Smaller, high mileage economy cars are back!


Photo courtesy of jolengs at Flickr.com.

American car manufacturers love pickups and SUVs. These high end vehicles have been lavished with elaborate advertising, intensive research, and promotional test driving campaigns because of high profit margins. As a result of this infatuation, gas guzzlers account for an unhealthy percentage of sales from the Big Three.

Profits at Detroit’s Big Three will shrink by $7 billion to $11 billion. Reductions in vehicle sales, especially SUVs, will lead to an industry-wide decline in pretax profits of $11.2 billion to $17.6 billion. Detroit’s Big Three will absorb $7 billion to $11 billion in total reductions because of their dependence on SUV and pickup sales.

Detroit’s Big Three will absorb nearly 75 percent of the decline in total sales volume. Without deeper discounts, sales volumes in the North American car and light truck market will shrink between 9 and 14 percent, or 1.9 to 3.0 million vehicles, because of the overall effect of higher oil prices on the economy. Detroit’s Big Three automakers absorb nearly 75 percent of the sales decreases.



The chickens are coming home to roost. For years, American car manufacturers have lobbied for freedom to produce cars that are less and less fuel efficient. While protesting legislation to raise the CAFE standards, Senator Bennett summed up the position nicely:

…the manufacturer deals directly with the customer in producing the kinds of automobiles people want to buy. And if people say: I really don’t want to buy that automobile, if CAFE standards disappear, the manufacturer can say: OK, if you don’t want to buy it, we won’t produce it. Whereas, now there is pressure; we have to produce it in order to meet the CAFE average, whether people want to buy it or not.

Unfortunately for American autoworkers, car manufacturers were slow to recognize that consumer tastes are shifting. With oil headed over $120 a barrel, sales of most American made cars have fallen sharply, but, believe it or not, economy cars are selling pretty well. Even “economy” cars that would barely meet foreign standards are selling well in the US:

Focus sales are up 23 percent through March compared with the first quarter of last year. The redesigned car is taking 7.6 percent of the U.S. small car market.


Photo courtesy of Ochileer at Flickr.com.

Anyone out there in the market for a new car?



What kind of car are you considering, and why? Leave us a comment!



mike May 6, 2008 at 3:07 pm

Excellent post. It’s good to see SUV sales slumping. Maybe people are starting to come around!

http://www.solarpower-home.com

Richard Neal Huffman July 6, 2008 at 6:23 am

The car maufactuers’ and the oil industry have long walked hand-in-hand in their efforts to get every dollar possible from consumers. For now the small car rules. Sales will skyrocket and prices for small cars will increase. Somewhere, in the future the big will be promoted once again.
I have consistently driven small. I bought a Ford Focus when it wasn’t in style.
Author of, Dreams In Blue: The Real Police

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