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Will rising gas prices hurt SUV sales? An analyst sounds the alarm

June 1, 2018
Has the epitaph for the sedan been written a bit too soon?
With national gas prices at about $3 a gallon and generally rising, a prominent automotive industry watcher is pointing to changes she said could mean a boost for the lowly passenger car and spell trouble for big trucks and SUVs.
That position is a bit of a break from some other analysts who have downplayed the potential that gas price increases could change vehicle buying habits. They note that SUVs are more fuel efficient than in the past.
Maryann Keller, of the New York-area consulting firm Maryann Keller & Associates, has posted an article on the social media site LinkedIn that highlights some of the issues: 
• "Gasoline prices are rising. Historical analysis shows that rapid gas price escalation tempers buyer enthusiasm for large vehicles.
• "The RVI Used-Vehicle Price Index segment analysis shows that wholesale prices of sedans are increasing while SUVs are decreasing.
• "Higher fuel prices coincide with the rising supply of late-model trucks and SUVs.
• "The used-vehicle market predicts the financial performance of many automotive-related companies."
Keller said that gas prices are up in part because of oil production cuts in Saudi Arabia and Russia, and she noted that these increases come as the summer driving season starts in less than two weeks.
This all follows Ford’s highly publicized decision to stop selling most sedan models in the U.S. and General Motors’ recent production cut announcement at the Ohio plant that makes the Chevy Cruze sedan. Fiat Chrysler Automobiles had previously jettisoned the Dodge Dart and Chrysler 200 to focus more on SUVs. 
GM officials, including Chairman and CEO Mary Barra, have, however, said that passenger cars remain an important piece of the company’s portfolio.
"Most automakers have reduced current output of their remaining sedans to reduce dealer inventory as well. It wouldn’t be surprising to see these cuts being made just as gasoline prices are creeping up to a possible point where buyer preferences may again lean in favor of vehicles that offer lower operating costs, especially smaller CUVs and even sedans," Keller wrote.
Although she noted that it’s early to declare a trend, Keller also pointed out that wholesale values for sedans were up while they dropped for large SUVs and pickups from March to April.
The potential market changes are playing out as the Trump administration is backing away from higher mileage requirements, a position that has prompted outrage and warnings from some consumer and environmental groups.
Robert Weissman, president of the advocacy group Public Citizen, was particularly pointed in his comments after Ford’s sedan announcement:
"Fat on profits from SUV sales in the early 2000s, the Big Three automakers drove themselves to the brink of collapse with their failure to plan for the inevitable rise in gasoline prices."
 
 

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