With gas falling, trucks come back
Pickups and SUVs will outsell cars this month, according to sales trackers at Edmunds.com.
By Peter Valdes-Dapena, CNNMoney.com senior writer
December 22, 2008: 3:08 PM ET
NEW YORK (CNNMoney.com) -- After nearly a year of flagging sales, low gas prices and fat incentives are reigniting America's taste for big vehicles.
Trucks and SUVs will outsell cars in December, according to researchers at the automotive Website Edmunds.com, something that hasn't happened since February.
Meanwhile the forecast finds that sales of hybrid vehicles are expected to be way down.
"Despite all the public discussion of fuel efficiency, SUVs and trucks are the industry's biggest sellers right now as a remarkable number of buyers seem to be compelled by three factors: great deals, low gas prices and winter weather," commented Michelle Krebs, Senior Editor of Edmunds' AutoObserver.com.
This month, trucks and SUVs will make up 51% all vehicles sold in the U.S., according to Edmunds.com. Before the spike in gas prices earlier this year, market share for trucks and SUVs had been even higher than that, said Edmunds.com sales analyst Jesse Toprak.
"We don't claim they're back to what they used to be," Toprak said "but it's a reversal of the trend."
A big drop-off in truck sales, caused by high gas prices as well as weak home construction and contracting markets, has been a major factor creating a financial crisis for American automakers. Not only were these vehicles popular, they also generated much higher profits than cars. Domestic automakers are also face less competition from foreign automakers for the truck and SUV buyers.
On Friday, the Bush administration said it would lend $13.4 billion to GM and Chrysler to keep them out of bankruptcy.
Like summer for convertibles, winter is usually a strong selling season for SUVs as falling snow remind buyers of the benefits of four-wheel-drive.
Besides that, and low gas prices, truck and SUV buyers are seeing deals they can no longer resist, Toprak said. Pickup and large SUV sales are usually more dependent on incentives than those of other vehicles, even when the economy is relatively good. The current market has caused some automakers to put unprecedented rebates on their trucks, though, Toprak aid. For instance, for every truck they sell this month, automakers are spending about $5,200 on incentives, on average, according to data from Edmunds.com
Combined with discounts negotiated at the dealership, the actual prices consumers pay can be amazingly low, he said.
"I can get about $10,000 off a large SUV," he said."There's probably not going to be a better time."
Next year, incentive spending is expected to drop and, correspondingly, prices paid by consumers will rise as recently announced production cutbacks limit the supply of new vehicles, Toprak said.
The term "SUV," in this case, includes only truck-based vehicles like Ford Motor Co.'s (F, Fortune 500) Ford Explorer and General Motors' (GM, Fortune 500) GMC Yukon, not car-based crossover vehicles like the Ford Escape or GMC Acadia. Truck-based SUVs have a separate frame and they are designed for heavier hauling and towing. They generally weight more and have lower fuel economy than crossover vehicles.
While truck and SUV sales are increasing, sales of hybrid vehicles are expected to be down, Toprak said, as sharply lower gas prices have made hybrids less attractive.
Gasoline prices now average about $1.67 a gallon, according to the most recent AAA gas price survey. Prices had topped $4 a gallon this summer. Because of their additional batteries and electric motors, hybrid vehicles cost thousands more to purchase than non-hybrid vehicles but, when gas prices are high, owners of some hybrid vehicles can make up that additional cost in fuel savings over a few years. When gas is cheap, it takes longer to make up the extra cost.
Sales of the Toyota Motor Co.'s (TMA) Prius hybrid car are expected to be lower this month. The Prius is, by far, the most popular hybrid vehicle in America, accounting for more than half of all hybrid vehicles sold in America. As the highest-volume seller among hybrids, the Prius is seen as an indicator of the overall hybrid market, Toprak said.
In November, Prius sales were already down 48% compared to the same month in 2007. Prius prices are also expected to be much lower, Toprak said. When gas prices were high, Priuses were selling for more than their sticker price as buyers queued up on waiting lists.
Overall, December sales will still be dismal, Edmunds.com reported, despite an increase from the previous month. Sales are usually stronger in December than in November, anyway. Compared to seasonally adjusted trends, December will actually be the worst month of the year, Edmunds.com said.
Despite an increase in truck sales, market share for domestic automakers Ford, General Motors and Chrysler will drop about one percent to 51% compared to December of 2007.
No surprise here folks