As Oil Prices Drop, Will Americans Go Back To Big Vehicles?
By Brendan Moore
Oil is steadily falling in price (it dipped under $100 USD for the first time in five months last week) and some energy analysts think it may settle in around $100 USD a barrel for the short-term. Some analysts are much more optimistic, saying that they think oil will continue to descend further, until it reaches a plateau of around $70 a barrel.
Either of these scenarios begs these questions: Will Americans go back to pickup trucks and SUVs if gasoline becomes cheap again? If so, will it be in big numbers or a mere trickle? And how long would the lower prices have to be sustained before buyers felt confident enough about the future price of gasoline to then buy something that got 15 mpg that they would then have to fill up, for say, the next 4-5 years?
I talk to consumers about cars and all the issues peripheral to cars every chance I get, whether it’s a one-on-one situation, or in an informal group setting. I stop people in the parking lot at the grocery, or the post office, or at a gas station, introduce myself and my profession, and ask them about what they’re driving, why they’re driving it, etc. When I travel, which I do frequently, I do the same thing so I can get a feel for what people are thinking in different parts of the country.
Specific to the issue of fuel economy and the price of gasoline, I always ask how much weight fuel economy had when they were buying their new vehicle, or, if they’re driving something older, how much weight fuel economy will have when they choose their next vehicle. A couple of questions along these lines, and the people themselves will then generally take the conversation further, providing a fair amount of revealing detail around the logic and reasoning they employ when figuring out how much importance to give to fuel efficiency when making decisions about buying a new vehicle or whether to keep their current vehicle. It is a great way to get very good qualitative data from the average consumer. I always give them my business card in case they want to add anything later, which they sometimes do, whether its by telephone or email.
It seems to me that most Americans have evolved to a fundamentally different perspective than the one they had even a year ago regarding fuel usage in their vehicles.
Not all, mind you – there are still a fair amount of people that say that they will always buy the thirstiest vehicle they can afford, and let me tell you, as a group, they are really looking forward to the possibility of $70 a barrel oil.
But most people will tell you that they now pay a lot more attention to what they spend on filling up their tanks and they just have no desire now to spend any more than they absolutely have to in order just to drive around. The recent spike in gasoline prices forced them to look at their usage of gasoline, and even if the price of gas goes down again, they’re just not that interested in spending anything they don’t have to at the pump. A typical comment is, “If gas goes down again, great. That doesn’t mean I’m going to go out and get something big that sucks a lot of gas. I’m still going to drive something that gets the best fuel mileage available in the size car I need. And if gas keeps going down, fine, it just means I’ll have more money left over to spend on other things in my life. I’m not spending money on gas anymore that I don’t have to. Its stupid.”
You’re reading this and probably thinking to yourself, “okay, sure, I know people like that”. Or, maybe you’re thinking that you’re one of those people. Or, maybe this synchs up with something you read somewhere else recently. But, what’s the point?
The conclusion for me is that this fundamental change in consumer attitudes regarding fuel consumption is pervasive, far-reaching and permanent among most Americans. If you also accept this conclusion, then logically, you have to believe that the pickup truck and SUV segments will continue to shrink until they are merely a small percentage of the overall market.
Let’s connect the dots even further. I do this for a living, so I know all about the trucks and SUVs that foreign automakers sell here, but let’s be honest while we’re connecting the dots here – they do not have the same preponderance of those vehicles as the domestic manufacturers do. That’s why they’re having less problems in this changed market right now. My message is for what’s left of the Big 3.
If you are Chrysler, Ford or GM, the three auto manufacturers with the most trucks and SUVs in their respective lineups, I think it would be unwise for you to view a drop in the price of oil as your cue to stop your current march towards developing and subsequently selling many more small-car models. A drop in the price of oil, and therefore gasoline, may you give you the much-needed breathing room to unload all of that excess inventory of big ‘ol trucks and SUVs. But from what I’m hearing from consumers, it does not alter the fact that most of the American public has pivoted towards small, fuel efficient vehicles regarding their future buying preferences, and will not be returning to gas hogs.
My advice is to keep going, guys, keep going towards the goal of world-class, fuel-efficient cars. That is the future that most Americans see in their driveway, and that is the future that you need to pursue.
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