Anecdotal Evidence of the New Order

By Ian Grasso

03.04.2008

Once again the monthly sales numbers give us a chance to reflect on what we all already know: year-to-year sales are down overall, body-on-frame vehicles are in trouble, and small cars are the only things getting traction on dealers’ lots. But this month, an interesting aside popped up from the friendly bureaucrats at the Department of Energy alongside the regular news from the automakers—fuel consumption is down 1.1% from this time last year. That is the largest drop in 16 years (coincidently a recession year). Are we finally seeing the effects of all those heavily-marketed new tee-totaling econo-boxes on our national oil habit? Is the green car market finally here and having an effect, after years of promise?

The rundown for those of you who haven’t heard: GM- down, Ford- down, Chrysler – down, Toyota – down, Honda – up, Nissan – up. Overall, light duty trucks, the classification for all SUV’s, pickups, and Minivans is a rash of red, with only the crossover segment posting a positive figure (a 7.5% gain). There is obviously a sea change afoot in the new car market: the Focus (now with flashy chrome side vents!) and Cobalt (still with garish spoiler!) are even selling well.

Indeed, let us glance over the data and bask in the glory that people are finally “going green” and buying small cars and crossovers instead of big trucks straight out of the Pleistocene epoch. Let us point to the decreasing consumption of gasoline as one step on the path to a veritable Candyland of hybrids and plug-ins and other assorted technologies that will get us to our jobs sin and carbon-free. You know, it is unfashionable and, I dare say, unconscionable to keep driving those big trucks and SUV’s that manufacturers have forced upon us for all of these years. We all know that the “it” cars in Hollywood are Lexus’ $100,000 LS600h and RX400h. No earth-conscious actor or multimillionaire producer would ever arrive on the red carpet in anything that doesn’t have a bank of nickel hydride batteries, even if, in the case of the LS, the car only gets a very CAFE-unhelpful 20/22.

Yes, the days of everyone showing up at the club in an Escalade on dubs is probably coming to an end, if they aren’t already over. And as everyone inevitably trades their big body-on-frame SUV for a Chevy Aveo or Honda Fit, I will no longer have to deal with the weekly nerve-tingling autocross with a 5500lb Sequoia to the last parking spot at Costco. The writing is on the wall people… go buy a new small car, or if you want to go big, a CRV. Your local car dealer can figure something out for you, because it is time to get rid of that dinosaur.

At least that is what I hear on TV…

Because some part of our national conscience is rooted in the idea that consumption of the newest thing can solve all ills, the pitch for a new, fuel efficient, vehicle will probably work on quite a few people. There is still 72 month financing to make the payments reasonable, and you will be saving the environment every time you turn the key, right?

Wrong. While the price of oil is obviously changing habits, people are still buying new cars and trucks in healthy volume, especially when various credit markets are exploding like the finale of a perverse 4th of July celebration. In fact, they bought 1,176,286 of them last month alone. And while those new cars are, on average, the most fuel-efficient vehicles that have ever been sold– a lot of people still plunk down their hard earned cash for big, gas-hungry cars and trucks. In a sign that not much has really changed and people still need to work and tow their gear, the aging Ford F-150 remains America’s best selling new vehicle, although sales were clipped by a reasonable 5% over last year. Porsche increased (no doubt due to those awesome commercials) the sales of the Cayenne by 109.7% and the only thing BMW seems to be able to sell is the X5.

Of course, gas is expensive. And as it is with most things, those in the lower income brackets will feel the pain most vividly. But while green is the new black for the elite, for most people it is does not make much sense to purchase a new car out of guilt or peer pressure to be more environmentally conscious. In most cases, it doesn’t even make sense to buy a new car simply for better fuel economy – something most people quickly realize at the dealership when they look in the trunk of a Cobalt or at the price tag of a hybrid. This is much to the chagrin of automakers using the dream of green to move product and legislators hoping that their overwrought CAFE legislation isn’t rendered useless by market forces.

My guess is that oil consumption will continue to fall at a slow pace, as people hold onto their older cars for longer and drive less if able, making the world more green without actually having to buy a green car. If the credit markets continue to tighten, there isn’t much hope for a widespread recovery to 2006-07 levels of new car sales in the near or mid-term. The dismal fact for automakers is that the forced economy levels of CAFE will need to be streamlined into new vehicles in an age of lowering profit margins or no profit at all, lengthening any recovery. Once again, the market has spoken, and the movement towards “green” looks more like a passing trend every day.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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4 Comments

  1. a real contrast with Canadian sales.

    However even some fans of bigger vehicules wants some economy without going to smaller vehicules. Hence the sales of the diesel version of the Grand Cherokee who take a big part in Canada. Imagine the upcoming smaller diesel engines for the Chevy Silverado, Dodge Ram 1500 and Ford F-150 as well as the Colorado, Dakota and Ranger. (and the RWD cars like Mustang, 300, G8)

    However, for smaller vehicules, the Fit don’t have lot of “pizzaz” compared to the new Fiat 500. Thank goodness for Honda than Fiat is not available currently in Canada and the US, they could lost of buyers to Fiat (and then there a rumor on Autoblog mentionning then Mazda might change its mind about the Mazda 2 and could bring it here)

  2. Maybe the move to small cars won’t be as pronounced as the move to much more efficient cars, whatever their size. For example a VW Passat TDI gets better fuel economy than a Honda Fit and the Passat is much larger. A VW Passat hybrid diesel could get 60 MPG and it’s still a hell of a lot bigger than the small Honda Fit.

    It’s not just size. it’s fuel efficiency.

  3. The environmental movement is once again reverberating throughout our society, and you’re right – green definitely is the new black. This is the greatest thing I have ever read.

  4. Seems most of the new trucks are being sold to farmers, who think nothing of plunking down 50 grand in this era of $5 corn and $14 soybeans. Farmers who don’t have new trucks are the excpetion, not the rule.

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