What looked like a permanent divorce, triggered by $4-a-gallon gas, has proved to be just a temporary lovers' quarrel between Americans and their light trucks.
According to new industry data, last year's fuel price spike had only a marginal impact on the U.S. car market. After an initial, knee-jerk response toward smaller cars, most motorists went back to buying what they would have if prices hadn’t risen at all — including pickups, SUVs and other light trucks.
“Everyone reported on the rapid escalation of small-car demand, but the rapid descent of small-car market share went somewhat unnoticed,” says Jeff Anderson, head of consulting and analytics for Experian Automotive, a consulting firm.
Sales of small and economy cars peaked at 17 percent of the U.S. market in May 2008, when the national average for a gallon of unleaded was $3.70, according to Experian Automotive. By the time prices crested at just above $4, the segment already was losing steam. By September, it was back to just 10 percent, roughly where the segment had stood prior to the fuel crisis.
Similarly, hybrid-electric vehicles hit a record 3 percent of the market in April 2008 and slipped back to 2 percent by August. The Toyota Prius, the poster child for the environmental movement, topped 20,000 sales in June 2008, but by the beginning of this year Toyota was struggling to sell 6,000 a month. Volume has rebounded only moderately since the recent launch of the third-generation Prius.
"The Prius is not for everyone. There are still people with large families that need SUVs and minivans, and workers who need full-size pickups," said Jim Lentz, president and chief operating officer of Toyota Motor Sales USA, at the CAR Management Briefing in Traverse City, Mich.
Lentz said the big truck is not dead; what people want from it is changing, though.
"What we're hearing from consumers is not that they don't want big cars (or trucks), but that they want big vehicles with 20 to 30 percent better fuel economy," he said
There long has been a debate over what price would finally lead to a shift away from pickups, SUVs and other light trucks, which collectively peaked at just over half the U.S. market American market in mid-decade. It didn’t happen, as some had forecast, at $2, or $2.50, or even at $3 a gallon. But $4 a gallon initially seemed like the magic number.
The SUV market share stood at 12 percent in January 2008, then plunged to an anemic 7 percent by May of that year. Yet by the end of the year, it was back to 12 percent.
The full-size pickup truck segment is a bit more difficult to parse because a sizable number of buyers use their vehicles for work. The broader downturn in the economy forced many blue-collar buyers, particularly those in the construction business and related trades, to hold back.
On the retail side, sales clearly took a tumble, at least initially, plunging from around 14 percent to barely 9 percent between January and June 2008. But then, even as gas prices kept rising, something totally unexpected happened: full-size pickups started getting hot again. By August, the segment’s share nipped 15 percent, not much behind small/economy cars.
Why would demand seemingly defy logic? For one thing, manufacturers introduced a slew of new models, including complete redesigns of both the Dodge Ram and Ford’s F-Series, long the nation’s best-selling vehicle. It also helped when makers launched a series of lucrative incentives that, at times, topped $6,000 per vehicle.
Not all pickups fared as well, notably including the Toyota Tundra and Nissan Titan. And because of a slump in fleet sales, overall full-size truck sales remain in a funk. The F-Series is being closely chased this year for best-seller bragging rights by that pillar of the small car segment, the Honda Civic. But the wholesale transformation of the U.S. automotive market simply hasn’t happened, the data reveal.
“Anyone who predicts a long-term shift in consumer car-buying sentiment based solely on last summer’s knee-jerk reaction to gas price increases could be in for a surprise,” said Experian’s Anderson.
Consumers, he said, “have short-term memory,” and once the initial pain is passed, they tend to go back to the products that they’re most comfortable with.
Analyst Stephanie Brinley of AutoPacific Inc., the California-based automotive research firm, agreed. “We’re not seeing people trade in trucks on Minis,” at least not in any significant numbers, she said.
There have been some subtle shifts, however.
The midsize market has gained about four points of market share, though that is arguably the result of new products, such as the Chevrolet Malibu, boosting the segment’s momentum. And with a flood of new crossovers, large and small, many buyers have been shifting away from traditional, truck-based sport-utility vehicles, though that trend began well before last year’s fuel price spike.
Within individual product segments, meanwhile, many buyers are letting fuel economy guide their decisions. Demand for V-6s has tumbled in favor of more efficient inline-fours within the midsize passenger-car segment. Makers like Ford and Chrysler are betting on new, high-mileage diesel models to maintain demand for their big pickups.
Could the next fuel price run-up finally shift buying patterns? It’s certainly possible, and has happened in Europe, where cars the size of the Ford Focus are now considered “family” vehicles.
It's also possible that proactive incentives could motivate American motorists. The “Cash for Clunkers” program is a good example. Preliminary data show buyers who qualified for the $3,500 to $4,500 incentives traded in on smaller, more fuel-efficient vehicles than had been expected. The Ford Focus was the single most popular model purchased, but the Top 10 list is heavily weighted with downsized passenger cars, rather than trucks.
But barring even more significant shifts in fuel prices, or longer-running government incentive programs, Americans seem willing to swallow hard and stick with what they know and like best, even if it means devoting more of their income to pay at the pump.