Sens4Miles

May car sales likely to show shift in taste

When automakers report monthly sales results Tuesday, the numbers are likely to show more evidence of a fundamental purchasing shift among U.S. consumers who are abandoning profit-generating pickups, SUVs and luxury vehicles in favor of fuel-efficient cars, including gas-electric hybrids.
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Sales are believed to have declined in May -- led by General Motors Corp. and Chrysler LLC -- along the way to the worst auto sales year in more than a decade.

But even more important for the U.S. auto industry is the massive shift in buying patterns.

During the first four months of this year, sales of pickups dropped 16.8%, SUVs dropped 9.9% and luxury vehicles fell 12.9%, according to Autodata Corp., while sales of small cars rose 7.5%.

"Part of the story is the absolute volume drop," said Michael Robinet, vice president of global vehicle sales forecasting at CSM Worldwide in Northville. "But I think the bigger story that especially affects Detroit is the segment change that is going on, and how the Detroit Three are going to react."

Indeed, Ford Motor Co. announced production cuts two weeks ago and GM is expected to announce further restructuring efforts at its annual meeting Tuesday.

Automotive Web site Edmunds.com said last week that it expects May sales to be 7.4% lower than the same period in 2007. It predicted that GM will report a 19.2% sales decline followed by Chrysler with an 18.2% sales decline and Ford a 9.3% decline.

"As a result of high gas prices, compact car and hybrid market share are predicted to reach an all-time high this month," Jesse Toprak, executive director of industry analysis for Edmunds.com said in a statement.

For the first four months of the year, hybrid sales in the United States rose 20% to 123,230 vehicles, or 2.7% of the total sales, according to Edmunds.com.


Dealers also seeing shift

Many consumers who need a vehicle are instead buying used cars and -- to a lesser extent -- trucks.

David Butler, general manager of the Suburban Collection, said the Troy company's nearly 40 dealerships have seen used-car sales increase about 20% this year, while sales of used pickups and SUVs are down substantially.

"Year to date, our sales for the Suburban Collection are up. ...But the major trend this year is used vehicle sales are up substantially over last year," he said.

For the first four months of this year, prices of used full-size SUVs fell 17.5% and full-size pickups fell 15.8%, according to an equity research report from Lehman Bros, while prices of used compact cars increased 10.2%.


Luxury woes

The segment shift also is hammering luxury sales. Through April, sales of luxury imports fell 11% and sales of luxury domestic vehicles fell 17.8%, according to Autodata. Lexus sales are down 9.7%. BMW sales are off 8.2%. Land Rover and Saab are doing worse. (Cadillac and Mercedes-Benz, armed with new models, are doing better than others -- about even with last year.)

Milton Pedraza, chief executive officer of Luxury Institute LLC, said economic events, including the housing credit crunch and the meltdown at Bear Stearns, have cut across all sectors of the economy.

"Even the affluent and wealthy consumer has been hit hard," said Pedraza, whose firm conducts consumer research on luxury brands.

At Suburban Collection, Butler said sales of ultra-luxury cars, such as Bentley and Lamborghini, have not been affected by the economy or gas prices.

But Butler confirmed that many customers who lease mainstream luxury vehicles -- such as Cadillac, Lexus and Mercedes models -- are trading in their vehicles so they can lower their lease payments.


Hybrids pay off

In the past, most hybrid buyers were those who were willing to pay extra to reduce their impact on the environment. But with gas prices soaring over $4 per gallon, it now makes economic sense to buy hybrids.

The buyer of a Toyota Camry Hybrid would have paid about $889 more than a regular Camry, but would save about $573 per year on gas, and would break even in about 1.6 years, according to a study by Edmunds.com.

Edmunds ranked the Chevy Malibu as the second-best hybrid deal. With a premium of $438, and an average gas savings of $160, the consumer breaks even in 2.7 years.

Edmunds' analysis was based on $3.61 a gallon gas, which was the national average for regular unleaded on May 5. Prices have continued to rise since then.

"The higher the gas prices go, the more economically beneficial they are," said Philip Reed, senior consumer advice editor for Edmunds.com.

http://www.freep.com/apps/pbcs.dll/a...SS06/806020346

GS69

Analysts Predict 10% Drop in New Car Sales in May; Honda Only AutoMaker to See Sales Gain
Thanks to an ever-tightening credit market and record high fuel prices, analysts are predicting a 10 percent drop in new car sales for the month of May, a new report finds. Although the sales drop is expected to be fairly uniform across the board, it is expected that General Motors, Ford and Chrysler will be hit hardest, largely due to their reliance on trucks and SUVs.

According to Automotive News, General Motors will likely report a 22 to 25 percent drop in new car sales for the month of May, while Ford is expected to check in with a 22 percent drop. Chrysler is expected to see at least a 20 percent decline in sales.

Despite an expected sales drop of 6.7 percent from May 2007, analysts predict that Toyota's market share will clime from 17.5 percent last month to 18.1 percent in May.

The only automaker expected to post a sales increase for May is Honda. Thanks to its lack of fuel-thirsty vehicles, the Japanese automaker is expected to post a 3.2 percent sales gain on May 2007.

Official May sales results will be made known on June 3.

RocketGuy3

iTrader: (1)

Wow, I can't believe of that group, SUVs suffered the smallest decrease in sales... That's disappointing.

GS69

Nissan Leads Drop in Japan AutoSales
By Makiko Kitamura

June 2 (Bloomberg) -- Nissan Motor Co., Japan's third- largest carmaker, led a drop in domestic auto sales in May, as higher taxes and fuel costs cut demand for new vehicles.

Sales of cars, trucks and buses fell 6.1 percent to 221,377 from a year earlier, the Japan Automobile Dealers Association said in a statement today. The total excludes minicars.

Japan's consumer spending has slumped because of inflation driven by higher food costs and a record price for gasoline. Car sales also dropped on one less selling day and after the tax rate on automobiles rose to 5 percent in May from 3 percent in April.

``With gasoline prices so high, consumer sentiment is taking a big hit,'' said Takashi Aoki, who helps manage about 130 billion yen ($1.2 billion) at Mizuho Asset Management Co. in Tokyo. ``People aren't spending money at shopping malls and they certainly aren't driving there either.''

Gasoline in Japan surged to a record 160.3 yen a liter ($5.76 a gallon) last week. The tax rate fell for one month in April after the government failed to agree on a revenue bill.

The high gasoline prices also deterred transport companies from buying new trucks. Truck sales in May fell 16 percent to 29,659 units.

Emerging Markets
Japanese carmakers are reducing their reliance on mature markets such as Japan and the U.S., where sales are slowing, and expanding in emerging markets. Japan's stagnant wages and a shrinking population dragged vehicle sales, excluding minicars, to the lowest in 35 years last year.

China surpassed Japan as the world's second-biggest auto market after the U.S. in 2006. Emerging market sales will outstrip those of Japan, the U.S. and Europe combined by 2010, according to consulting company Global Insight Inc.

Sales at Nissan dropped 11.4 percent to 33,681 vehicles. Last month, the company's sales surged 11.5 percent, the most of any carmaker, as consumers rushed to buy vehicles at the lower tax rate.

Toyota Motor Corp.'s sales fell 2.8 percent to 105,519 vehicles in May. Honda Motor Co., Japan's second-largest carmaker, sold 26,900 vehicles, a 5.1 percent increase, helped by its revamped Fit compact.

New Models
Japanese automakers are introducing new models in the country to capture a bigger share of the shrinking Japanese auto market. Japan vehicle sales, including minicars, will likely fall to about 5.32 million units this year -- a fourth straight annual decline, according to the Japan Automobile Manufacturers Association.

Toyota, which plans to raise domestic sales 0.6 percent to 1.6 million vehicles this year, has introduced three new models in Japan through May. Honda released its new Freed minivan in Japan on May 29, as it aims to raise the company's domestic market share to at least 15 percent from 12 percent now.

Toyota rose 1.9 percent to close at 5,470 yen on the Tokyo Stock Exchange. Honda gained 2.3 percent to 3,610 yen and Nissan rose 0.9 percent to 945 yen.

Sales of minicars, powered by engines no larger than 0.66 liters, fell 2.8 percent to 139,147 units last month, according to the Japan Mini Vehicles Association. Minicar sales peaked in 2006 at 2.02 million units.

Daihatsu Motor Co., Japan's largest minicar maker, boosted sales 3.9 percent to 49,168 units. Suzuki Motor Corp., the country's second-largest minicar maker, sold 45,018 minicars, little changed from last year. The two carmakers were helped by the introduction of new models in December and January respectively. Honda's minicar sales fell 20 percent to 13,056 due to aging models.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net.
Last Updated: June 2, 2008 03:06 EDT

cpone

Its amazing what Market Driven Economics can do.

Threxx

I've had three luxury cars in a row, a full sized truck before that, and a muscle car before that.

Gas prices, inflation, and the fact that I probably won't have a two income household for about 6 years starting in about 4 years from now have driven me to drill down even cheaper and I'll probably replace the BMW with something very inexpensive and economical. It's not that I can't afford to drive a nice car that doesn't have good mileage, it's just that it's getting to the point that driving a nice car costs more than it's actually worth to me.

mmarshall

I agree with your reasoning. I like the 2.5L Subaru boxer-AWD layout, but I might consider a smaller/lighter version of it next time like the Impreza or Outback Sport. It will have the Outback's snow traction but give a little better mileage (and acceleration) from the lighter package.

If you like the BMW driving feel, check out the Mazda3. It's about the closest you'll get to a Bimmer in an economical, FWD compact, except maybe for some entry-level VW's. I'm leery of VW reliability, though.

Threxx

Yeah Mazda3 is a strong consideration of mine but its fuel economy is a little bit lacking for its class.

And really that's an even bigger issue with boxer motors in general... they are inherently inefficient, and it show in the poor economy ratings for those Subarus relative to other vehicles in their class.

carguy101

Everyone should just drive a Corolla.

carguy101

What a retarded "study". Sure, the Camry Hybrid is about $800 more than a Camry 4 cyl. XLE in terms of MSRP. But Camry Hybrids are basically selling for MSRP right now, while you can easily get $3000 off MSRP on a Camry XLE.

The real price difference is more like $3,800. That means a break-even point of 6.6 years, if the gas savings are $573 per year.

Threxx

Resale value also affects this and I have a feeling right now the resale on the Camry hybrid is higher. What I'm saying is if you pay a $3800 premium for the hybrid and then sell it in 5 years for $2500 more than you would have sold a regular Camry, then in reality you only paid $1300 extra.