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05-24-2006, 12:20 PM
Trend could hurt Detroit's automakers. (http://www.freep.com/apps/pbcs.dll/article?AID=/20060524/BUSINESS01/605240455/1014)
Justin Hybde and Michael Ellis - Detroit Free Press - May 24, 2006
http://www.cleanmpg.com/photos/data/501/2006_Ford_Focus.jpg
American consumers are showing signs of a shift in attitude, with a growing number of people making fuel economy a primary concern - a potentially worrisome sign for Detroit's automakers.
More new car shoppers are looking for four-cylinder engines, while sales of V8-powered vehicles have fallen in recent weeks. Cars continue to regain market share from trucks.
And today, a survey by Consumer Reports, the bible of the big-spending baby boom generation, says 37% of people in the market for a vehicle want a more fuel-efficient model than they currently own, a jump from its previous surveys.
One automaker is already hustling to get ahead of the curve. General Motors Corp. said Tuesday that it is launching a promotion that will allow California and Florida buyers of certain vehicles - including its all-new full-size SUVs - to get gasoline for $1.99 a gallon for 12 months, regardless of how far they drive.
GM said it might expand the offer to other states if buyers respond.
"We feel that we don't really get the recognition that we deserve with the fuel economy of our vehicles," GM spokeswoman Deborah Silverman said. "So we're taking fuel prices off the table."
For the past decade, fuel efficiency has been only a fleeting concern for new vehicle buyers, who voted with their dollars for larger vehicles and more powerful engines. But with gas prices hovering near $3 and other economic trends, the tide that has kept Detroit automakers afloat could be ebbing.
"Given the environment we're in, it's just beginning to cause a reaction among consumers," said Robert Gentile, director of Consumer Reports' Auto Price Services. Higher gas prices "can affect any manufacturer that hasn't focused on manufacturing vehicles that are more fuel efficient and that consumers want."
Gas prices eased slightly this week to a national average of $2.88 per gallon, according to the U.S. Energy Information Administration, but are still 36% higher than a year ago. The agency now forecasts that gas prices will average $2.71 a gallon this summer, but warns that any supply disruptions, like Hurricane Katrina last year, could send prices soaring.
While GM, Ford Motor Co. and Chrysler Group have tried to make more popular small vehicles, the results have been mixed. Consumer Reports released the study along with a list of 23 vehicles it recommends with good fuel economy. Only two are sold by Detroit automakers - the Pontiac Vibe and the Ford Focus wagon.
Joyce Grad, 56, a retired nurse from Warren, was at Ferndale Honda on Tuesday comparing the new subcompact Honda Fit and the Honda Civic small car. She eventually settled on the Civic, one of the most fuel-efficient models on the road. Grad said she had been spending up to $38 on every tank of premium gasoline for her old Volvo.
Grad's grandfather worked for Henry Ford, making $5 a day, and she wanted to buy a car from the Detroit automakers. But the Honda appealed to her more and had better scores in Consumer Reports.
"I've beaten myself up about this numerous times and decided I have to do what's right for me," she said.
Gentile said among buyers who are considering replacing their vehicles, half would consider a gasoline-electric hybrid, while 38% would look at a flexible-fuel vehicle.
The survey also found that many consumers had shifted their budgets because of higher fuel prices, started shopping for deals or had been driving less.
"If prices continue to rise and stay at a plateau, consumers are going to have to make harder decisions," Gentile said. "They're really going to care how fuel-efficient a vehicle is."
George Pipas, Ford's director of sales analysis, said Consumer Reports' findings were in line with industry trends. He noted that trucks had gained market share from cars from 1981 to 2004, but cars had increased their share in 2005 and are on track to do so again this year.
Sales of the larger, truck-based SUVs, which were among the most profitable vehicles for Detroit automakers, plateaued in 2000 at about 3 million vehicles and have fallen 9% this year after a 13% drop last year.
"There was a decline going on before gas prices started to rise," Pipas said. "Suffice to say, the rate of decline has accelerated as gas prices rose."
Citigroup analyst Jon Rogers said in a research note Tuesday that sales of GM's new full-size SUVs - the Chevrolet Suburban and GMC Yukon XL -- were twice as likely to fall due to rising gas prices than sales of regular-sized SUVs. Rogers reiterated his "sell" rating on shares of Ford and GM, which has said the launch of its new SUVs and pickups are key to its turnaround this year.
J.D. Power and Associates found that sales of vehicles with four-cylinder engines began to pick up around mid-April, while sales of V8-powered models softened.
"The question is, is this just a short-term blip and things will get back to normal, or is this the beginning of a long-term trend?" asked Tom Libby, senior director of industry analysis at J.D. Power's Power Information Network. "It's too soon to answer the question."
The new GM gas-price incentive, called the GM Fuel Price Protection Program, would be offered on certain 2006 and 2007 full-size SUVs and midsize sedans, including the Hummer H2 in California.
Under the GM incentive, customers who buy their vehicles between May 25 and July 5 will get a prepaid MasterCard. GM will track the miles they drive with OnStar, then refill the card based on the price of a gallon of premium fuel.
For example: A Florida driver with a vehicle that gets 20 miles to the gallon drives 1,200 miles in a month, burning 60 gallons of gasoline. The current average price for premium gasoline in Florida is $3.17 a gallon. GM would put $71 on that driver's prepaid card - the difference between 60 gallons at $3.17 a gallon and 60 gallons at $1.99.
Vehicles with lower fuel economy, or drivers who put more miles on their vehicles, would get a larger credit. Even at $100 a month, the deal would still be less than typical rebates.
"This incentive is likely to get the attention of many consumers," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "The psychological impact is immeasurable; the actual dollar savings amounts to about $1,000 per vehicle."
Justin Hybde and Michael Ellis - Detroit Free Press - May 24, 2006
http://www.cleanmpg.com/photos/data/501/2006_Ford_Focus.jpg
American consumers are showing signs of a shift in attitude, with a growing number of people making fuel economy a primary concern - a potentially worrisome sign for Detroit's automakers.
More new car shoppers are looking for four-cylinder engines, while sales of V8-powered vehicles have fallen in recent weeks. Cars continue to regain market share from trucks.
And today, a survey by Consumer Reports, the bible of the big-spending baby boom generation, says 37% of people in the market for a vehicle want a more fuel-efficient model than they currently own, a jump from its previous surveys.
One automaker is already hustling to get ahead of the curve. General Motors Corp. said Tuesday that it is launching a promotion that will allow California and Florida buyers of certain vehicles - including its all-new full-size SUVs - to get gasoline for $1.99 a gallon for 12 months, regardless of how far they drive.
GM said it might expand the offer to other states if buyers respond.
"We feel that we don't really get the recognition that we deserve with the fuel economy of our vehicles," GM spokeswoman Deborah Silverman said. "So we're taking fuel prices off the table."
For the past decade, fuel efficiency has been only a fleeting concern for new vehicle buyers, who voted with their dollars for larger vehicles and more powerful engines. But with gas prices hovering near $3 and other economic trends, the tide that has kept Detroit automakers afloat could be ebbing.
"Given the environment we're in, it's just beginning to cause a reaction among consumers," said Robert Gentile, director of Consumer Reports' Auto Price Services. Higher gas prices "can affect any manufacturer that hasn't focused on manufacturing vehicles that are more fuel efficient and that consumers want."
Gas prices eased slightly this week to a national average of $2.88 per gallon, according to the U.S. Energy Information Administration, but are still 36% higher than a year ago. The agency now forecasts that gas prices will average $2.71 a gallon this summer, but warns that any supply disruptions, like Hurricane Katrina last year, could send prices soaring.
While GM, Ford Motor Co. and Chrysler Group have tried to make more popular small vehicles, the results have been mixed. Consumer Reports released the study along with a list of 23 vehicles it recommends with good fuel economy. Only two are sold by Detroit automakers - the Pontiac Vibe and the Ford Focus wagon.
Joyce Grad, 56, a retired nurse from Warren, was at Ferndale Honda on Tuesday comparing the new subcompact Honda Fit and the Honda Civic small car. She eventually settled on the Civic, one of the most fuel-efficient models on the road. Grad said she had been spending up to $38 on every tank of premium gasoline for her old Volvo.
Grad's grandfather worked for Henry Ford, making $5 a day, and she wanted to buy a car from the Detroit automakers. But the Honda appealed to her more and had better scores in Consumer Reports.
"I've beaten myself up about this numerous times and decided I have to do what's right for me," she said.
Gentile said among buyers who are considering replacing their vehicles, half would consider a gasoline-electric hybrid, while 38% would look at a flexible-fuel vehicle.
The survey also found that many consumers had shifted their budgets because of higher fuel prices, started shopping for deals or had been driving less.
"If prices continue to rise and stay at a plateau, consumers are going to have to make harder decisions," Gentile said. "They're really going to care how fuel-efficient a vehicle is."
George Pipas, Ford's director of sales analysis, said Consumer Reports' findings were in line with industry trends. He noted that trucks had gained market share from cars from 1981 to 2004, but cars had increased their share in 2005 and are on track to do so again this year.
Sales of the larger, truck-based SUVs, which were among the most profitable vehicles for Detroit automakers, plateaued in 2000 at about 3 million vehicles and have fallen 9% this year after a 13% drop last year.
"There was a decline going on before gas prices started to rise," Pipas said. "Suffice to say, the rate of decline has accelerated as gas prices rose."
Citigroup analyst Jon Rogers said in a research note Tuesday that sales of GM's new full-size SUVs - the Chevrolet Suburban and GMC Yukon XL -- were twice as likely to fall due to rising gas prices than sales of regular-sized SUVs. Rogers reiterated his "sell" rating on shares of Ford and GM, which has said the launch of its new SUVs and pickups are key to its turnaround this year.
J.D. Power and Associates found that sales of vehicles with four-cylinder engines began to pick up around mid-April, while sales of V8-powered models softened.
"The question is, is this just a short-term blip and things will get back to normal, or is this the beginning of a long-term trend?" asked Tom Libby, senior director of industry analysis at J.D. Power's Power Information Network. "It's too soon to answer the question."
The new GM gas-price incentive, called the GM Fuel Price Protection Program, would be offered on certain 2006 and 2007 full-size SUVs and midsize sedans, including the Hummer H2 in California.
Under the GM incentive, customers who buy their vehicles between May 25 and July 5 will get a prepaid MasterCard. GM will track the miles they drive with OnStar, then refill the card based on the price of a gallon of premium fuel.
For example: A Florida driver with a vehicle that gets 20 miles to the gallon drives 1,200 miles in a month, burning 60 gallons of gasoline. The current average price for premium gasoline in Florida is $3.17 a gallon. GM would put $71 on that driver's prepaid card - the difference between 60 gallons at $3.17 a gallon and 60 gallons at $1.99.
Vehicles with lower fuel economy, or drivers who put more miles on their vehicles, would get a larger credit. Even at $100 a month, the deal would still be less than typical rebates.
"This incentive is likely to get the attention of many consumers," said Jesse Toprak, executive director of industry analysis for Edmunds.com. "The psychological impact is immeasurable; the actual dollar savings amounts to about $1,000 per vehicle."