Incentives luring buyers back to pickups, SUVs

Roland Jones • Profile • E-mail

Is history repeating itself in the automobile industry? The latest data on vehicle sales suggest that it might be.

Auto sales hit the skids in September, sinking to their lowest level in more than 15 years, as the faltering economy and credit crunch combined to squeeze the business. But amid the carnage, sales of large pickup trucks and sport utility vehicles held their own, according to Edmunds.com.

Yes, you read that correctly: trucks and SUVs, the very same gas-swigging monsters that Americans have stampeded away from this year as gasoline prices rose to record levels.

Surprisingly, as the rest of the automotive market buckled last month, SUV sales held steady at their August level of 4.4 percent of the U.S. market, down from the all-time high but up from 3.5 percent in July. Meanwhile large pickup trucks accounted for 14.3 percent of vehicle sales, the highest level of the year and up from 13.7 percent in August.

September’s resilience follows surprise gains in August, when pickup truck and SUV sales rose 43 percent and 27 percent, respectively, compared with July. The reason for the rebound? High sales incentives and declining gasoline prices, according to Jesse Toprak, executive director of industry analysis for Edmunds.com, an automotive Web site.

“The data over the last few months show consumers are shallow — they’ll go and buy a large SUV when gas prices go down,” Toprak said. “So there will always be those consumers that like these vehicles, whether it’s because of their style or size, and they’ll be lured into buying them when incentives are high or gas prices slide.”

For the most part, 2008 has seen a strong shift away from large trucks and SUVs and toward smaller, more fuel-efficient cars as gas prices rose to a record national average of $4.11 a gallon in July.

Now that the economy is weakening, crude oil prices are dropping fast, and the national average gas price could fall below $3 a gallon in a matter of weeks, analysts say. Last week, the national average fell below $3.50 a gallon for the first time in six months, according to government figures. Randa Fahmy Hudome, a consultant on energy and a former Energy Department official, thinks it could head toward $2 a gallon next year.

“If the price of oil continues to drop — to $50 or $60 a barrel, which is really possible in 2009 — I think we’re going to see $2 gas again,” she told MSNBC Sunday. “In essence, I do think we’ll see a continuing trend in declining gas prices.”

Could declining gas prices return American drivers to their gas-guzzling ways? America’s love affair with big cars is almost as old as the automobile itself, and has only gotten more ardent in recent decades.

But as sales have slipped, automakers have ramped up the incentives in an aggressive bid to maintain production volume of some of their most profitable models. Incentives for large trucks and SUVs hit a record $5,953 per unit in August, according to Toprak.

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