US consumers have finally found the price point, $4 a gallon, that is forcing them to reconsider their automotive choices. Cities are reporting high ridership in public transport and were unprepared by the influx of extra riders to the system. Consumers are moving towards smaller vehicles, and suburban neighborhoods are looking just a little too far away with the ever-rising cost of the commute between work and home
How bad is it for SUVs? May sales started to point towards a big downward shift in the US marketplace. For the first time since 1992, the Ford F-series, a pickup truck, was outsold not just by one vehicle, but by four small cars including Honda’s Civic and Accord, and Toyota’s Camry and Corolla. If trends continue as they did in May, then the auto industry, particularly SUV-dependent companies, is looking at significant financial pain for the next couple of years.
Just recently, General Motors announced that it was looking to wean itself from the SUV. The Hummer brand, once a bright beacon in the field of SUVs, is now being looked at more critically and, if the landscape doesn’t significantly improve for SUV sales, possibly being positioned for sale. It is not only the Hummer brand which is suffering, GM announced that four plants making SUVs are closing. The shift in the market is not good news for US carmakers, which rely on sales of “large vehicles” - pick-ups, trucks, SUVs - to survive
It’s not just American manufacturers that are feeling the SUV sales pinch. Australia’s automotive industry, already in trouble, has been hit hard by the demand for more efficient, or alternative-powered vehicles. Australia is feeling the strain with auto manufacturing plant closures and a slew of lost jobs. In light of the market shift, an emergency fund has been proposed by the Australian government to encourage the development and manufacturing of fuel efficient and hybrid vehicles.
So what’s the next move for car makers? GM is rushing the very stylish looking Volt to production, and we wouldn’t be surprised if the Cadillac Provoq wasn’t available soon after. The Malibu, Aveo, and Cobalt will probably get more efficient and likely feature a hybrid version as soon as possible. The Ford Focus is looking like it will become Ford’s flagship vehicle. Toyota and Honda will probably continue to enjoy the spoils of having been foresighted, or lucky, enough to provide the market with a reasonable, in-demand product.
It is a tough situation for manufacturers, but one that doesn’t evoke much sympathy. The slow creep in oil prices in the past three years, the increased demand by China and developing countries, and the now well acknowledged fact that Global warming is real (and will be the biggest problem that the world will face in the next decade) made SUVs a bad business bet. Car makers weren’t caught off guard by a sudden change in market demand, but rather failed to see that moving away from the SUV not only made sense from an environmental point of view, but was integral to their own survival.
So, let us raise a glass to the death of the hulking, gas guzzling SUVs. Let us not cry for their death, but cherish the fact that with them gone, the industry will have to reinvent itself and embrace what they should have embraced years ago: small, environmentally friendly, and fuel efficient vehicles.
by Jorge Chapa