“Given the rising demands on the world energy market, the U.S. automobile industry is facing a true paradigm shift. U.S. auto sales this month reflect a continuing trend of international manufacturers and dealers meeting the evolving needs of the American consumer,” said American International Automobile Dealers Association President Cody Lusk.
For auto manufacturers and dealers, May 2008 saw a continuing trend of bleak sales accompanied by an industry-wide shift away from trucks and SUVs and toward smaller, fuel friendly vehicles. The culprit? Mounting fuel prices and an economy that has Americans at every earning-level tightening their belts. Manufacturers sold just 1,396,965 light vehicles last month, down almost 11 percent from the 1,563,941 sold in May 2007. Year to date, sales are down 8.4 percent, from 6,790,615 to 6,222,574. In 2007, about 16.1 million vehicles were sold in the U.S. This year industry analysts predict sales will fall somewhere below 15 million – the lowest number in more than a decade.
International Brands Gain Market Share
For dealers with international brands, there is a silver lining to the soft economy. Broken down, May’s numbers reveal that while light truck sales fell 23.6 percent, passenger car sales were up 2.4 percent. That’s good news for Asian nameplates in particular, whose fleets rely less on trucks and SUVs and more on small, fuel sipping vehicles. Overall, Asian nameplates saw a small boost in sales of 3.7 percent and European makes felt only a negligible loss of 0.8 percent. Not too shabby when weighed against domestic nameplates, which fell 23.4 percent.
In terms of market share, domestic automakers maintained just 44.4 percent of the U.S. market in May while international makes took a 55.6 share. For the first time in history, Asian brands, with 48.1 percent of the market, outsold the Detroit 3.
No End in Sight for Rising Gas Prices
With the national average fuel price just pennies away from the four dollar mark, analysts see no ceiling for gas prices. According to a June 4th CNN news story, gas price records were set 27 times in the past 28 days. None the less, it might not be long before consumers look back at fuel prices in May 2008 with fond nostalgia. If oil prices hit $200, which analysts say could happen in as early as six months, Americans could be filling their tanks to the tune of six of seven dollars a gallon.
Again, this could be good news for international dealers. “Skyrocketing oil prices have consumers shifting rapidly toward smaller vehicles and more fuel efficient options,” said AIADA President Cody Lusk. “The international industry’s efforts to gain more of the U.S. market share will be helped by their eco-friendly track records and experience bringing hybrids, biodiesels, and electric vehicles to market.”
Industry Braces for Long-Term Change
You would be hard-pressed to find an analyst who believes Americans will see gas prices fall anytime in the near or long-term. That’s why manufacturers are preparing for a real and lasting shift in consumer purchasing behavior. "Certainly five to ten years from now, you’re going to look back and say the spring of ’08 was the turning point,” said Jesse Toprak, chief industry analyst for Edmunds. “Even if gas prices go down for a month or two, consumers are not going to rush back out and buy SUVs. This appears to be a permanent shift.”
That shift is reflected both in May’s sales numbers, and in the toppling of Ford’s F-150 as America’s most popular vehicles. It was overtaken by not one, but four international sedans. Toyota’s Corolla and Camry, and Honda’s Civic and Accord all sold more that the F-150’s 42,973. Not since October 1991 has a car, not a truck, been the country’s top-selling vehicle. In May, the Civic was the most popular vehicle with 53,299 sales. Need more evidence that American’s have fallen out of love with fuel-guzzlers? Look no further than GM’s June 3rd announcement that it is considering dropping its hummer brand and is closing four North American plants that produce trucks and SUVs.
Small Cars Planned for 2009-2010
In response to plunging light truck sales, manufacturers are scrambling to offer small, appealing vehicles – the sooner the better. "Given the state of the economy and gas prices, really any of the smaller-vehicle timelines could be pulled ahead," said Tina Jantzi, senior manager of North American forecasting at J.D. Power Automotive Forecasting.
Fuel efficient vehicle expected to be released on these shores in the next year or so include a Honda hybrid hatchback, the Kia Soul, the Nissan Cube, and a Scion tC redesign. Until then, manufacturers are doing what they can to make their current fleets as desirable as possible. In the short-term, that could mean everything from lowering axle ratios, turbo-charging engines, and polishing up incentive plans.
See below for a complete breakdown of May 2008 monthly and year-to-date sales by international nameplate.