Fuel Prices & the Industry: Different This Time

Will rising gas prices knock Detroit back on its heels? Probably not.

Here in Michigan, gasoline prices have hit a record high, with, according to AAA Michigan, a statewide average of $4.22 per gallon. That beats $4.21, which was reached July 17, 2008. So given that the last time we were well into the “summer driving season” and this time we’re still a few weeks away from Memorial Day, it seems that it is going to be a long, long summer for many vehicle manufacturers.
 

The difference this time is that most of the manufacturers do have more appealing fuel-efficient offerings.   And there is some indication in the April sales figures that the steadily rising gas prices have had an effect on consumers. Consider, for example, the iconic Ford F-150. In January Ford launched two V6 engines for its full-size pickup. Yes, a 3.7-liter and a 3.5-liter EcoBoost. You might think that truck buyers wouldn’t be all that keen on 6s in a vehicle that is seemingly synonymous with “V8.” But according to Ford, of its April sales for the F-150, 50% of the 45,435 units were V6-equipped, and of the V6 vehicles, a massive 75% of them had the EcoBoost engine.
 
(It isn’t all sweetness and light for that engine, however. The Ford Flex was where Ford launched the EcoBoost, and total Flex sales were 1,927 units, down a whopping 50.3% compared to April ’10.)

The Ford Fusion had a respectable year-over gain of 11.7% (21,189 units) and the new Focus showed a 22.4% (17,265 unit total) increase compared with last year. Both of those cars are solid on fuel economy.
 
Again, there is a bit of a twist: Mustang sales jumped by 59% (8,180 units), and while you can get a Mustang with a V6, arguably the sales increase has a whole lot more to do with the season than the price at the pump. (And in the on-going Mustang vs. Camaro battle, you may be interested to know that while Camaro’s sales were up only 18.6% compared with last April, Chevy moved 10,852, so still more than Mustang.)
 
You couldn’t buy a Cruze last year. In April, Chevy sold 25,160. That’s a fuel-economy oriented car that is probably going to continue to do exceedingly well going forward. Even the Malibu is continuing to turn in solid numbers, at 24,701. Overall, the GM portfolio is in better shape than it was in 2008, not even taking the Volt into account. (There were 493 sold in April, so. . . .)
 
Over at Chrysler, there was a total uptick of 22% compared to last April, but what’s interesting to note is that Jeep brand was up 65%, with Compass sales up 181% compared to April ’10 (a total 4,050 units) and Grand Cherokee up 189%, with 9,802 moving off of lots. Clearly there is something of a Mustang/Camaro thing going on here vis-à-vis Jeep brand: Love is more powerful than gasoline prices.
 
Over at Honda, its fuel-efficient Fit was up 66.3%, to 8,116 units. There were a few more Civics sold, too, 26,777, which is a 3% rise from April ’10. In addition to gas prices, Honda has to face the consequences of the Japanese earthquake/tsunami/nuke plant problem going forward.
 
As does Toyota, which continues to be snake-bit in the market, reporting a 2.4% decrease on a daily selling rate basis compared with April ’10. Even the Prius was down 4.3%, to 12,477 units. Clearly, capacity is going to become a problem for that car going forward.
 
And on it goes.
 
This time it is going to be different for the auto industry. Sure, none of us is going to be happy when it comes to filling up our tanks. But so far as the industry goes, things are much better than they’ve been in previous years because the vehicle manufacturers have not only upped the number of fuel-efficient models available, but they now have their capacity under better control, so they’re not going to be pumping out a whole bunch of models that no one wants to buy, and which the OEMs end up stacking up profit-sapping incentives.
 
Yes, it will be different this time.
 
And maybe by next time, the industry and the people it serves will be really serious about an energy strategy.