on the market are GM models nearing the end of their product cycle, when sales typically fall off. GM's new full-sized 2007 SUVs are just now being introduced.
"Our company's position is that there will not be a major massive shift in the market toward smaller economical cars until gas prices approach four dollars a gallon, and the price has to stay there for at least a year," Mr. Libby said.
Still, analysts believe that in the future, the SUVs that will sell best are smaller, more fuel efficient models such as the Hyundai Tucson, Honda CR-V, Kia Sportage and Toyota RAV4, analysts say.
But, they note, those are precisely the kinds of SUVs that American automakers are not producing, and the domestic companies will pay a heavy price in the future for that.
"GM and Ford simply don't have much in the way of small SUVs to offer, and certainly nothing that competes with the Honda CR-V and Toyota RAV4," Mr. Morici said. "The Ford Escape, their smallest, is still fairly large, and GM has the Saturn Vue, which has proven to be a fairly low quality vehicle."
Perhaps an even more obvious sign that things are tanking for large SUVs can be found in recent statements made by American carmakers upon the introduction of their new models.
Instead of the usual upbeat kind of market forecasts that automakers routinely make when they introduce new products, some Ford officials openly predicted that the sales of their refurbished 2006 Explorers would likely drop. And GM, which has just begun introducing its lineup of new large SUVs, is warning that sales will be a struggle the new few months.
Detroit's vulnerability to the precipitous drop in SUV sales is bothering Wall Street and credit rating agencies.
Both Goldman Sachs and Merrill Lynch issued notes to investors recently expressing fears that sagging SUV sales will serve as a further drag on profits and market share. And ratings agency Standard & Poor's said it would review Ford and GM operations and decide by mid-January whether to lower their credit ratings lower to junk status.
source: http://www.post-gazette.com/pg/05282/584656.stm
SUV sales have been falling for the better part of a year, but the bottom fell out of the market last month, with sports utility vehicle sales plummeting more than 30 percent, signaling what some observers believe could mark a permanent falling out with American consumers.
"What you're looking at is a sea change in consumer preferences," Peter Morici, a University of Maryland economist who follows the auto industry, said last week after reviewing the worst showing for sports utility vehicle sales since they first hit the market in the 1980s.
While SUV sales may recover a bit if gas prices ease, "it will never, ever grow back to where it was before," when SUVs accounted for huge profits and market share for domestic automakers, Mr. Morici said.
Reports coming from all over the country say dealer used-car lots are filling up with SUVs as owners, shocked at having to pay $50 and up just to fill the tank, are trading them in for gas-sipping smaller cars.
From truck-crazy Texas to Pittsburgh, moving SUVs off the new car lot is a lot like getting a child to clear his plate of vegetables.
Friday offered an example. A late-morning tour of about dozen local SUV dealerships found nobody on hand to buy or even look at SUVs.
"People are coming in and wanting to get out of the big SUVs and into something smaller," said Don Allen Automotive Group sales manager Mike Taubes. "We have an awful lot of trade-ins on our lot and many of them are full-sized and large SUVs."
The view across the street from his office confirmed Taubes' observation. On the used car lot's front row, 10 of the dozen or so vehicles were SUVS of one kind or another.
Many believe what is happening to larger-size SUVs is what happened to big American cars after the 1973 Arab oil embargo sent gas prices soaring and consumers flocking to smaller foreign makes, precipitating what has turned out to be a permanent decline in market share for U.S. car companies. That drop-off was cemented in the late 1970s when another oil price spike and concerns about American automakers' quality-control fueled a second boom in Japanese car sales and market share.
A look at the data for the month of September tells the SUV story.
According to Autodata Corp., sales of mid-sized SUVs were off 6.7 percent for the first nine months of the year compared with a year ago, while sales of gas-hungry larger SUVs were off 16.3 percent for the same period. In September alone, sales for all SUVs were down 30.4 percent.
Even online searches for information, a way many potential buyers start their searches, has plunged for SUVs. The Web site cars.com said the number of searches for large SUVs fell more than 25 percent last month on average and even more for many specific models.
By comparison, Web interest in smaller cars skyrocketed, led by vehicle searches for the gas-friendly Honda Civic, Honda Accord, Toyota Corolla, Toyota Camry, Volkswagen Jetta and Toyota Prius, cars.com said. Sales of small cars jumped 23 percent last month from a year ago, giving the category 18 percent of the U.S. market, up from 13.6 percent in September, 2004.
Not all industry analysts are ready to write off SUVs just yet.
Tom Libby, senior director of industry analysis for Powers Information Network, a division of J.D. Power Associates, does not believe a major shift away from SUVs is under way.
Instead, he believes sales within the category are shifting out of full-sized and large SUVs to entry-level SUVs and so-called crossovers -- car-based vehicles that combine qualities of minivans, SUVs and passenger cars and often look like fancy station wagons.
Sales of small SUVs for the first nine months of the year were up 2 percent from a year ago, and sales of crossovers were up even more -- a whopping 16.6 percent, according to Autodata. Popular crossovers include Chevy's HHR, Toyota's Highlander, Ford's Freestyle and Chrysler's PT Cruiser.
They are popular because buyers can get the best of several worlds -- flexible cargo and passenger space, decent traction and comfortable ride -- without the gas mileage headaches and loss of driving ease that comes with large and full-sized SUVs.
Detroit is finally catching on to the trend. General Motors, for instance, has anywhere from seven to 14 new crossover models coming out over the next few years.
Mr. Libby cites another factor that he believes is overstating the decline in SUVs -- he noted September's big drop can be at least partly accounted for by low inventories after two months of big sales resulting from employee-pricing discounts that ended last month.
He and others also note that four of the eight full-sized SUVs on the market are GM models nearing the end of their product cycle, when sales typically fall off. GM's new full-sized 2007 SUVs are just now being introduced.
"Our company's position is that there will not be a major massive shift in the market toward smaller economical cars until gas prices approach four dollars a gallon, and the price has to stay there for at least a year," Mr. Libby said.
Still, analysts believe that in the future, the SUVs that will sell best are smaller, more fuel efficient models such as the Hyundai Tucson, Honda CR-V, Kia Sportage and Toyota RAV4, analysts say.
But, they note, those are precisely the kinds of SUVs that American automakers are not producing, and the domestic companies will pay a heavy price in the future for that.
"GM and Ford simply don't have much in the way of small SUVs to offer, and certainly nothing that competes with the Honda CR-V and Toyota RAV4," Mr. Morici said. "The Ford Escape, their smallest, is still fairly large, and GM has the Saturn Vue, which has proven to be a fairly low quality vehicle."
Perhaps an even more obvious sign that things are tanking for large SUVs can be found in recent statements made by American carmakers upon the introduction of their new models.
Instead of the usual upbeat kind of market forecasts that automakers routinely make when they introduce new products, some Ford officials openly predicted that the sales of their refurbished 2006 Explorers would likely drop. And GM, which has just begun introducing its lineup of new large SUVs, is warning that sales will be a struggle the new few months.
Detroit's vulnerability to the precipitous drop in SUV sales is bothering Wall Street and credit rating agencies.
Both Goldman Sachs and Merrill Lynch issued notes to investors recently expressing fears that sagging SUV sales will serve as a further drag on profits and market share. And ratings agency Standard & Poor's said it would review Ford and GM operations and decide by mid-January whether to lower their credit ratings lower to junk status.
source: http://www.post-gazette.com/pg/05282/584656.stm
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