Smaller cars start muscling in on consumers' affections

[ProjectRS]

March 20, 2005
By Rick Haglund
Detroit Bureau


DETROIT -- Domestic automakers profited in the 1990s by adhering to the immutable law of automotive marketing: Americans like big vehicles.

Detroit fed the sport-utility-vehicle boom with increasingly outrageous vehicles, such as the military-like Hummer H2 and the Ford Excursion, an SUV so tall it won't fit in some parking structures.

But sales of big SUVs are crumbling faster than Michigan roads in the winter. Buyers are turning to smaller cars and SUV-like crossovers, everything from the Chevrolet Cobalt SS compact car to the Ford Freestyle crossover.

Higher gas prices aren't the only reason for the switch. Analysts say the era of the big SUV maybe be over for another, more important reason: The SUV just isn't "phat" anymore.

"Before, buying a Hummer H2 was kind of cool. Now it's seen as a little excessive," said Mike Chung, pricing and market analyst at Edmunds.com, an automotive-buying information service in Santa Monica, Calif.

Filling up a Hummer, which gets about 10 miles to the gallon, also is a little excessive these days.

AAA Michigan said Monday the average price of regular gasoline has jumped 39 cents a gallon in the past 12 months to a current average of $2.09 a gallon.

Sales of full-size SUVs, including such vehicles as the Chevrolet Suburban and Ford Expedition, fell 21 percent in February compared to a year ago. That's after a 31 percent decline in January compared to January 2004, according to the Power Information Network in Westlake Village, Calif.

"Rising gas prices are certainly a contributing factor to this trend," said Tom Libby, Power's senior director of industry analysis. "We've had two dramatic increases in gasoline prices in the past year, and that begins to have an impact on consumers."

Others say consumers are tiring of the boxy-looking, awkward-handling SUVs. They are turning to more stylish crossover vehicles, which are based on car platforms and provide nearly as much usable space as the truck-based SUVs.

"We're recouping lost SUV sales with crossovers such as the Ford Freestyle," Ford sales analyst George Pipas said.

Ford still sells more than twice as many trucks, a broad category that includes SUVs, pickups, minivans and some crossovers, as it does cars.

But in the first two months of this year, Ford's car sales rose 2.7 percent while truck sales fell 12.1 percent, a trend that most other automakers experienced.

Wes Brown, an auto marketing analyst at Nextrend Inc. in Los Angeles said one reason SUVs were so popular in the 1990s was that their supersized proportions appealed to people trying to stroke their egos.

"We, as a society, are very worried about our self-image," he said. "We're very insecure. We want to feel good about the things we buy."

But as the big SUV gradually turned into the replacement for the minivan in the suburbs, its cachet as a vehicle for the adventurous type plummeted, according to Brown.

"It became a soccer dad car and that tainted its image," he said.

In the past few years, automakers have developed new vehicles segments that allow vain car buyers to draw attention to themselves while saving a few bucks on fuel.

Among those are sport wagons, such as the Dodge Magnum, and small vans, such as the Honda Element and Scion xB, which are so boxy they're cool again.

The Chrysler Group also is finding success with traditional, rear-wheel-drive American sedans, such as its hit Chrysler 300 and the Dodge Charger.

And although compact cars languished during much of the past decade, they're making a bit of a comeback.

J.D. Power & Associates in Troy forecasts that the small-car segment - including the Chevy Cobalt, Ford Focus, Honda Civic - will grow slightly from 13.7 percent of the market today to 15 percent by 2008.

Americans are finding buying a small car doesn't mean they have to go without luxury items, such as leather seating and a premium sound system.

"Now you can get all the bells and whistles on a small car," market analyst Chung said.

But automakers, worried that a prolonged downturn in SUV sales could mean a big dent in long-term profits, aren't ready to declare the SUV boom over just yet.

Paul Ballew, GM's top sales analyst, said sales of truck-based SUV are down mainly because GM's Chevrolet Suburban and Tahoe, and GMC's Yukon, are nearing the end of their life cycle.

Those vehicles make up two-thirds of the entire large-SUV market, Ballew said. GM is expecting SUV sales to rebound when its restyled vehicles hit the market next year.

"We have had a hard time finding evidence that SUVs are in a long-term decline," Ballew said.

But some analysts say they've found that evidence in buyers' desires for more stylish vehicles than the conservative-looking SUV.

"If you buy a new vehicle, you want people to know you've bought a new vehicle," analyst Brown said.

from: http://www.mlive.com/news/statewide/...8205280100.xml

[powervette]

don't expect safety from this Daewoo :

[hudson32]

The rising gas prices should get more people to buy mid-size or full-size cars. All of them get better gas mileage compared to most SUVs. Consider that Camrys, Accords, LaCrosses, Grand Prixs, Impalas, and 500's get 27-30 miles per gallon one the highway. Some large car get around that gas mileage too on the freeway. And I think for most people, their needs can be met with a car. Especially with a car like the Malibu Maxx, which gets 30 mpg on the highway and has tons of storage space.

[awalbert88]

Wagons are rapidly becoming cool again, because they offer as much space as most SUVs while giving vastly better fuel economy.

I'm not at the point yet where gas prices are hurting me enough to make me abandon my supercharged Regal. That said, the thought is floating around in the back of my mind. The fuel economy isn't too bad - 23-24mpg average; it's the use of premium fuel that is putting the hurt on my wallet.

I'm not sure when an H2 was ever cool. I always thought they were excessive. Most SUVs are, and with a growing number of AWD-capable cars being introduced, the "I need it because of snow," excuse doesn't fly very well any more.

[tgagneguam]

Buyers are turning to smaller cars and SUV-like crossovers, everything from the Chevrolet Cobalt SS compact car to the Ford Freestyle crossover.

Wouldn't it be great if this occurred in large numbers for these very vehicles? I think so. Perhaps the Cobalt's launch was fortuitously-timed.

Incidentally, hudson32's mention of the LaCrosse is timely. I went to an area Buick dealership this Sunday with my grandfather; he wanted to check out "that new Buick." I have to say that I saw a gray, full-loaded CXS LaCrosse, replete with tasteful spoiler, on the lot, and it was actually quite attractive. And the fit and finish of the exterior was remarkable, to say the least. Maybe people need to give this car a look?

Oh no, am I getting old before my time?!

[ponchoman49]

A friend of mine traded his gas pig loving Dodge Ram with the super pig 5.9 liter 360 option in for a Mercury Sable and has seen a 11-12 mpg improvement. He's so glad he listened to me. The main 2 reasons he bought the Ram; in case he needed to haul something around which he did twice in his 4 year ownership and that it was cool to sit high up in the air. Another friend traded his 97 Olds Sillouette which typically got 18-19 mpg on trips for a 2001 Impala LS with it's bigger 3800 and gets 28-29 in the same type of driving. And both buds saw a drop in there insurance too with the switch and enjoy far snapier performance and handling! If they want to haul something now they simply rent a truck or van for a day. Thats far cheaper than owning one of these pigs!

[dindak]

GM should start pushing the mileage numbers on Malibu and Cobalt in their ads. People are starting to think about mileage as $1.20 gas is never coming back.

[fatratchevy]

Hmmm. . .your reference to trucks/suv's as "pigs" is a little harsh, obviously you dont live in the south were trucks are actually used. I own a Chevy truck (as a daily driver) and haul things on occasion, and have yet to find a car/crossover that can tow/haul like my truck. Do I need its usefullness every day? No. Do I need its usefullness often? Yes. . . So what is a person to do? Buy a "gas friendly" car and rent a truck once a week, or buy a truck and get usefulness but less than stellar gas milage?

Oh, by the way, I drove from Dallas to San Antonio last weekend and knocked down 21 mpg in my 5800# Z71 Avalanche, with a bed load of camping gear. . .you can't beat that "pig" with a stick!! On the way back i knocked down 18.5 mpg. not great but sure beats having to rent a truck. . .

[Darc Requiem]

Originally Posted by tgagneguam

Wouldn't it be great if this occurred in large numbers for these very vehicles? I think so. Perhaps the Cobalt's launch was fortuitously-timed.

Incidentally, hudson32's mention of the LaCrosse is timely. I went to an area Buick dealership this Sunday with my grandfather; he wanted to check out "that new Buick." I have to say that I saw a gray, full-loaded CXS LaCrosse, replete with tasteful spoiler, on the lot, and it was actually quite attractive. And the fit and finish of the exterior was remarkable, to say the least. Maybe people need to give this car a look?

Oh no, am I getting old before my time?!

No you aren't. Alot of has remarked that the LaCrosse is much more impressive inperson than in pictures. I've seen about a half dozen and when they pass by me I stare a bit because I'm surprised at how classy they look.

[AJR]

Originally Posted by dindak

GM should start pushing the mileage numbers on Malibu and Cobalt in their ads. People are starting to think about mileage as $1.20 gas is never coming back.

GM has been doing that for a while around here, but the cash back message seems to be a lot louder.

Toyota started advertising that it has something like 5 cars in its lineup that achieve 30 + mpg.

Ford appears to be out to lunch on this issue, and Dodge just seems to be laughing at the increasing gas prices.

[GMfan2381]

I find the position GM is in to be very interesting. On the one hand they may be right, SUVs are down because they are showing their age. On the other hand, maybe consumers are moving towards crossovers and cars. GM does need a new truck line, but should there be more emphasis on cars or trucks/suvs?

I would say to put most of the money on the trucks/SUVs, make them all with DoD and have hybrid options on them, that way they can still boast high power and boast some fuel economy. But I would not turn a blind eye to the car/crossover market like Ford and GM did before. Reading the market right will make or break the decision GM is making. And if they make the wrong move it may just break them. I see cars and crossovers only gaining ground on the SUVs. And while the SUV market isnt dead, there may not be as much to gain out of it as there was 6 years ago.
GM needs to play this hand carefully, it could burn them bad if they dont.

[AdmiralViscen]

They say that all automakers are seeing car sales rise while truck sales fall, but that is not true. For 2005, Nissan's car sales have been falling, but their overall market share has increased, because truck sales brought their total sales up despite the car decline.

This shows that new product = more sales, whatever that product may be.

[BigAls87Z28]

Hrm...could be good that Caddy is getting a Theta crossover to perhaps take someone that might not want something as big as a Lade, anddoesnt want to spend the bucks on a AWD SRX, but still have the ability to bling it out.
I think that GMC needs a crossover Theta car before Caddy.

[Jay]

Good. I hate SUV's and the lame a s s hip hopper wannabes who drive them.

[ejfx]

Do I sense the return of station wagons......throw an AWD option with the abilty to tow 10,000lbs, and better fuel economy then SUV's. Helped by DOD and wagons will be growing segment again. Sales that havent been seen since 87.

Bring back the large car platform of the 90's!