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Pickup, SUV Sales Thrive as Pump Prices Drop

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November 6, 2013 by   Leave a Comment

Forget the government shutdown, Obamacare angst and political gridlock.

The Detroit Free Press reported that gas prices are down to almost $3 a gallon and Americans are buying big pickups and SUVs at a pace the industry hasn’t seen since before the recession.

That’s great news for the Detroit Three and their shareholders. American automakers make bigger profit margins on pickups and large SUVs than on smaller cars and the trend is expected to continue with auto sales on track to top 15.6 million for 2013, which would be the strongest tally since 2007.

On Friday (Nov. 1), the national average price of a gallon of gas was $3.28, down 23 cents from a year ago.

Just a few years ago, Americans were ditching pickups and SUVs for smaller cars. Fuel economy is still important, but across-the-board improvements in fuel economy and lower gas prices make it less of a factor.

“It is no longer a deterrent in terms of a purchase decision,” said Mustafa Mohatarem, General Motors’ chief economist. “We have been seeing that for virtually the whole year.”

In October, sales of light trucks rose 15% compared with a 6.6% increase for cars, according to Autodata.

Sales increased 18% for Ram, 13% for Ford F-Series, 13% for GMC Sierra and 10% for Chevrolet Silverado.

The 2014 Dodge Durango posted a 58.5% sales surge as commercials with fictional “Anchorman” Ron Burgundy, portrayed by Will Ferrell, began saturating the airways during Major League Baseball’s playoffs and World Series.

Other factors in sales

The average pickup on the road in the U.S. today is still about 12 years old. Most of the buyers replacing those aged rigs need a new truck. Historically, pickup sales always surge at the end of the year.

“It is almost a perfect storm right now for truck sales to be strong,” said Jessica Caldwell of Edmunds.com. “And there is pent-up demand in that market as well.”

But this is not yet a replay of last decade’s housing bubble, which drove many construction workers to buy new trucks they later could not afford. Neither has the industry experienced the phenomenon of affluent suburban women buying pickups.

But trucks are now luxury vehicles, with every automaker pushing their largest, most heavily equipped crew cab trucks. There are ample numbers of consumers who can afford them.

To read the entire article click here.

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