| 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
High Gas Prices put a dent in truck sales
Big 3 auto dealership sales have dropped off a cliff this month after the end of employee pricing programs.
American Red Cross, HUMMER and GM Foundation;
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 wont be good. GM reported a loss of $1.4 billion in the first six months of 2005. Ford made a profit, but not on it’s automotive unit. Delphi has already beat the October 17th deadline to file for bankruptcy. GM has started sharing platforms and profit’s, but they havent 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 wasnt 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;
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 dont own the bulk of the crossovers.
Sales of trucks account for about 75 percent of Fords total sales. General Motors percentage of their total sales of trucks is not as high as Fords. 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 spike 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 Wards automotive analyst;