Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21
Bitcoin Halvings Price Forecast and Stock to Flow Analysis - 18th Jul 21
Dell S3220DGF Unboxing and Stand Assembly - 32 Inch 165hz Curved Gaming Monitor Amazon Discount - 18th Jul 21
What Does The Fed Mean By “Transitory Inflation” And Why Is It Important To Understand? - 18th Jul 21
Will the US stock market’s worsening breadth matter? - 18th Jul 21
Bitcoin Halving's Price Projection Forecasts Trend Trajectory - 18th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Auto Makers Feel the Heat of High Gas Prices 

Companies / US Auto's Jul 05, 2008 - 12:51 AM GMT

By: Salman_Khan

Companies The Sport Utility Vehicle has been an American icon ever since it was born into mass popularity during the days of World War II when the American WillysJeep was introduced in the US car market. Vehicle buyers were drawn to their large cabins, higher ride height, and perceived safety. Additionally, full-size SUVs have greater towing capabilities than conventional cars, and can haul trailers, campers and boats. SUVs had the added benefit that they could carry more passengers than a pick-up truck. Finally, a perception of social wealth SUV owners grew.

For 17 years, the Ford F-150 Pick-up truck was the best selling vehicle in America on a monthly basis. That spot was lost to not only one car but to four. The Toyota Camry and Corolla and Honda Civic and Accord all past up the Ford F-150 in sales for the month of May and more vehicles are expected to make the leap.Light truck and SUV sales at major auto makers are down anywhere from 12 percent at Toyota to 37 percent at GM. GM announced plans to close four plants that manufacturer trucks and SUVs . Nissan, Ford and Chrysler all have similar plans.

General Motors Corp., the automaker that popularized the " monster car" Hummer, may sell a mini-car four feet (1.2 meters) shorter than its biggest offering and more than a foot shorter than anything else it markets in the U.S. to win back buyers scared off by high fuel prices. GM may bring the production version of the Chevrolet Beat to the U.S. , people familiar with the plan said. The car, which would normally be reserved for Asia and Latin America , gets as much as 40 miles a gallon, a fuel efficiency topped in the U.S. only by hybrids. The possible American introduction of the Beat would be one step in a fleet downsizing and shift away from fossil fuel-based vehicles that the people said is already under way at Detroit- based GM. Resigned to $4-a-gallon gasoline and stricter pollution rules, the largest U.S. automaker has recognized that its response must go beyond the mothballing of large truck plants, the people said.

GM, turning 100 this year, has few options to re-inventing itself. Mattel Inc., maker of toy cars, has a larger market value than General Motors Corp. for the first time as record U.S. gasoline prices crimp sales of real cars and trucks. The company reported its largest annual loss in 2007, $38.7 billion, and hasn't had a profitable year in the past four. The car maker's U.S. market share hovers at the lowest level since 1925, and last year GM was 3,000 cars away from being dethroned by Toyota Motor Corp. as the world's largest automaker. GM shares fell to the lowest since 1954 this week after an analyst said bankruptcy was ``not impossible'' if the auto market continues to deteriorate.

Besides the Beat, GM is weighing a list of options for refocusing its auto lineup on fuel efficiency rather than performance. They include the U.S. introduction of a small pickup popular in Latin America and an expansion of the number of versions of the Volt plug-in electric car, the people said. GM is also trying to increase production and speed up availability of the successor to the Chevy Cobalt sedan and develop a fuel-efficient alternative to the Cadillac Escalade sport-utility vehicle, they said.

Already, GM has reassigned engineers to many of the projects, according to the people familiar with the planning. The company is taking them from SUV and truck programs suspended while awaiting the return of customers. Now, these people said, GM sees no point in waiting.

Sales of the smallest cars in the U.S. have risen 31 percent in the first half this year as the industry total fell 10 percent and the largest SUVs 31 percent. GM reported a 21 percent plunge in U.S. sales of pickups, SUVs and vans for the first six months. Higher input costs, which can be primarily attributed to a surge is steel prices is also seen as hitting the profitability of SUV makers.

Thus, a clear shift in consumer tastes and preferences is being marked in US, thanks to Crude Oil spike. As pointed out in my earlier post in the same blog, Americans are cutting down on distance travelled on road. American Airline industry too is reeling under the pressure emanating from high Aviation Turbine Fuel ( ATF ). Not surprisingly, American railroad industry has posted a decent comeback this year, with Ridership on Amtrak trains in the Northeast corridor, including those through Springfield , climbing sharply higher. May was the best month ever for the government-owned railroad company, said Amtrak spokeswoman Tracy L. Connell . For the Northeast corridor, from October to May, our ridership was up 11 percent over the same period a year ago, and for May alone, it was up 9.2 percent over the previous May. Other Mass Transit System like Peter Pan Bus Lines, which serves much of the Northeast, has also seen its ridership rising as gas prices have been rising.

Earlier also, during the oil crisis of 1973 when OPEC blocked shipments of crude oil to countries that supported Israel in the Yom Kippur War, Americans and other countries converted to more fuel efficient cars. Before the embargo, American car makers made larger and less fuel efficient vehicles. As the embargo took place, consumers made up their minds with their wallets. Foreign producers like Datsun (Nissan), Toyota , Peugeot, Volkswagen, Mazda and Honda generated record sales during this time. As OPEC lost its hold on oil production, gas fell cheap once again by the 1980s. Americans were driving larger cars once again, albeit with somewhat better fuel efficiency than that of the 1960s and early 1970s. SUV sales finally peaked in 2004 and 2005, with a sales of 4 million SUVs.

One has to wonder though, will we see the SUVs back on top in the American auto market any time soon? This is yet another question, which only the time can tell.

By Salman Khan

Salman Khan is a Commodity Analyst working with a leading Delhi based Indian brokerage firm, Mansukh Securities and Finace Limited as Research Analyst in Commodities. He has a rich experience of tracking Energy, Precious Metals, Base Metals and Agri Complex for last 2 yeas across various International and Indian commodity bourses (NYMEX, COMEX, LME,  CBOT, SHFE, MCX and NCDEX. He is a voracious reader and a prolific writer. He is the inhouse editor of monthly journal "MAKE MORE GUIDE" published by Mansukh Securities and Finance Limited . His articles have also appeared in leadind portals like , and . He also blogs regularly at his personal blog .

Salman Khan Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in