Americans went big in April, snapping up jumbo SUVs and pickups.
With U.S. gasoline prices down by about a third from a year ago, sales of large and luxury sport utility vehicles soared 31 percent in the first quarter, while family sedan sales fell 3 percent, according to researcher Autodata Corp. That trend continued this month, analysts said. It’s getting so hard to sell a small car, Ford Motor Co. is laying off 700 workers at a Michigan factory that makes compacts and hybrids.
American consumers have become convinced lower fuel prices are here to stay and they are reverting to the vehicle equivalent of comfort food: roomy SUVs and pickups. Their focus on fuel economy has waned. Energy recovery technologies weren’t attractive to car buyers surveyed recently by J.D. Power. Even President Barack Obama’s pleas to consumers to consider fuel-efficient cars have been falling on deaf ears.
“Lower gas prices are influencing people tremendously,” said John Wolkonowicz, a Boston-based independent auto analyst and historian. “Big is what we want. Americans don’t want those little cars.”
Speeding the move back to big is a new crop of SUVs that don’t guzzle like they used to and now ride on more comfortable car frames. These SUVs, known as crossovers because they combine attributes of cars and trucks, have become the perfect package to appeal to Americans’ desire to live large without feeling guilty.
“The crossover is just tailor-made for what we are as a country and who we want to be,” said Wolkonowicz, a former product planner for Ford. “Most Americans want to see themselves as adventurous people, taking a go-anywhere, do-anything approach to life.”
While gasoline prices have increased 14 percent since the year began, a gallon of regular gasoline still costs about a dollar less than it did a year ago, according to AAA, the motoring club.
Trucks are likely to be top sellers again when April results are released on Friday. JPMorgan Chase & Co. predicts rising deliveries of profitable full-size pickups, while CLSA predicted that General Motors Co. would “benefit from the strong SUV environment.” The top six automakers are all projected to show gains compared with a year earlier as the annualized rate, adjusted for seasonal trends, rises to 16.7 million, the average analyst estimate.
As Americans increasingly turn toward bigger vehicles, automakers are responding.
Sales of GM’s sleekly redesigned Suburban SUV were up 77 percent in the first three months of the year and the automaker is doing all it can to squeeze more out of the Texas plant that makes them. Ford’s Lincoln Navigator SUV, a hip-hop favorite way back in the 1990s, has found new life with modern styling that boosted sales 84 percent in the first quarter.
“These are not the same SUVs as 10 years ago,” said Michelle Krebs, senior analyst with AutoTrader.com. Crossovers, in particular, “get better fuel economy and because they’re on a car platform they feel different.”
Improved mileage and lower fuel prices have minimized buyers’ interest in the issue. Consumers ranked a list of energy-recovery systems not important in a new J.D. Power survey of technology preferences. That may be because car buyers have a “short memory” when it comes to expensive gasoline, said Kristin Kolodge, J.D. Power’s executive director of driver interaction and Human Machine Interface research.
“We might have seen a different answer if prices were at $5 a gallon,” Kolodge said.
With no panic at the pump to drive consumer behavior, sales of small cars and hybrids have plunged. Small cars accounted for 18.5 percent of U.S. auto sales in the first quarter, down from 20 percent a year ago, Ford Chief Executive Officer Mark Fields told analysts this week.
“Because of that reduction, that’s why we took the shift off” at the Wayne, Michigan, factory that builds the Focus compact and C-Max hybrid, Fields said. “The good news for us is as we see that shift into trucks and utilities, that’s a benefit for us because of our profitability on those vehicles.”
That profit potential has Obama worried that U.S. automakers will return to the bad old days of dependence on big, fuel-thirsty vehicles.
“Detroit needs to be focused on capturing, you know, the lion’s share of the market for fuel-efficient cars,” Obama told the Wall Street Journal this week. “I understand that American consumers sometimes are resistant. We like big cars and we like driving long ways and we like cheap gas.”
U.S. automakers, though, need to “seize the future” by selling more fuel-efficient models, the president said. He also encouraged consumers not to be lulled into believing gas prices will remain low forever.
“If you’re going out shopping for a new car, don’t think it’s always going to be this low,” Obama said in January at an event in Phoenix, according to the Detroit News. “You’ll be mad at me later, and I’ll be able to say, ‘I told you: Don’t get a gas guzzler.’”
Steering Americans away from larger vehicles isn’t easy. Mid-sized SUVs are the most shopped vehicle type on AutoTrader.com and compact SUVs are No. 2, Krebs said. American drivers like to ride high and have space for people and cargo, Wolkonowicz said. And they feel safer in larger vehicles.
Demographics also are driving the shift to SUVs. The millennial generation, offspring of baby boomers, are entering their nesting years and need space for all those child seats they’re strapping into their vehicles.
“J.D. Power says 28 percent of new car sales now are to millennials,” Krebs said. “They’re mostly older millennials who are starting families and they need more space.”
Unit sales of cars and light trucks in April probably rose 5.9 percent to about 1.47 million vehicles, according to the average estimate from 12 analysts. There were 26 selling days this month, the same as last year.
Nissan Motor Co. may report the biggest year-on-year gain among the top automakers with a 9 percent increase, the average estimate of eight analysts surveyed by Bloomberg. Fiat Chrysler Automobiles NV may come in second at a 7.6 percent jump, according to estimates. GM and Ford may report a 5.3 percent and 6.1 percent gain, respectively.
Fiat Chrysler fell 4 percent to $14.75 at the close in New York. GM slipped 1.3 percent to $35.06 and Ford declined 1.4 percent to $15.80.