Fuel Sippers Gaining on Heavyweights
As Gasoline Prices Continue to Rise, Large Vehicles Lose Favor
By Greg Schneider
Washington Post Staff Writer
Thursday, May 20, 2004; Page A01
Ever since gas prices started spiking last month, customers have been flocking to one side of Lustine Toyota/Dodge in Woodbridge and ignoring the other.
"The Dodge truck business is way down," General Manager Jim Giddings said, because of what he called "this gas thing." He's on track to sell just 36 Dodge trucks this month, compared with 68 during the same month last year.
Toyota sales, on the other hand, are up 38 percent so far in May. One of the big drivers is the Prius, the gas-electric hybrid that has become a phenomenon in the past year. Giddings said he has a waiting list of more than 50 customers.
As average gas prices have topped $2 a gallon this month for the first time, cracks are emerging in America's decade-long obsession with bigger and bigger vehicles. Drivers are starting to think about the cost of cruising in two tons of steel, and some are turning to a new crop of innovative -- and more economical -- smaller cars.
Sales of truck-based SUVs fell in April, and sales of small cars went up. Automakers rushed to the aid of SUVs, which is where they earn most of their profit, lowering base prices and offering more incentives than on any other type of vehicle. At the same time, they raised prices on small cars.
"Gas prices seem to be the most likely reason why. . . . As long as they stay around where they are or higher, there is going to be some shifting of the market," said Jesse Toprak, director of pricing and market analysis for Edmunds.com. That's bad news for domestic automakers, who are "especially vulnerable because they make most of their profits from large SUVs and large trucks, and if demand softens, it's going to hurt their bottom lines for sure," he said.
No one is pronouncing the death of the SUV, and car companies insist they are not worried about long-term fallout from higher gas prices. "I think folks have their blinders on when they are just looking at gas prices because the much more important factor . . . is the overall economic environment," said George Pipas, U.S. sales analyst for Ford Motor Co. Inflation, interest rates and unemployment are so low, he said, that "we don't expect to see a substantial shift in sales mix" despite the bigger bite at the fuel pump.
But something is happening, even within the SUV segment. The consumer hunger once focused on big, truck-based SUVs has shifted to smaller, more fuel-efficient "crossover" utility vehicles, which are based on car frames. Crossovers such as the Nissan Murano and Chrysler Pacifica have spurred the segment to four straight years of double-digit sales growth.
"We think that this fuel-efficient segment of the SUV category will have sales growth of at least 30 percent" over the coming year, Paul Taylor, chief economist for the National Association of Automobile Dealers, wrote in a recent analysis. Sales of large SUVs, meanwhile, are expected to stay flat or even decline.
In keeping with that trend, Ford has seen far more interest than expected in its new Escape gas-electric hybrid, a small SUV that will go on sale late this summer. While Ford plans to build only 20,000 Escape hybrids per year, more than 34,000 people have already signed up for an e-mail newsletter about the vehicle, which is expected to get 35 to 40 miles per gallon in city driving, a marked improvement over the 20 mpg of the conventional Escape.
© 2004 The Washington Post Company