The Reuters news agency reports that some United States car buyers are taking diesel-powered Volkswagens for a test drive while others are trading in their sport utility vehicles for family sedans or opting for a model with a smaller engine as petrol prices continue to spike.
The recent rise in US petrol prices to record levels reportedly has Americans shopping for more fuel-efficient cars, and has at least dampened their love for SUVs which some consider the biggest ‘gas guzzlers’ in suburbia.
“This is definitely different. It’s all over the news. I guess people just figure that prices will never go down,” Tim Murphy, the new car sales manager at Toyota of Santa Barbara in Goleta, California, told Reuters.
The news agency noted that CarMax Group, which operates 51 used car and 12 new car dealerships across the United States, on Wednesday cited petrol prices as one possible reason for weaker sales over the past few weeks. CarMax reportedly cut its earnings outlook, sending its shares down more than 13% on Wednesday, and the stock of its competitors down between 2% and 4%.
Motorist group aaa told Reuters that the [nationwide] average price at the pump hit a record high, unadjusted for inflation, of $US1.95 per gallon for regular [87-octane] petrol, up about 45 cents from a year ago, while, in California, the average price was $2.27 a gallon for regular.
To top it off, petrol prices have yet to hit their highest for the year, with the traditional peak summer driving season not set to start until Memorial Day weekend later this month, the US Energy Information Administration has said, according to the report.
Reuters noted that Detroit’s carmakers last week added new incentives on SUVs to cut inventories of unsold models, despite already generous offers, after sales in April were weaker than many had expected.
The higher prices could shift demand toward more fuel-efficient models, which had been poor sellers in the past, said.
At the company’s annual general meeting in Kentucky on Thursday, Ford chairman and chief executive Bill Ford Jr reportedly said petrol prices could “help drive customer behaviour the way you’d like to see it,” when asked what the company was doing to improve the fuel economy of its vehicles.
Car dealers and industry officials told Reuters the war in Iraq and the slow pace of job growth are also hitting new and used vehicle sales.
“Our business has been at levels lower than historical levels for the last few months. What part of that gas prices play is very hard to determine,” Steve Whitener, co-owner of Briarwood Ford in Saline, Michigan, told the news agency.
According to Reuters, Allen Levenson, vice president of sales and marketing at Asbury Automotive Group, which operates 140 car franchises in the US, noted that, in previous years, when prices at the pump spiked, sales of SUVs continued to climb but this time around, buyers seem more cautious.
“This is the first time that I’ve seen a noticeable shift,” Levenson reportedly said.
He told Reuters that some consumers are trading in large SUVs for smaller models: “There is a little slowdown in the large SUVs. They’re buying the smaller SUVs or the passenger cars.”
The news agency said hefty incentives, including General Motors’ “Truckfest” promotion, contributed to a 1.5% drop in the average price of large SUVs in April from March, according to Edmunds.com which also said that prices for compact cars rose 2.4% in April from March.
Pat Foley, the used car manager at Rey Reece Volkswagen in Portland, Oregon, told Reuters consumers are taking a second look at Volkswagen’s diesel-powered cars, which get 40 miles per [US] gallon.
“The interest has definitely increased,” Foley reportedly said, adding: “I would buy 10 used diesels today if I could find them.”
According to Reuters, diesel is 15 to 20 cents per gallon cheaper than petrol in the US but diesel cars are not sold in several states, including California, due to higher emissions of smog-forming nitrogen oxide.
The news agency added that Volkswagen once had the US market for diesels cornered, but DaimlerChrysler‘s Mercedes recently launched a diesel version of its E-Class luxury sedan while its Jeep brand plans to launch a diesel Liberty [Cherokee] SUV this autumn.
Murphy reportedly said his California Toyota dealership can’t get enough of the Prius hybrid petrol-electric car, which gets 55 miles per gallon – in contrast, sales of the Sequoia and Land Cruiser large SUVs, which get about 15 or 16 miles per gallon, have softened.
One dealer, who asked not to be named, told Reuters some used car wholesalers have stopped buying large SUVs.
“There’s so many people who have them, and they’re going to unload them, because of the gas,” he said, according to the news agency.