Move over, big trucks and SUVs: Here come the cars
NEW YORK -- "Cars are back!" You've heard it so often, particularly from wishful-thinking truck haters, that it's become a provocative, if empty, Chicken Little refrain.
The reality is that Americans continue to buy more trucks than cars, despite fuel prices setting daily records. But … cars are creeping back toward half the sales mix. Their share was 47.2% last month, up a few tenths from the past two years.
And sales of the smallest, cheapest cars, which generally use the least fuel, are booming as overall industry sales are falling, according Autodata.
A flood of cars — not trucks — being unveiled at the annual auto show starting here this week, and at shows since last fall, makes the point: Companies that don't have an array of cars for the price-weary and fuel-wary might soon be in the same sad shape as those that had too few trucks a few years ago.
Cars are "definitely recovering," says Kevin Tynan, an industry analyst at Argus Research.
The shift to cars is "not overnight, but it's noticeable," says Tom Libby, at consultant J.D. Power and Associates' Power Information Network. And he adds that the shift is uneven. "There are some car segments that are frankly not doing well — large cars such as the Dodge Charger and Chrysler 300."
But thanks to the rush of introductions, the diversity of cars is mind-boggling. It shows that automakers are betting car interest will spread over all sizes and types. The gamble is that the current flirtation with fuel-thrifty small models will blossom into a new love for cars as mainstay vehicles.
One buyer who's taken the vow is Jason Francis of Corona, Calif. "The big dinosaurs are going away," says Francis, 38, a real estate agent who traded in both his big pickup and the family SUV during the past year.
Francis says he was spending $160 a week on gas for his Dodge Ram 1500 quad-cab pickup and Ford Expedition SUV. He traded the pickup last year for a Toyota Scion xB compact car. His wife let go of the Expedition this month for Ford Taurus X, a crossover based on the Taurus sedan.
"I've been a truck guy forever," he says. But his new vehicles have upright seating like trucks and have halved his fuel bill, and the Scion "is a fun car to drive."
Carmakers perform balancing act
Woe, however, to the automaker who rushes toward small, fuel-efficient cars at the expense of other options in its lineup. "As an automaker, you've got to balance it all," says Jesse Toprak, director of industry analysis for Edmunds.com. "Gas-efficient cars tend to do well in markets like this, when gas prices are high and consumer sentiment is weak."
But there's not much profit margin in such cars, and if fuel prices fall — or Americans get used to high gas prices — buyers historically gravitate back toward larger, roomier, more powerful vehicles.
"The challenge for the domestic automakers is that even though the small-car market is hot, they don't make nearly as much in profits as they do with traditional SUVs or trucks," Toprak says. "They're lucky if they break even."
Automakers, sensing renewed enthusiasm for cars, but not willing to bet their companies on small cars with small profits, are marching out bigger and more muscular cars along with offerings of minimachines.
At one end of the car market are the likes of Chrysler's Dodge Challenger retro coupe with a muscular Hemi V-8, and Pontiac's iterations of the full-size G-8.
Pontiac is a General Motors brand that sells only cars, and hopes to benefit from the renewed interest. It just began selling two versions of the rear-drive G-8 and enough more are in the works to turn the G-8 into a brand. Pontiac is unveiling here a very-high-performance G-8 GXP, coming next year and — in the auto equivalent of gender-bending — a G-8 "car" with front seats and a pickup bed, due for 2010.
Such car/pickups are popular in Australia, where GM's Holden unit manufactures the G-8 for Pontiac. Car-based pickups were sold in the USA by GM, Ford, Dodge, Volkswagen and others in the 1970s and '80s.
At the other end of the car market, automakers are sprucing up their smallest cars for more competition. Ford invested to remake its Focus small car. And Honda has unveiled here a new version of its Fit for the USA.
"Small cars probably are the biggest story in the industry right now," says George Pipas, Ford Motor's manager of sales analysis. He calculates they are accounting for 20% of new vehicle sales. They usually hold a steady 13% to 14%, according to Autodata.
Eco-friendly cars make strides
Along with cars that are fuel-stingy by virtue of size, the auto show calendar that began in Los Angeles last November also has, not surprisingly, included plenty of environmentally friendly fuel-sippers.
"Our industry has relied on 95% oil to power our vehicles. Obviously that is going to change," General Motors CEO Rick Wagoner says.
"If oil prices continue the way they're going, I think we jump from hybrids to the next generation of plug-in hybrids much faster than the domestic automakers are planning or have thought about," Tynan says.
A fast shift to plug-ins, still in development but some able to average 70 to 120 miles per gallon, sounds like a dream. But they'll cost more than today's hybrids, which in turn cost more than all-gasoline vehicles.
And the shift might be too sudden for Detroit, Tynan says. Domestic automakers are "running to catch up to a market that's gone by them by the time they get there," he says. "If they're working to make midsize sedans more competitive with the import (cars), the import makers are already focusing on the next generation of hybrids. … They're already behind."
Any new car also will collide with a rough economy.
Pickup owner Colin Gregory, 35 of Hanford, Calif., would love to join the car wave, if he could afford it. He'd like to dump his 2001 Chevrolet Silverado 2500 for "a very small car" for his 38-mile round-trip commute. "I'm paying about $300 a month on fuel alone, which could feed my family. With the mortgage, it's just too darn much," says Gregory, a production coordinator for a manufacturer. But he owes on the pickup, bought used four years ago and figures "resale value would be horrible" due to its 12 mpg. So until he can afford the car, he says, he's commuting by motorcycle.