SUV sales keep truckin’
Record-high gasoline prices don’t seem to be deterring customers from buying sport utility vehicles and pickup trucks, say some Greater Des Moines dealers.
“We are selling as many Tahoes and Suburbans as we have been,” said Tim Manning, general sales manager for Bob Brown Chevrolet. “Personally, I don’t think people think this [high gas price] is long term. I work with a lot of car buyers, and I don’t get that thrown at me.”
While car buyers are conscious of high gas prices, it’s not the most important factor in their purchase decision, said Jim Usgaard, general manager of Betts Auto Campus
“People are really focused on safety, quality and finding the car that fits their lifestyle needs,” said Usgaard, who said higher gas prices haven’t affected sales of the luxury vehicles it sells, among them Lexus and Cadillac. Even Betts’ heaviest SUV, Hummer, is maintaining steady sales after the dealership filled an intial backlog of orders, he said.
“I think there’s always a concern (regarding gas prices)” said Steve Westra, general sales manager for Noble Ford-Mercury in Indianola, “but whether it’s actually preventing them from purchasing a vehicle, I don’t think so. As far as a measurable, trackable amount, I don’t see it yet.”
At the same time, Bob Brown Chevrolet anticipates some erosion of profits as it adds dealer discounts to manufacturer rebates as high as $4,000 on the larger SUVs and trucks it sells. And, like most other retailers, Betts said its profits are being affected by the higher cost of transporting its products to the showroom.
Just weeks after reporting its fifth-strongest year on record, the U.S. auto industry is anticipating “modest growth” in sales for 2004. May sales figures released last week showed the strongest month yet this year, with total vehicle sales up 7.3 percent from a year ago. And, despite rising gas prices, the market share for large SUVs increased to 6.1 percent in May, up from 5.4 percent in April.
The only way that high gas prices could significantly affect sales, analysts say, is if prices were to rise to $2.50 a gallon and remain at that level for several months.
“Gas prices are in the consciousness of many Americans, but unlikely to reach levels nationally that will significantly impact buying decisions on a broad scale,” Paul Taylor, chief economist for the National Automobile Dealers Association, said in a release. “However, subtle changes could occur if consumers start to believe that the high prices at the pump are a permanent reality, rather than just a short-term spike.” The NADA believes that gas prices will come down by late fall.
Due to the overall economic recovery, Westra said his dealership is anticipating a better sales year than 2003.
“Our major-selling vehicle is still F-150 trucks, and SUV sales continue to grow,” he said.
Manning said that manufacturers’ rebates and dealer discounts have helped keep new vehicles moving. His company’s Chevy sales in May exceeded its goal by 16 percent, he said.
“Nationally, supplies (of new vehicles) have been pretty high,” he said. “Large dealerships such as ours are carrying large inventories in anticipation of a good year.”
At the same time, dealers say they haven’t seen any noticeable increase in sales of more fuel-efficient vehicles.
Sales at European Motorcars, a Mercedes-Benz, BMW and Land Rover dealership, have been at record levels for the past several months, and 2004 will probably be a record year for the dealership, said David Dean, general sales manager.
“The vehicles we sell are some of the most luxurious in the market, but also some of the most fuel-efficient,” Dean said. Some of its entry-level cars, such as BMW 3-series and the Mercedes-Benz C-class, get up to 37 mpg and are generating record sales, he said.
So, does that mean the dealership’s SUV sales are off?
“Quite the contrary,” Dean said. “I’m seeing everything in an upswing here. The SUVs that we sell are really pretty fuel-efficient. I think people are looking at the larger SUVs as well as looking at the cars that are more fuel-efficient.”
TRUCK SALES, PRICES INCREASING
According to the 2003 National Automobile Dealers Association data report released a few weeks ago, the light truck category continued to grow, accounting for a record 54 percent of total light vehicle sales, up from 52 percent in 2002. During the same period, sales of crossover utility vehicles, which are built on car platforms, soared by 35 percent to make it the largest growth area in the SUV segment.
Additionally, the average selling price of a new vehicle increased 5.4 percent to $27,550. The average used vehicle price fell 2.5 percent to $13,500.
The average dealership annual payroll was $2.31 million, a $67,000 increase over 2002. Moderate consolidation among franchised new vehicle dealers continued in 2003, with the net dealership count dropping by 75 to 21,650 dealers.