May car sales to show shift

  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.

Sales are believed to have declined in May — led by General Motors Corp. and Chrysler - 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.

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One Response to “May car sales to show shift”

  1. hybrid used cars sales | Hottags Says:

    […] May car sales to show shift 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. The Auto Monster Cars Blog - http://www.automonster.ca/ […]

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