2005 October 03 Monday
Ford And GM SUV Sales Plummet

Consumers react to the high price of gasoline.

General Motors (GM) sales were down 24% overall, and its SUV and truck sales fell 30%.

SUVs are going out of style.

Ford Motor (F) also took a hit, with sales down nearly 20% in September. Sales of Ford, Lincoln and Mercury cars were up 6%, but sales of trucks and SUVs fell nearly 28%.

Ford and GM are attributing part of the drop to the end of their price discounts where buyers could pay employee prices for vehicles. But the Ford sales with SUVs down 28% while cars are up 6% demonstrate that the market is shifting away from gas guzzlers big time. I'd love to see what is happening to their average fleet fuel economy.

Sales are up for Chrysler, Toyota, and Nissan.

Compared with same month last year Ford's SUV sales dropped in half.

The company sold 12,879 Ford Explorer SUVs, down 57.7 percent from 30,448 in September 2004. It sold 1,771 Mercury Mountaineers, down 54 percent from 3,846 in the same month last year.

Ford said overall sales of its sport utility vehicles were down 51 percent from last year, when it offered 0 percent financing for 72 months.

Big ouch.

Ford is massively shifting toward hybrids.

Ford recently announced a plan to make gas-electric hybrid engines available in half its Ford, Lincoln and Mercury lineup by 2010.

Given the large profit margins on SUVs it makes sense for the car makers to put hyrbid technology into SUVs first.

I'm expecting the big three to pour a lot more technology in the direction of raising fuel economy of SUVs because SUVs have much larger profit margins. GM and Ford especially need to revive their fortunes in higher profit margin markets.

I bet we will see more rapid development of GM's Displacement-On-Demand (DOD) technology that turns off some cylinders at cruising speeds and Chrysler's equivalent MDS (Multi-Displacement System) technology. GM and Chrysler already sell some vehicles with these technologies. GM sells the DOD technology with their optional Vortec engines. Perhaps GM will start offering the Vortec upgrade for no additional cost in some SUV promotions.

Share |      By Randall Parker at 2005 October 03 05:41 PM  Economics Energy


Comments
invisible Scientist said at October 3, 2005 5:47 PM:

Both Ford and General Motors are suffering from totally incurable and terminal mediocrity. Even the components they will use to build hybrids will probably come from Japan. This is ridiculous. They need to get their act together and start investing a high percentage of their net worth to invent new batteries that will be competitive. And the car companies, the nuclear industry, and the gov't have to make a long term plan to build the infrastructure to fuel these batteries.

The efforts to design new fast breeder reactors, and fusion research have to accelerate.

Engineer-Poet said at October 3, 2005 6:31 PM:

All of the Big 3 had PNGV programs, which were hybrids.  They should have some expertise and technology for motors, batteries, etc. in-house.  Buying it from Japan just seems ridiculous.

Hugh Angell said at October 3, 2005 6:54 PM:

Anyone got a handle on what the repair costs are on hybrids? May not have been on the
market long enough to see what the ultimate cost of ownership will but since you are
already paying a premium for the vehicle the 'cost' of ownership could be a lot higher
than the fuel savings.

Invisible Scientist said at October 3, 2005 8:06 PM:

You are correct: the hybrids are so expensive that if you add the price and the maintenance costs, and then subtract the dollar value of the gasoline that was economized by driving a hybrid, it would take many years to recuperate the invesment. There are already cheap bare-bone cars selling for $10,000, and these cars would be a better "investment" for the average consumer, who does not want to waste money. But the issue, is the foreign trade deficit, how long the US can keep this game of buying everything from foreigners by simply exporting printed paper in exchange...

Dan Morgan said at October 3, 2005 8:10 PM:

Anyone want to buy a 1999 GMC Yukon? It weighs about as much as an M1 tank. I think I will have it the rest of my life now.

There must be an awful lot of people out there with big SUVs thinking the same thing. ... too bad we can't melt them down or something.

I filled my Nissan Altima up today for $52! At that price, a whole new mindset takes hold.

Engineer-Poet said at October 4, 2005 7:35 AM:

News on the Prius is that it has very low repair costs; articles like the brakes have a greatly extended lifespan because the regeneration system handles a lot of the loads without wear.  Battery packs are lasting well over 200,000 miles in taxi service (at least in Vancouver).

The Prius is a marvel.  Its transmission has ONE planetary gearset and a couple reduction sets.  It has no hydraulics, no clutches, no valves.  Something so simple could probably run half a million miles without service.  The electric motors have ball bearings, probably sealed; such bearings run 20 years and more in appliances without attention.  The engine itself has its stress limited by the ability of the electrics to pick up surge loads.

Hybrids may be to the auto industry what radials were to the tire industry:  the products that nearly refused to wear out, causing production to fall and the industry to collapse.  If so, this probably spells the end of GM (weakest) and either Ford or Daimler-Chrysler.  Maybe Nissan too, as they're late to the party.  Toyota comes out on top.

Derek Copold said at October 4, 2005 8:38 AM:

I'm stuck with a Dodge 1/2-ton. Since I've gotten about 8-1/2 years use out of it, I'm not all that upset. My next vehicle will be a smaller one, though, probably a Honda CRV or something else in that class. It's not just gas prices that drive that decision. Even before the recent price hikes, I was getting a bit tired of muscling an oversized vehicle in an urban setting. However, it is nice being able to merge into traffic practically at will.

Invisible Scientist said at October 4, 2005 11:53 PM:

Engineer-Poet: Thanks for the information about hybrid cars: I was thus wrongly under the impression that hybrids are too complicated making the maintenance would be expensive. But since electric motors are very simple, this makes sense since much of the work is done by the electric motors, and there is less burden on the internal combustion engine...

Additionally, in 10 years, the pure electric cars will also gain more market share, and then since electric cars almost do not wear out (each wheel would get its own small independent electric motor, eliminating the need for transmission and gears), there will be less profits for the automobile companies. But already, the car companies in the US represent only a small fraction of the economy in comparison to the 1960s.

Derek Copold said at October 5, 2005 8:58 AM:

I wouldn't say that simplification and increased reliability and life-spans will mean a reduction in auto company profits. Televisions, stereos and other appliances have been getting both cheaper, longer-lived and more reliable, yet still TV companies are pumping them out. They do this because they can make newer models with better performance and new features. Sure, we think of a car as a means of getting from point A to point B, but there are marketing geniuses out there who can come up with all sorts of features and designs that will ensure a steady turnover of products. Hell, they can do it on appearances alone. Even if reliability and performance were assured to be god-like in perfection, I doubt very many people would want to buy a car if it looked like a 1978 Pinto or Gremlin. Styles and tastes change, and people will shell out money to keep up with them. Of course, this could be very good news for used car buyers who will have a better chance of avoiding a lemon.

Bob Badour said at October 5, 2005 12:38 PM:

Derek,

They can just do what the cellular phone companies do: Change to an incompatible recharger every couple of months and discourage the stores from stocking them...

Engineer-Poet said at October 5, 2005 2:07 PM:

People are still driving around in 40-yr-old cars.  Fuel availability issues aside, I doubt that any attempt by the makers to force upgrades will work; a big enough market for spare parts will be met first from salvage, then from manufacture.

Derek Copold said at October 5, 2005 3:26 PM:

"People are still driving around in 40-yr-old cars."

Sure, and I imagine there will be a few people in 40 years driving around today's models. However, most people like to change out vehicles. When you get right down to it, a lot of new car purchases are made more out of vanity than out of necessity or cost.

Randall Parker said at October 5, 2005 3:50 PM:

The old car problem is smaller than it looks. Why? Because people who drive more miles can shift toward the newer and more efficient cars. The higher the price of gasoline the greater the incentive for high mileage drivers to shift toward newer and more fuel efficient cars.

Low mileage drivers have much less incentive to shift. If gasoline prices hit $5 a gallon then used SUV prices will drop far enough to make ownership of an SUV a good deal for lower mileage drivers.

I bet 20 year old cars travel far fewer miles per year than new cars. I also bet that the bigger the fuel efficiency saving of newer cars the greater the differential in number of miles driven will be between new and old cars.

Jorge D.C. said at October 12, 2005 1:44 AM:

No need to catastrophize the situation. We are coming out of a long period of extremely low gas prices adjusted for inflation.

That having been said we need to address important issues...

#1) We need to drill the crap out of ANWR (NO ONE knows how much is up there), build more oil refineries and build more nuclear reactors (how many boycott travel to nuclear-dependent France over environmental concerns: zero). Interesting that we are exploding the US population and hamstringing the infrastructure at the same time.

#2) The decision to let Exxon and Mobil get together was bad for the consumer. Duh. The big American oil companies need to be broken up like Ma Bells. They are colluding and microsofting the little guys. It is a joke. There is no "open market" for oil in the world or in the USA.

#3) A bigger joke is that we are fighting an incredibly expensive war and now are bringing Iraqi oil back online and the result is we pay higher oil prices.

You know your empire is cooked when there are military victories but alas no spoils.

william jackson said at August 12, 2006 3:30 PM:

Buyers, particularly the people who just love those large suvs. Have you people checked the residual value of one of these tanks? The depreciation rate is so fast and so high that by the time you have owned your suv for three years or so, you will owe more than it is worth.

Also, you people who continue to buy fords and gm vehicles better wise up. What do you think happens to your warranty
if they decide to file bankruptcy? Do you think your rights are protected? think again!!

Go toyota, honda or nissan


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