Dealers prepared for small-car demand

Gas prices are spiking. But this time, Michigan is ready. When prices soared in 2008, the three big U.S. automakers were caught flat-footed. They didn't have competitive small cars and relied on trucks and SUVs for profits.
Anonymous
Mar 5, 2012

When gas prices peaked at $4.12 in July of that year, sales from the Big Three plummeted more than 20 percent. That same month, sales of the fuel-sipping Toyota Corolla jumped 16 percent.

Fast-forward to February 2012. Overall U.S. auto sales rose 16 percent to 1.1 million last month, largely on the strength of Detroit’s small cars. The annual sales pace hit 15.1 million, the best rate in four years.

The difference: U.S. automakers spent billions in the last four years to roll out new models such as the Dodge Dart and Chevrolet Cruze.

The timing is fortunate. Buyers are shifting to small cars again. Twenty-three percent of new car sales were small cars in February, up from 17.9 percent in December, according to auto information site Edmunds.com.

So far, the shift isn’t as dramatic as it was in 2008, when small car sales jumped to 27 percent of the market in May as gas spiked to near $4 per gallon. But prices have never been as high at this time of year. The price of a gallon of gas is up 46 cents this year to an average of $3.74. In the Tri-Cities this weekend and into Monday, the price of a regular gallon of fuel hovered at $3.95. Analysts say gas could hit $4.25 by late April.

While the price increase causes pain at the pump for locals, it bodes well for Michigan, which has a newfound confidence.

“We are very well positioned as a company to thrive in a world of escalating gasoline prices,” Bill Ford, chairman of Ford Motor Co, said.

Sales of the Focus, which Ford rolled out last year, more than doubled to 23,350, making it the best February for the Focus in 12 years. The new Focus gets up to 40 mpg on the highway, seven miles per gallon better than the 2008 model. The company’s sales were up 14 percent in February compared to the same month last year.

The story is the same at General Motors Co. In July 2008, Honda Motor Co. sold 12,266 Fit subcompacts, besting the Chevrolet Aveo by nearly 5,000 cars. But GM recently replaced the unappealing, underpowered Aveo with the sportier Sonic. The company sold 8,000 Sonics in February, outselling the Honda Fit and Toyota Yaris combined.

Don Johnson, GM’s U.S. sales chief, said that three years ago, just 16 percent of the cars and trucks GM sold got over 30 miles per gallon on the highway. Now, it’s close to 40 percent.

“We believe that this puts us in a very strong competitive position,” Johnson said Thursday. GM’s sales rose 1 percent in February.

Even Chrysler Group, whose lineup skews toward SUVs and big cars, will become a bigger player in the small car market this spring, when the new Dodge Dart goes on sale. In the meantime, its Fiat 500 subcompact had its best month ever in February, helping Chrysler’s sales climb 40 percent.

Shane Sake, sales manager at Gage Motor Mall in Grand Haven, said the local dealership has seen an increase in sales of more fuel-efficient vehicles as gas prices spiked during the past several years, and the dealership is prepared to meet the demand as gas hits the $4 a gallon mark.

“Historically, you see an increase in Malibus, Cruzes and higher fuel economy kinds of vehicles,” Sake said.

Sake said that it remains to be seen how the higher gas prices will impact sales of SUVs, and he said he believes those who purchase pickup trucks will continue to do so.

Japanese carmakers are also benefitting. In 2008, they saw sales slide because they couldn’t make their most efficient cars, like the Toyota Prius hybrid, quickly enough to satisfy demands. But this February, Toyota Motor Corp.’s sales rose, led by a 52 percent jump in the Prius. Honda Motor Co.’s sales were also up, thanks to a 36 percent increase for the small Honda Civic.

Bigger vehicles from both U.S. and Japanese automakers are also less vulnerable to gas spikes, since they get better gas mileage than they did in 2008. Ford’s new Explorer SUV, which came out last year, sits lower and is more aerodynamic to save fuel. It gets up to 28 miles per gallon on the highway; its 2008 predecessor didn’t even get 20. Honda’s new CR-V gets up to 31 miles per gallon compared to 27 for the 2008 model.

Brian Harmon of Grand Haven said he drives a SUV on a regular basis and the rising prices are affecting what he does.

“The prices are ridiculous,” he said. “I drive to Zeeland every day and it’s over 100 bucks a week to drive back and forth Monday through Friday.”

— By The Associated Press and Tribune reporter Alex Doty.

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