In 2011, Jennifer Nigro, a resident of Denville, New Jersey, purchased a fuel-sipping Chevrolet Malibu, motivated by gas prices that she says were "through the roof." Last November, she traded that in for an Equinox SUV, craving a roomier interior for her two children, ages 15 and 18. As gas prices began to decline, "SUVs went back onto our radar," she said. She said she feels safer in the larger vehicle and is even more "thrilled" that gas prices continue to decrease.
Nigro represents a growing trend among consumers. As the economy rebounds, gas prices fall and the fuel efficiency of larger vehicles continues to improve, more people are moving away from cars toward larger vehicles. Light trucks outsold cars last year for the first time since 2011. From January through October, cars accounted 46.6 percent of the market, while light trucks made up 53.4 percent, according to registration data by IHS Automotive.
The University of Michigan's Transportation Research Institute reported that the average fuel economy of cars purchased in December declined to 25 miles per gallon, down from an all-time high of 25.8 mph last August. Michigan researcher Michael Sivak said this turn toward SUVs and crossovers and other larger vehicles is likely due to the large decreases in the price of gasoline.
Dealers are seeing the trend play out in their showrooms. As the economy rebounds, "people are ready to get into something new and bigger," said Judith Schumacher-Tilton, who owns Gearhart Chevrolet and Schumacher Chevrolet in New Jersey. She sees many customers trading in smaller cars for Tahoes and Suburbans.
Automakers unveiling their new vehicles at The North American International Auto Show in Detroit, which opens to the public on Saturday, are expected to mirror the shift in the public's appetite. Instead of focusing extensively on fuel economy, as they have for the past few years, this year's offerings will have a different tilt. Because of the lower gas prices, automakers will "skew things towards emphasizing performance and de-emphasizing fuel economy," said Tom Libby, an analyst with IHS Automotive. "If they have six features they can emphasize, they won't emphasize fuel economy as much as they would have six months ago."
Libby cited a dozen vehicles slated to be unveiled at the show that are either big vehicles, like the Toyota Tacoma and Nissan Titan, or performance versions of a car, among them the Lexus GS F, the Audi M6 Gran Convertible, the Cadillac CTSV, and the Mustang GT350R. Jonathan Linkov, deputy editor of autos for Consumer Reports, said, however, that unlike pre-recession shows, where power and luxury were the exclusive focus, manufactures now strive to make every one of their vehicles fuel efficient as well — even the highest-performing ones.
Steve Majoros, Chevrolet's director of marketing, said that 242,242 Equinox vehicles were sold last year, with plants running at their maximum capacity. He said that number would have been even higher if more were built. "The compact SUV [segment] is on fire," he said, while full-sized trucks are General Motor's "bread and butter." GM sold 50,000 of its best-selling vehicle, the Chevy Silverado, in December.
Audi of America is similarly bullish on SUV sales continuing to grow. It is showing its Q7 in Detroit. "We've never had a lower day's supply and higher sales of that car," Audi Chief Operating Officer Mark Del Rosso said on the company's Jan. 5 sales call.
Emily Kolinski Morris, Ford's chief economist, said during a sales call the same day that the pick-up segment and utility vehicles have the most strength, while the passenger car segment has the least. The improving fuel economy of mid-sized utilities makes them even more appealing to customers, she said. But Erich Merkle, Ford's U.S. sales analyst, says the carmaker isn't banking on gas prices staying low, and that while vehicles like the Escape and F-150 are big sellers, it has a number of hybrids, plug-in electric vehicles and compact cars, like the Fiesta. "We've been working hard over the past five to six years to make sure we have a broad portfolio so we're able to operate when fuel prices are high, low or anything in between."
Car companies lacking a sufficient number of SUVs now wish they had more. Bob Pardzinski, vice president of national sales for Hyundai Motor America, says he's "constantly pushing for more SUV production." The Korean manufacturer has agreed to send additional quantities of its Tuscon and Sante Fe SUVs to the U.S., but Pradzinski would relish a small SUV, like the Mercedes GLK. Jeannine Ginivan, a spokesperson for Volkswagen Group of America, said although it has the Tiguan and Touareg, they're missing a vehicle in the shorter SUV segment. It announced last summer that it will be bringing a seven-seat crossover SUV to market in 2016. It plans to further discuss its SUV strategy at the Detroit show, Ginivan said.
There’s a flipside for consumers to the diminished demand for small vehicles The trend may make it easier to get a deal on a reliable, small, fuel-efficient car, as dealers need to provide incentives to get them off the lot, Consumer Reports’ Linkov says. Gas prices "are bound to go up like they went down," he says, so those who flock to small cars now could ultimately stand to benefit in the long run.
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