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Posted by Sheryll Alexander Jun 14, 2006 |
From The Dallas Morning News:
Although $3-a-gallon gas has scared off some buyers of full-size sport utility vehicles and pickup trucks, it has deeply eroded the sales of the truck-based vehicles such as the Ford Explorer and Jeep Grand Cherokee that launched the SUV craze 15 years ago.
Although midsize SUVs introduced America to big, trucky boxes on wheels, the full-size versions that became popular in the mid-1990s have largely overshadowed them.
Full-size SUVs have more space, cargo capacity and cachet. And most buyers of full-size SUVs care more about interior space and cargo capacity than fuel consumption, so the midsize SUVs are not an option when gas prices shoot up, some analysts say.
"That [midsize] segment has fallen off significantly," said Paul Ballew, executive director of global marketing and industry analysis at General Motors Corp. "Our mids get worse mileage than our full-size SUVs, and you're seeing manufacturers shift accordingly. Its day in the sun has probably passed."
All five traditional midsize truck-based vehicles have weathered double-digit sales declines since the first of the year, ranging from a 13.9 percent drop for the Chevrolet TrailBlazer to a 39.3 percent dive for the Dodge Durango, according to national sales statistics compiled by Automotive News.
Full-size SUV sales fell an average of 11 percent during the same period, and some increased dramatically. Sales of the Chevrolet Tahoe, one of the newest SUVs in the segment, were up 35.4 percent through April, while sales of the GMC Yukon full-size SUV increased 3.6 percent.
And more challenges for midsize SUVs are on the horizon. Next fall, the Environmental Protection Agency will release new fuel ratings for all vehicles sold in the U.S.
The EPA intends to establish a more realistic test procedure that is likely to drop current city ratings 10 percent to 20 percent on all vehicles and highway estimates 5 percent to 15 percent, EPA officials say.
"You could argue that the new ratings will make midsize look even worse," Mr. Ballew said.
"It's a vehicle that has no rationality," said George Hoffer, a professor of economics at Virginia Commonwealth University who follows the auto industry and has owned three midsize Jeep SUVs. "I don't criticize GM for putting their money into full-size SUVs. They can haul and tow. My Jeep does nothing well. I look good in it, and that's all."
Truck-based midsize SUVs have also been hurt by ferocious competition from smaller, softer car-based SUVs -- vehicles such as the Toyota Highlander and Honda Pilot. The main vehicles in the truck-based portion of the segment are the Durango, the Explorer, the GMC Envoy, Grand Cherokee and the TrailBlazer -- all of them domestics.
"I think they will fall to a relatively small niche after next year," Dr. Hoffer said. "They have no reason to exist."
A Chevrolet TrailBlazer, for example, is powered by a 291-horsepower, six-cylinder engine that's rated at 16 miles per gallon city and 22 on the highway. It can haul 1,194 pounds of cargo and tow up to 6,800 pounds. The new Tahoe, though $8,000 more expensive, has a 320-horsepower V-8 that also is rated at 16/22. The Tahoe can haul 1,835 pounds of cargo and tow up to 7,500 pounds.
Last November, GM announced that it was closing 12 factories by 2008, including a midsize SUV plant in Oklahoma City that employs 2,400 people. Ford has already shuttered an Explorer plant in St. Louis.
Despite all the talk about fuel consumption these days, there is little evidence that consumers are turning away from big SUVs and pickups strictly because of high gas prices, some industry observers say. There are few alternatives to those vehicles for drivers who need them, analysts say.
"We really don't think we will see any changes in consumer behavior until gas gets to $4 a gallon and stays there for a year," said Tom Libby, senior director of industry analysis at Power Information Network, a division of J.D. Power and Associates.
Full-size pickup sales in general are flat. U.S. sales of the big Dodge Ram, for example, fell a modest 3 percent through April, and those of the aging Chevrolet Silverado were down 5.3 percent. But Ford continues to sell F-150 pickups, with sales up 1.4 percent through April.
Moreover, by the end of the year, Chevy dealers will have an all-new Silverado, and Toyota will be building an all-new Tundra pickup.
"Those vehicles are likely to get that segment revved up again," Mr. Libby said.
Likewise, the once-prominent Ford Expedition full-size SUV -- whose sales are down 24.1 percent through April -- will be replaced by a new model later this year.
For now, sales of all truck-based SUVs -- midsize and full-size -- are down a total of 9 percent this year on top of a 13 percent decline last year.
In the same period, car-based crossover utility vehicles have seen a 27 percent increase in sales, said George Pipas, sales analysis manager at Ford Motor Co.
"Most of the shift is from demographics," Mr. Pipas said. "Baby boomers are getting older. If I don't really need that vehicle, the older I get, the less interested I am in stretching to get up into a big SUV or truck. The second factor is gas prices."
Neither is obvious these days at Classic Chevrolet in Grapevine, one of the largest Chevy dealers in the U.S. Classic is so confident about full-size SUV sales that it's carrying an inventory of 300 new Tahoes and 100 new Suburbans.
Salesman Ken Thompson says he isn't worried.
"People are talking more about fuel economy," said Mr. Thompson, head of the Thompson Group, a specialized sales unit that has been the nation's top Chevrolet retailer for 25 years. "But if you need a Tahoe or Suburban, it's not going to stop most folks."
One final test may await truck-based midsize SUVs, said Jerry Reynolds, host of the weekly Jerry Reynolds Auto Advice Show on WBAP-AM (570).
The Chrysler Group has announced that it will offer an optional diesel engine in the Jeep Grand Cherokee -- a modern, economical 3-liter motor from Mercedes-Benz.
"If that sells, the problem is gas prices, and maybe the segment comes back at some time," Mr. Reynolds said. "If it doesn't, that segment is done."