Death of the SUV

As energy prices soar, Frustrated owners try to unload their guzzlers.

Americans are turning away from the boxy, four-wheel-drive vehicles that have for years dominated the nation's highways. Sport utility vehicles and pickup trucks - symbols of Americans' obsession with horsepower, size, and status - are falling out of favor as consumers rich and poor encounter sticker shock at the pump, paying upward of $80 to fill gas tanks.

The sale of new SUVs and pickup trucks has dropped precipitously in recent months amid soaring gas prices and a weakening economy: SUV sales for the month of April alone fell 32.3 percent from a year earlier and small car sales rose 18.6 percent. This fundamental shift comes against a backdrop of relentless gas increases, and growing concerns over the environment and US oil consumption, according to auto analysts and car dealers.

With stocks of unwanted new SUVs and pickups piling up at dealerships across the country, automakers are offering unprecedented promotions. Incentives for large SUVs, including cash rebates, topped $4,000 in March, or more than double those offered in March 2002, according to Edmunds.com, which monitors the motor industry.

Good Riddance

CNNMoney is reporting Goodbye SUV, hello small cars.

Sales of large SUVs plummeted 28% in the first quarter this year, while subcompact sales rose 32%, according to Autodata Corp. Thriftier four-cylinder engines, once despised by Americans for their perceived lack of power, are selling in record numbers.

April sales results to be released on May 1 are likely to show an even more pronounced shift, predicted Jesse Toprak, chief industry analyst for the auto information site Edmunds.com. "That's simply a function of the dramatic increase in oil prices that we've seen in the last few weeks."

The trend away from SUVs started well before gas prices began climbing in 2005, in part because of the introduction of "crossover" vehicles - those with SUV styling but built on the more nimble and fuel-efficient car chassis. SUV sales peaked at 3 million in 2003; they're expected to fall to half that number this year, and the change caught Detroit unprepared.

My Comment: Any change will catch GM or Ford off guard as both companies are always behind the curve and slow to adjust to trend changes even though this was easy to spot years ago.

Now owners of SUVs and other gas guzzlers who've seen the price of a fill-up climb sharply are getting a second shock when they try to trade in their behemoths. Used car dealers don't want the big vehicles on their lots anymore because hardly anyone is buying them. Some won't take them at any price.

My Comment: SUVs are headed for the scrap heap of history and the scrap heap at the junk yard where they belong.

Demographics also play a role. Baby boomers are trading in larger vehicles as their nests empty, and their children are now of car-buying age. Half of the next generation will pick small cars for their first set of wheels, said George Pipas, Ford's top sales analyst.

"Gas prices are important because they've accelerated these shifts, but the shifts were going to happen anyway," Pipas said. "SUVs were not going to roam the Earth in this decade as they did in the 90s."

My Comment: "Shifts were going to happen anyway." Exactly. Nonetheless this was too hard for GM to figure out even one month ago.

Menicocci, a resident of the upscale Miami suburb of Palmetto Bay, recently placed his 2003 Chevrolet Tahoe with leather seats and 39,000 miles for sale on Craigslist for $16,000 -- roughly $2,000 less than what his research determined was the Kelley Blue Book value.

He bought a 2003 Kia Spectra for $5,000 because he was tired of paying so much for gas with his heavy Tahoe. "I was wasting $30 a day compared to $10 a day," he said.

"Everybody is like, `What is that? Is that the maid's car?"' said Menicocci, who sells marble and granite for a living. "But I don't care. At this point, I'm way past looks and appearances."

My Comment: "I'm way past looks and appearances" says it all. Attitudes have changed dramatically.

Flashback April 2, 2008
GM says still expects second-half U.S. recovery

March Auto Roundup And Retail Sales Forecast

General Motors Corp still expects the U.S. economy to recover in the second half of 2008, pulling industry-wide auto sales higher, an executive said on Tuesday.
GM sales analyst Mike DiGiovanni, speaking to reporters and analysts on a conference call, said he saw "early signs" that the U.S. market was steadying.

My Comment: Is this some kind of April Fool's Joke?

Separately, GM North American sales chief Mark LaNeve said GM's inventory of full-size pickup trucks was "more than adequate" despite a five-week-old strike at supplier American Axle & Manufacturing Holdings Inc that has idled 30 GM plants.

My Comment: And it will be more than adequate if the strike lasts another 15 weeks. Who wants full sized pickups? GM ought to be thankful for that strike or they would be ramping up for a nonexistent second half recovery.

Some SUVs, especially the Hummer are so ugly I still cannot fathom anyone buying one. I guess at one point it was some sort of status symbol as in: "Hey look at me... I can drive a huge, ugly expensive car that looks like a big yellow box on wheels and costs a fortune to fill up." That's status alright.

Things have changed, abruptly and for the better. Status symbols are out. Cool to Be Frugal is in. A secular trend in downsizing is underway. Wall Street has still not caught on. Profits are not coming back.

Comments

[ChryslerSux]

Couldn't agree more. I can't help but shake my head and laugh at what all these morons in their soccer mom ginormobiles are finding when they fill up after driving around 300 miles by themselves in a 9 passenger vehicle at 12 mpg, and now they get a double shock at trade in time. Classic. Enjoy it, morons!

[User 190443]

Any large car company should have a complete stable of products from small and thrifty to a large utility vehicle for when people really need it. Now that gas prices have gone up, people are realizing that conspicuous consumption can be costly. Before they needed to do the math; now it is painfully obvious every time they fill up. In my blog, I wrote a post, "Gas prices too high? Use less gas." Supply and demand rules and all those people driving gas guzzlers raise the price of fuel for the rest of us. My bogey has always been 30 mpg minimum on the highway and it has saved me thousands of dollars over 15 years or so.

UH2L
www.thingsivenoticed.com

[Tom B]

"Some SUVs, especially the Hummer are so ugly I still cannot fathom anyone buying one."

They remind me of the legendary Volkswagon "Thing" ( www.americandreamcars.com/1973vwthing102... ).

Ironically, they got popular around the time of Iraq war number 1, when Americans were risking their lives to save Exxon and Mobil. Fortunately for them, they had no taste for permanent Baghdad real estate at that time.

I was driving Civics and Corollas a decade ago, before Peak Oil became obvious. It used to utterly annoy me that there were so many more car options in Europe-- you could get conventional gas autos that got 40 plus MPG. All the car makers wanted to sell here were SUV's, sio they could "Sloan" you with expensive add-on packages. My next car's a hybrid. I actually test drove a Prius in 2000, but it was the first US model year ( I think) so I was worried about reliability and service issues and didn't buy it.

[allcars]

And those boomer's kids, going into jobs that pay half what their parents started at 20 years ago, with no pension plan and ever-increasing health care costs, aren't going to be buying big expensive vehicles of any kind any time soon. Rust in peace, old SUV.

[InvestorsLive.com]

I agree we should make a list of all of the stocks that can benefit from this

As always Im scanning: www.investorslive.com/blog /

[SUV Owner]

Many of the "My Comments" were the voice of someone who has no need for a large SUV and obviously can't afford the fuel to run one. Some of us require large vehicles for work and/or family and your petty comments such as "good riddance" and not only ignorant but also offensive. I am the recent purchaser of a Ford Expedition and I could care less what it's worth at trade in or how much fuel it uses because if fills a need for me. BTW, it delivers 16 MPG around town and 18 on the highway at 70 MPH, much better than the 3 MPG my boat gets!

[Tom B]

"Ford Expedition ..... BTW, it delivers 16 MPG around town and 18 on the highway at 70 MPH, much better than the 3 MPG my boat gets!"

A Honda Odyssey gets 26MPG and costs less to buy; it is a zillion times smarter as a purchase, IMHO.

[rysiek]

Oil is $125 a barrel. Coal converted to fuel-gasoline, diesel, jet, costs about $55 a barrel. The process was developed by Germany in the 1940s. 2 plants are running at present in the US.
within 5 to 10 years, we can be independent of foreign oil. The cost, about 500 billion dollars. The money would be spent her in the US, would bring about employment for us.

[cdcaddy]

When it comes to the US auto industry I don't get the manufacturers...we have all known for years that oil would be a diminishing resource...today we have a terrible bio-fuel program and auto makers are still making gas only engines and the govt has not put into play the design of an infrastructure for re-new able energy. We are so far behind the curve and it's not just the auto industry. Brazil is currently selling more cane based ethanol than gasoline - oh yeah - that's because GM supplies most of the E85 vehicles...and they use sugar [non protein] for ethanol and they have a complete system to get
ethanol to the consumers. [seen any E85 stations in your area - not mine] Yes - SUVs as they are configured today will become a relic...
but we have problems bigger than an SUV to now fix...