Low gas prices spark light truck sales

Americans bought a record 17.47 million vehicles in 2015, surging past the old record of 17.35 million set in 2000. Several factors drove the record growth: pent-up demand, an improving economy, easy credit, low interest rates, and low gas prices.

The last factor is affecting not only what vehicles we buy but also how automakers design future products.

Low gas prices have helped fuel the trend away from cars and into more trucks, SUVs and crossovers. Virtually every brand saw increases in light truck sales, which includes pickups, vans, crossovers and SUVs, while cars were down. Crossover vehicle sales in particular are on fire. On the other end, fuel savers such as hybrids and electric cars, and even some conventionally powered economy cars, took an especially hard hit.

Considering these vehicles, as well as high-performance cars, were being developed when gas prices were oscillating at record highs between $3 and $4 in 2011 and 2012, according to Gasbuddy.com, may make it seem like automakers can see the future.

Instead, they see what consumers want.

“Fuel prices alone are not driving sales of trucks and SUVs,” said Stephanie Brinley, senior analyst at IHS Automotive. “It’s what the consumers prefer. Fuel economy is comparable with cars now, so you don’t have the guilt. This just makes it easier.”

Trucks in particular are known to be particularly high-profit items for the manufacturers, so in the short term they will be happy to ride the wave. But in response to consumer trends and forecasts of low fuel prices in the near term, some brands are already cooling off car efforts and concentrating on truck and SUV development.

Fiat Chrysler Automobiles announced in late January that it will cut production of small cars in the U.S. so it can build more profitable and more popular Jeeps.

Ford announced at the 2016 Chicago Auto Show that it will add four more SUVs to its global lineup by 2020.

“In terms of a longer-term trend of people moving from passenger cars into SUVs, we think that will continue beyond fuel prices,” said Mark LaNeve, Ford vice president of sales and marketing, who cited improved powertrain efficiency of larger vehicles than in years’ past.

But automakers have to consider governmental pressure as well as consumer preference.

“Low fuel prices are here for the foreseeable future, maybe two years plus,” said Wayne Gerdes, owner of CleanMPG.com. “However, much higher efficiency (CAFE) standards are still looming and the (automakers) have to meet or face large penalties.”

Brinley said the Environmental Protection Agency “has signaled it’s not relaxing their requirements for 2025.” That magic number is an industry fleet average of 54.5 miles per gallon. The situation may not be as completely dire as it sounds, as Brinley points out this is an “unadjusted” number, and due to a complicated system of credits the manufacturers can take advantage of along with other factors, the requirement should end up “closer to 35 mpg real-world.”

The “adjusted” number is the one we see on Monroney new-car stickers.

This prompted the drive to more fuel-efficient vehicles in the first place, when CAFE regulations were started in 1975 and finalized in 2012. As a result, larger vehicles are more fuel-efficient than ever before. A 1985 Ford F-150 2WD automatic got about 16 mpg combined; the 2015 version of America’s best-selling vehicle gets 22 mpg combined.

Despite the improvement in fleet fuel economy, the biggest gainers of fuel efficiency are losing to low gas prices. The extra cost often associated with hybrid powertrains or battery electric vehicles are hard for buyers to justify with cheap gas.

“Something needs to give,” Brinley said about the consumer disconnect between cheap gas and the need for more efficient, less polluting powertrains.

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It’s a formidable challenge for automakers to meet requirements with vehicles that people want to buy. Electrified powertrains are the clearest way forward yet but they can be 20 percent more expensive. The federal credit for an electric vehicle of $7,500 is meant to offset the cost to the consumer. A Ford Focus EV starts at just under $30,000 well-equipped, while a Focus hatch in top of the line Titanium trim is $23,725.

But parity in pricing didn’t stop the sales slide of hybrid and electric vehicles in 2015.

“New (electric vehicle) buyers are getting hammered on the total cost of ownership,” Gerdes said, adding that resale of an EV is about one-third of the high initial price just three years later. If you’re in the market for a new plug-in vehicle, Gerdes says to buy used or lease “and let automakers take the hit.”

“Cars are an emotional purchase,” said Brinley. “Fuel economy is important in context, but there has to be another reason. They are going to have to figure out the product, the styling, the handling, not just the fuel economy. Figure out what the consumer wants, and pull them in.”

Some progress is already being made. While early alternatively powered vehicle efforts may have focused primarily on powertrain technology, drivers looking for a well-rounded vehicle are getting more choices. Brinley points to some recently redesigned hybrid products, such as the 2016 Toyota Prius, that have addressed not just mileage but factors such as price, power, driving dynamics and interior refinements. “It has to be an ‘and’ proposition,” she said.

So how will automakers accomplish this in new products going forward? The real story is in the technology. Kia’s all-new Niro, unveiled at the 2016 Chicago Auto Show, is a subcompact crossover hybrid expected to get 50 mpg. The powertrain and eco-car platform will serve Kia’s goal to triple its green-car lineup by 2020.

Manufacturers still look at the big picture while catering to vehicle fashion trends. Vehicle designs are something of a shell game, coming and going while underlying technologies persist. As people’s tastes change, we will see the latest tech emerge in new places, such as the planned Chrysler Pacifica plug-in minivan and more efficient midsize pickups.

“Powertrain development is not concurrent with vehicle development,” explained Brinley. “One hybrid system could be applied to three different vehicles. Sometimes you have a new car with a new engine tied to that car, but powertrains have a longer shelf life than cars.”

As far as what future trends to watch for, Brinley says look at the engineering under the skin for more fuel-saving tech such as light-weighting materials or multispeed transmissions that are spreading into new models and segments.

Gerdes expects the trend to crossovers and trucks to continue, but to also expect more efficient options in those vehicles.

“Expect to see more diesels in the light-duty truck space, more hybrids and plug-in hybrids across the compact and midsize segments and even some compact CUVs ending up being hybridized,” Gerdes said.