The scenario facing the nation may bring about a car parc similar to the fleets found zipping around Europe, Asia and just about anywhere else in the world except for the USA.
Going into the summer season, gas was topping $4 a gallon, and diesel is even more expensive.
People are bemoaning $70 to $80 fillups and talking about taking "staycations" where travel plans are put into park and leisure time is spent at home in the backyard. Errands are consolidated, and mpg is calculated when contemplating attending a social event.
Nearly a quarter of those polled in a June CNN survey feel the cost of fuel has reached crisis proportions, while almost 60 percent view the situation as a major problem; more than half are concerned over the prospect of rationing and 71 percent plan on choosing a more efficient model next time they buy a new vehicle.
Rural residents, who tend to be more dependent on driving their vans, SUVs and pickups for longer distances, are especially hard hit.
TRENDS & MARKET Analysis
Skyrocketing global petroleum pricing indicates that this is not your typical American oil spike traditionally buffered by the belief that relief at the pump is just around the corner – this appears to be a sustained increase with more gas pains to follow.
And small cars are big.
For some 30 years Ford's F-series trucks were the best-selling vehicles in the U.S.; sales fell 31 percent in May as Toyota and Honda rose to the top. Honda was up 18 percent, Nissan posted an 8 percent sales boost. Hybrids are flying out of dealership showrooms as sport utility vehicle sales are in a freefall, a situation made more significant because SUVs and trucks have long generated healthy profit margins for domestic automakers.
The normally staid, just-the-facts style of reporting by the Associated Press took a sharp turn as an AP dispatch observed how General Motors "officially blew up its old business model" in a production shift to smaller cars amid several closings of pickup and SUV plants amounting to a 35 percent reduction in big-vehicle capacity. Even the imposing Hummer marque may be on the block. A new smaller-car model is on the drawing board with an anticipated rollout in 2010, when GM's plug-in Volt is also scheduled to come online.
CEO Rick Wagoner has noted that "we at GM don't think this is a spike or temporary shift. We believe that it is, by and large, permanent."
Ford is also reconfiguring, cutting back on larger vehicles and going with its more petite offerings. Sales of the Focus are up 53 percent. "Our dealers are selling the Focus at unprecedented turn rates," says Jim Farley, group vice president for marketing and communications. "In fact, Focus' retail sales were 91 percent of beginning inventory, which puts it in the same league as the industry's best-selling small cars. This is a strong statement about customer demand for Ford's newest small car."
According to Farley, the company this year is embarking upon a 30 percent increase in Focus production and plans are afoot to manufacture its Fiesta global B-car in Mexico with a North American release date coming in early 2010. Two Fiesta models will be offered, a sedan and a hatchback, "helping feed customers' growing demand for small cars."
"It may be that $4 gas is the tipping point," says automotive industry consultant Dr. George E. Hoffer, an economics professor at Virginia Commonwealth University. "The SUV craze was a bubble and now it is bursting. We will become more like the rest of the world: Income will become a constraint on what you drive (relating to keeping the tank filled). There will still be SUVs, but it will be a niche vehicle," he tells Aftermarket Business.
"It doesn't get a lot of gas mileage, it doesn't ride well and it can't carry a lot unless you get one of the larger ones. It's run its course," says Hoffer. "I'm beginning to see signs of panic" among consumers and OEMs alike struggling to unload the nation's gas-guzzling fleet.
The next two or three years are likely to be "a transitional stage" as differing powertrains such as hybrids and plug-ins are brought to market and new directions explored. "The hydrogen car is too far off," Hoffer explains, "so I don't know what the technology will be" that ultimately gains widespread consumer acceptance.
Still thinking big
"After the push into small cars, we're going to have a bunch of large cars and trucks that are economically obsolete. The run-up in the gas price lowers the value of the older stock of larger vehicles. A relatively minor accident will result in them being totaled; a relatively minor mechanical repair will cause them to be junked quicker," he says.
"As more of these vehicles get junked, there should be more parts available in salvage yards," Hoffner continues. "The independent repair shop can counsel people not to do anything irrational," as in dumping your gas-hog at a loss and jumping into a smaller vehicle that may not work for you and your family.
"Don't panic. It's very hard to trade yourself out of your gasoline problems and what you're giving up in terms of comfort and safety," Hoffer advises.
"The basic tradeoff is size and weight versus gas mileage," he observes. "We will make marginal adjustments" as the fuel economy realm sorts itself out. As-yet undetermined technological developments will eventually come forward to provide a solution, according to Hoffer, who does not anticipate us opting for tiny golf cart-like vehicles in any great numbers – that's just not likely to become the American Way. We think big.
"As the batteries get bigger the cars will get bigger," he says. "They will stay away from large gas-powered cars, but there may be larger cars with smaller engines, electric cars and hybrids, etc. I see then using new technology to get better gas mileage," notes Hoffer.
"Ford and General Motors have been successful in Europe, and to be successful in Europe you have to sell small cars. In this country they haven't. The money has been in large vehicles – the profit margins are great. In this country they've never been forced to market state-of-the-art small vehicles. Ford and GM are not incompetent, otherwise they would have been driven out of Europe," Hoffer says.
"Every time we've had a gas crunch, once the pressure's off we've always gone back to larger vehicles," he points out, "but I don't think we'll be able to go back this time."
