What goes up, must come down
Big SUVs lag in Sales, hindered by Gas Costs
– The New York Times, October 4, 2005
Truck and SUV sales plunge as Gas Prices Rise
GM, Ford hit hardest in September
– The Washington Post, October 4, 2005
High Gas Prices put a dent in truck sales
Detroit makers hit by a switch to cars
– USA Today, October 4, 2005
Big 3 auto dealership sales have dropped off a cliff this month after the end of employee pricing programs.
– Automotive News, October 11, 2005
American Red Cross, HUMMER and GM Foundation;
72 HUMMER vehicles, $600,000 to be donated by GM Foundation
– General Motors News Release, October 12, 2005
October 13, 2005 – Ford and General Motors and other automotive companies will announce their earnings next week. If the headlines of the past week are any indication of how things are going to play out, it won’t be good. GM reported a loss of $1.4 billion in the first six months of 2005. Ford made a profit, but not on its an automotive unit. Delphi has already beat the October 17th deadline to file for bankruptcy. GM has started sharing platforms and profits, but they haven’t found a solution to their rising health care and pension problems for the over 1 million retired non-working employees.
In the meantime, the price for gasoline this week was $2.84/gallon and the diesel price was $3.15. Large SUV sales have been going down for the last three years. It is no surprise with the price of gas that large SUV sales continue to go down. The decrease in sales is also due to GM selling a lot of their 2005 stock ahead of schedule. If you have nothing to sell, your sales numbers will decrease. According to Paul Taylor, chief economist National Automobile Dealers Association, “General Motors had just 38 days supply of cars at the end of August, to Fords 45 days of cars and Chryslers 66 days supply of cars. GM, and Ford to a lesser extent, had a difficult time selling cars in September. And older truck designs, which will be updated starting in early 2006 hurt GM truck sales, along with high fuel costs.”
Large SUV sales have been losing sales to the crew cab pickup. It makes sense. A large SUV is built on a truck frame, versus the Crossover which is built on a car frame. Why not buy a vehicle that can carry four people and haul things in the back of a pickup? Manufacturers saw the trend and starting building more crew cabs, more large crossovers, and less large SUVs. To some degree, the shift from large SUVs to crew cabs wasn’t that big of a deal. GM and Ford own the biggest section of large SUVs and they own the largest marketshare of trucks.
According to Tom Libby, Power Information Network, marketshare SUV sales were down twenty percent from September 2004 to September 2005.
There are many factors;
- Manufacturers are running out of SUVs after the employee discount program
- older models
- people are buying crossovers instead of the percentage of marketshare as of September 2005 for each
- Cars – 46.3%
- Vans – 9%
- Pickups – 19%
- SUVs – 25% – Crossovers are included in this percentage. This is where the story takes a twist. Large SUVs sales made by GM and Ford may be going down and there are some sales going to crew cab pickups which are made by GM and Ford. Even though the percentage of marketshare stays the same for SUVs, it is what is hidden in that number.Crossovers have gone from being 16.6 percent of that number to 45.9 percent of that market. In 2004 there were 4,600,000 SUVs sold, including crossovers (CUVs). In 2000 that would have been 763,000 CUVs, but in 2005 that will be 2.1 million crossovers. And Ford and GM don’t own the bulk of the crossovers.
Sales of trucks account for about 75 percent of Ford’s total sales. General Motors’ percentage of their total sales of trucks is not as high as Ford’s. According to Jerry Dubrowski, General Motors’ finance department, “It is commonly known that trucks are very profitable for General Motors. As we replace old models, implement platform sharing and lower incentive cost our profit on our new cars will increase.”
And the profit’s on cars need to increase if General Motors is to survive. On October 4, 2005, almost every major newspaper ran an article on large SUV sales going down in September. Large SUV sales have been going down for the last three years. At some point, it becomes a non-story. The story that day was in the USA Today, written by Sharon Silke Carty.
Silke Carty did her homework on this piece and compared the rise in average gas prices to the marketshare of trucks versus cars. In September 2002 the average gas price was $1.40, the marketshare of trucks was 51 percent and cars were the remaining 49 percent. In September 2004 the average gas price was $1.87, truck marketshare had grown to 57.9 percent and the car market had shrunk to 42.1 percent. Fast forward to September 2005, when the gas spikes a full dollar over the price in 2004 to reach $2.90. The truck marketshare fell back down to 51.5 percent (September 2002 levels) and the car market grew to 48.5 percent.
The overall sales by category, according to Ward’s automotive analyst;
- Large car sales were up 27.5 percent in September over last September, and are up 34.3 percent year-to-date through September. According to Tom Libby, JD Power, large car sales only make up 2 percent of the market.
- Crossover Utility Vehicles (Crossovers or CUVs) were up 6.7 percent in September over last September, and are up 18.6 percent year-to-date through September. These vehicles feature unitized construction, with the body and fame as one construction, usually a derivation of a platform used for an existing car line. According to Libby, CUVs are 45.9 percent of the SUV market as of August 2005.
- Truck-based SUVs were down 32.9 percent in September over last September, and are down 10.3 percent year-to-date through September. These trucks feature body-on-frame construction.
- Small car sales were up 16.9 percent in September over last September, but are up just 4.5 percent year-to-date through September.