tigerhonaker
10-05-2006, 10:08 PM
Gasoline prices continue to weigh on the minds of automobile buyers, even though prices at the pump have dropped since midsummer.
latest news
By Thomas Gryta
Last Update: 4:57 PM ET Oct 4, 2006
"It is a major part of the decision-making process in buying vehicles at $40,000 or lower," says Jesse Toprak, executive director of industry analysis at Edmunds.com, an automotive consumer information Web site. "It is still one of the first questions that customers ask on the lot."
The retail price of gasoline has fallen to an average of $2.31 a gallon nationwide, according to the most recent Department of Energy statistics, from more than $3 in mid-August. But the recent drop may have little effect on an industry that can take years to adjust its product offering due to the long lead time needed to produce new vehicle lines.
The traditional Big Three auto makers have long relied on pickup trucks and sport utility vehicles as a profit center, which has hurt them when it comes to fuel-efficiency perceptions. When consumers are more worried about fuel economy, it tends to benefit Asian auto makers that are perceived to produce more fuel-efficient vehicles.
Indeed, sales of hybrid models have sharply increased since 2000, and those sales are largely driven by vehicles rolling off the lines at Toyota Motor Corp. (TM) and Honda Motor Co. (HMC).
Last week, The Wall Street Journal reported that the manufacturing side of Toyota remains worried enough about fuel costs that it is preparing for a slow start for the newest generation of the big Toyota Tundra pickup truck.
DaimlerChrysler AG's (DCX) Chrysler Group is adjusting its vehicle lineup in light of a market shift to higher fuel efficiency. The company hopes by the end of the year to announce the details on the launch of a new subcompact car.
In 2005, about 2.4 million big pickup trucks were sold in the U.S., but this year, sales are down 14% through August due to high gasoline prices and a slowdown in the housing market, which means contractors and builders delay new vehicle purchases.
Addressing investors two weeks ago, Tom LaSorda, head of the Chrysler Group, says that the recent decline in gasoline prices hasn't lured buyers back to the large pickup trucks and SUVs.
"I think we'll see a permanent shift" away from large vehicles, he says. "We haven't seen anything over the last few weeks that would suggest a change at this point."
A recent survey from market research firm J.D. Power and Associates of consumers that consider one model but ultimately purchase a different make or model finds that nearly 17% of new-auto shoppers cite gas mileage as a reason for vehicle rejection. That's up from 13% in 2002.
"Gas prices did scare me a little," says Marietta Palgutt, a student at Florida State University in Tallahassee who recently purchased a 2003 Volkswagen Jetta. She picked the used VW after concluding that a gas-electric hybrid would cost her too much money upfront, regardless of any longer-term savings.
The study also notes that utility vehicle shoppers who reject an auto due to gas mileage will typically purchase a smaller utility vehicle similar to the larger one they rejected.
"Despite the recent drop, this mindset of putting gas mileage first will not change for a long time," says Toprak, who notes that such concerns didn't exist a decade ago. "Consumers do not have confidence that prices will continue to go down."
Until September, recent trends were continuing, says Toprak. Small vehicles were gaining market share with less incentives for buyers, while large SUVs and trucks were slowing despite increased incentive spending.
Largely due to the swing in fuel prices, Edmunds.com projected the September sales growth in both midsize SUVs and large trucks.
"This was the first month where we saw some recovery in trucks and SUV sales," says Toprak, noting that he doesn't see this as a permanent shift back to larger vehicles.
Analysts caution that this growth is against the backdrop of a dismal September 2005, when sales were under pressure from the aftermath of Hurricane Katrina and a strong incentive-laden summer performance.
"Even with a sharp drop like this, people aren't going to go out and buy a big vehicle," says Jeff Zupancic, director of retail research at J.D. Power. "I think there needs to be a prolonged period of gasoline in the low $2-a-gallon range for people to start buying these vehicles."
Paul Taylor, chief economist for the National Automobile Dealers Association, feels that the halt in rising fuel prices will allow sales of trucks and SUVs to pick up somewhat, as long as the incentives and interest rate are favorable.
"The consumer is now thinking that gas prices are going to be from $2 to $3 per gallon, not worried that they will continue to escalate to $4 or $5 per gallon, which was a concern one month ago," says Taylor.
Currently, J.D. Power projects that sales of crossover utility vehicles - which look like an SUV, but are smaller and more efficient - will grow by 35% through 2008, while the midsize SUV segment will shrink by 8%. In the 2004-2006 period, midsize-segment sales fell by 20%.
Despite the long-term decline in larger-vehicle sales, there will always be a market for these types of autos for larger families or for those towing a boat or recreational vehicle.
"Most people buy for their peak utility because they can't afford to have a particular vehicle for a particular use," said Ron DeFore, communication director at SUV Owners of America.
Even drivers who aren't fazed by higher gas prices cite other reasons to buy a fuel-efficient car.
Consider Rick Schuham, a Chicago corporate real estate broker. He recently decided to replace his BMW 7 Series with a similar luxury sedan to shuttle clients to properties. He first looked at hybrids, citing environmental concerns and American dependence on foreign oil.
"I would be shocked if I don't buy a hybrid in the next go-around," said Schuham.
http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%7B0C006831-8C84-44BB-BB7B-78E836753225%7D&keyword=
latest news
By Thomas Gryta
Last Update: 4:57 PM ET Oct 4, 2006
"It is a major part of the decision-making process in buying vehicles at $40,000 or lower," says Jesse Toprak, executive director of industry analysis at Edmunds.com, an automotive consumer information Web site. "It is still one of the first questions that customers ask on the lot."
The retail price of gasoline has fallen to an average of $2.31 a gallon nationwide, according to the most recent Department of Energy statistics, from more than $3 in mid-August. But the recent drop may have little effect on an industry that can take years to adjust its product offering due to the long lead time needed to produce new vehicle lines.
The traditional Big Three auto makers have long relied on pickup trucks and sport utility vehicles as a profit center, which has hurt them when it comes to fuel-efficiency perceptions. When consumers are more worried about fuel economy, it tends to benefit Asian auto makers that are perceived to produce more fuel-efficient vehicles.
Indeed, sales of hybrid models have sharply increased since 2000, and those sales are largely driven by vehicles rolling off the lines at Toyota Motor Corp. (TM) and Honda Motor Co. (HMC).
Last week, The Wall Street Journal reported that the manufacturing side of Toyota remains worried enough about fuel costs that it is preparing for a slow start for the newest generation of the big Toyota Tundra pickup truck.
DaimlerChrysler AG's (DCX) Chrysler Group is adjusting its vehicle lineup in light of a market shift to higher fuel efficiency. The company hopes by the end of the year to announce the details on the launch of a new subcompact car.
In 2005, about 2.4 million big pickup trucks were sold in the U.S., but this year, sales are down 14% through August due to high gasoline prices and a slowdown in the housing market, which means contractors and builders delay new vehicle purchases.
Addressing investors two weeks ago, Tom LaSorda, head of the Chrysler Group, says that the recent decline in gasoline prices hasn't lured buyers back to the large pickup trucks and SUVs.
"I think we'll see a permanent shift" away from large vehicles, he says. "We haven't seen anything over the last few weeks that would suggest a change at this point."
A recent survey from market research firm J.D. Power and Associates of consumers that consider one model but ultimately purchase a different make or model finds that nearly 17% of new-auto shoppers cite gas mileage as a reason for vehicle rejection. That's up from 13% in 2002.
"Gas prices did scare me a little," says Marietta Palgutt, a student at Florida State University in Tallahassee who recently purchased a 2003 Volkswagen Jetta. She picked the used VW after concluding that a gas-electric hybrid would cost her too much money upfront, regardless of any longer-term savings.
The study also notes that utility vehicle shoppers who reject an auto due to gas mileage will typically purchase a smaller utility vehicle similar to the larger one they rejected.
"Despite the recent drop, this mindset of putting gas mileage first will not change for a long time," says Toprak, who notes that such concerns didn't exist a decade ago. "Consumers do not have confidence that prices will continue to go down."
Until September, recent trends were continuing, says Toprak. Small vehicles were gaining market share with less incentives for buyers, while large SUVs and trucks were slowing despite increased incentive spending.
Largely due to the swing in fuel prices, Edmunds.com projected the September sales growth in both midsize SUVs and large trucks.
"This was the first month where we saw some recovery in trucks and SUV sales," says Toprak, noting that he doesn't see this as a permanent shift back to larger vehicles.
Analysts caution that this growth is against the backdrop of a dismal September 2005, when sales were under pressure from the aftermath of Hurricane Katrina and a strong incentive-laden summer performance.
"Even with a sharp drop like this, people aren't going to go out and buy a big vehicle," says Jeff Zupancic, director of retail research at J.D. Power. "I think there needs to be a prolonged period of gasoline in the low $2-a-gallon range for people to start buying these vehicles."
Paul Taylor, chief economist for the National Automobile Dealers Association, feels that the halt in rising fuel prices will allow sales of trucks and SUVs to pick up somewhat, as long as the incentives and interest rate are favorable.
"The consumer is now thinking that gas prices are going to be from $2 to $3 per gallon, not worried that they will continue to escalate to $4 or $5 per gallon, which was a concern one month ago," says Taylor.
Currently, J.D. Power projects that sales of crossover utility vehicles - which look like an SUV, but are smaller and more efficient - will grow by 35% through 2008, while the midsize SUV segment will shrink by 8%. In the 2004-2006 period, midsize-segment sales fell by 20%.
Despite the long-term decline in larger-vehicle sales, there will always be a market for these types of autos for larger families or for those towing a boat or recreational vehicle.
"Most people buy for their peak utility because they can't afford to have a particular vehicle for a particular use," said Ron DeFore, communication director at SUV Owners of America.
Even drivers who aren't fazed by higher gas prices cite other reasons to buy a fuel-efficient car.
Consider Rick Schuham, a Chicago corporate real estate broker. He recently decided to replace his BMW 7 Series with a similar luxury sedan to shuttle clients to properties. He first looked at hybrids, citing environmental concerns and American dependence on foreign oil.
"I would be shocked if I don't buy a hybrid in the next go-around," said Schuham.
http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=google&guid=%7B0C006831-8C84-44BB-BB7B-78E836753225%7D&keyword=