As gas prices soften, consideration of SUVs increases

Maybe it's just nostalgia for the good ol' days of the early 2000s, but the recent drop in pump prices is already drawing consumers' attention away from their "single-minded focus" on smaller, fuel-efficient vehicles, auto data tracker Edmunds.com reports.

"Consideration data," which track interest in various vehicle segments by visitors to Edmunds' website, indicate that the trend toward smaller vehicles is leveling off while interest in segments that had been declining — such as compact crossover SUVs — is rising. What's more, interest in gas-electric hybrids is down 34% since June.

"With the initial shock of high gas prices fading, consumers are returning to rationality and again viewing gas consumption as just one of many factors when considering their next vehicle," said Edmunds.com Chief Executive Jeremy Anwyl. "And as gas prices actually decline, this trend could accelerate."

The Energy Department reported Monday that regular gasoline was selling for an average of $4.11 a gallon in California after falling for the eighth straight week. That's down 10% from the all-time average high statewide of $4.58 hit June 1 but still $1.19 higher than a year ago.

Still, dealers in Southern California say they aren't noticing a shift in their showrooms away from gas sippers and back to SUVs.

"I think people are still in sticker shock," said Beau Boeckmann, vice president of Galpin Motors in North Hills, the world's largest-volume Ford dealership. "If it was three bucks a gallon, I think people would change their buying habits."

It might take even more than that, said David Conant, owner of the Norm Reeves Honda dealerships. Past scenarios that saw Americans flock back to gas guzzlers when pump prices retreated may not be repeated this time around, he said.

"I think the shift in buyer attitudes we've seen this time because of gas prices is the most dramatic in all the time I've been in the business," said Conant, who has worked for auto dealerships for more than 40 years. "This one has made a permanent mark on people's memories."

Conant also notes that the major automakers are spending hundreds of millions of dollars to shift production from big pickup trucks and SUVs to smaller cars. That's a clear reaction to what the companies see as a long-term change in consumer tastes. Through July, sales of small cars were up almost 11% this year in the U.S. while sales of SUVs were down 16% and pickups were off 23% from a year earlier.

Still, the Rocky Mountain Institute, a nonprofit group the promotes efficient use of natural resources, was concerned enough to issue a statement "highlighting the importance of keeping our eye on the ball during this brief reprieve from higher oil prices." The group urged that development of alternatives to traditional internal-combustion engines — such as plug-in hybrids and electric cars — continue apace.

"Automotive trends prompted by shifting consumer priorities need to continue full speed ahead," Michael Brylawski, the institute's vice president, said.

A pullback in the current rush to develop new powertrain technologies is unlikely, said Ron Cogan, publisher of the Green Car Journal and editor of greencarjournal.com.

In the past, a drop in gas prices has hurt investment in alternative vehicle technologies. "But that's not the case today," said Cogan, because the global petroleum market has changed in ways that make a return to former low pump price levels unlikely.

Automakers have been offering hefty discounts to move pickups and SUVs off dealer lots. But Edmunds.com analyst David Tompkins said that "gas prices, not incentives, are the driving force behind recent consideration shifts." He noted that some vehicles carrying big incentives were registering drops in consumer interest.

Edmunds.com compiles its consideration data by measuring traffic on its website to various vehicle segments.

— Martin Zimmerman

Photo: SUVs at a San Francisco dealership. Credit: Bloomberg News

Comments

[Raul Garcia]

Total morons, they are just going to encourage more price increases in the long run.

Jackasses

[Mark]

I bought a Hummer H3 about 3 weeks ago. No regrets here, and the falling gas prices make it even better. ;)

[Mike]

Fools and their money are soon parted. Way to reward an oil robber baron by buying more of his black crack.

[JP Berube]

One trend that isn't mentioned is that existing truck and SUV owners are finding that it is cheaper in the long run to hold on to their existing vehicle. Some aftermarket performance companies are seeing a boost in sales due to consumers fixing up their older vehicles.

Additionally, if you give in and purchase that deeply discounted SUV, regardless of whether or not the fuel prices rise again, it will hurt your resale value.

Don't be the guy or gal that becomes a victim of the latest and greatest new thing. Sometimes it's more prudent to wait it out!

[stuart]

Don't believe what you read about Jaguar quality and service. I have had dozens of jump starts and am on my 3rd battery....in 12,000 miles. I am afraid to drive it anywhere and Jaguar cannot find the problem or compensate me. Car just dies. Something is draining the battery down. They have provided terrible service and no help, even when I call corporate. When I asked them why I should still pay my lease, their response was to threaten to ruin my credit rating. I have never been treated so badly by any corporation. And these guys advertise quality...what a joke.