Bleak Car Sales Data Still Produce Winners
New car purchases are at the lowest levels in 10 years. Nearly all major carmakers reported steep sales declines for June. Derek Mattsson, head of Vehix.com, says consumers are still favoring cars like the Honda Civic at the expense of U.S. vehicles.
Copyright © 2009 National Public Radio®. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.
MICHELE NORRIS, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
ROBERT SIEGEL, host:
And I'm Robert Siegel. Americans have very strong feelings about their cars and their coffee, and that's where we begin this hour.
NORRIS: If you're more inclined to skip that four-dollar, half-caff mochachino at Starbucks or you find yourself cursing at your eight-passenger, fully loaded SUV, you're not alone. Changing preferences for cars and coffee have become a fiscal weathervane in this faltering economy.
SIEGEL: Starbucks' decision this week to close 600 underperforming stores around the country has to do with the cafe's ubiquity. In a moment, we'll hear from a neighborhood that may be oversaturated in Starbucks stores. But first, evidence that America's love affair with SUVs may have run its course: automakers had their worst June in over a decade. Sales are down more than 18 percent from one year ago.
NORRIS: Consumers who are still buying are shunning gas guzzlers and squeezing into smaller cars. To find out what they're seeking, we called the CEO of Vehix.com. Derek Mattsson runs the Web site, designed to assist car buyers with research to buy or sell a vehicle. Welcome to the program.
Mr. DEREK MATTSSON (Vehix.com): Thank you.
NORRIS: So if people are buying smaller cars, what are they looking for?
Mr. MATTSSON: Well, there's a definite preference towards the Asian vehicles. Honda Civic has been the most popular vehicle the last couple months. Obviously the Toyota products have been strong. There's some preference, obviously, for hybrids, as part of the compact set. However, not all consumers are willing to pay the extra $5,000 for that type of vehicle.
NORRIS: Now, you mentioned the Asian automakers. Honda and Toyota have done very well, despite the steep drop in sales for some of the American automakers. Honda has two models that are very popular right now, the Fit and the Civic, but I understand that both those vehicles are in very short supply.
Mr. MATTSSON: Yes, they're down to less than a two-week supply, which is nothing in a dealership.
NORRIS: Now, what does that mean?
Mr. MATTSSON: They're just - that means that the demand has been so great, there's not a lot of inventory in place. So what you're seeing with Honda is they're actually trying to increase production to deliver enough vehicles to meet demand. You're seeing the opposite with the American manufacturers, where they've started cutting production on most SUVs, trucks, minivans, over the last three months, and that will continue.
NORRIS: A tough economy always produces winners and losers. Is there a vehicular equivalent of a 90-pound weakling suddenly king of the car lot because of this focus on fuel efficiency?
Mr. MATTSSON: Well, I would say hybrids would be there, but I'd say the biggest winner as of late would be the Honda Civic, and the Honda Accord to an extent. That's a slightly larger vehicle, but I'd say those are the big winners. We're also seeing the new - the Fits and the other smaller subcompact fuel-economy vehicles really start to take off.
NORRIS: Why does the Civic stand out?
Mr. MATTSSON: I think it's people looking for an affordable fuel - car that's based on good fuel economy.
NORRIS: It doesn't necessarily have the kind of sexy or sleek design that you see in some of the other cars.
Mr. MATTSSON: No, I think, again, I think it's price and fuel economy. That's - the need for cool or spacious cars, that's not a top priority right now with consumers.
NORRIS: So if you look at the traffic on your Web site, what looks to be the worst-selling vehicle, the vehicle that you perhaps couldn't give away if you tried?
Mr. MATTSSON: Well, surprisingly, about a year ago, 28 percent of all the people that came to our site would be in search of an SUV or a large sedan. That has changed dramatically. In the last six months we've seen that erode at least 50 percent, where maybe 15 percent of the people are looking for an SUV.
NORRIS: I guess the news, if you absolutely need a large truck or an SUV, this might be a good time to buy one.
Mr. MATTSSON: Well, if you - again, I think the people that must have large vehicles for industrial use or large families or people that use it for some work function, I think that will continue, and this would be a terrific time to buy.
The trend over the past 10 years was suburbanites buying SUVs that they drive around town for no real purpose other than they like driving a large vehicle; that will definitely disappear.
NORRIS: Mr. Mattsson, good to talk to you. Thanks so much.
Mr. MATTSSON: Thank you.
NORRIS: Derek Mattsson is the CEO of the Web site called Vehix.com.
Copyright ©2009 National Public Radio®. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to National Public Radio. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.
Auto Sales Dip As Consumers Snub SUVs, Trucks
Reports from the big automakers show U.S. auto sales for June fell to levels not seen in more than a decade. But dealerships might be moving more vehicles if they only had the right models on their lots.
Just a few months ago, pickup trucks and SUVs that get between 10 and 15 miles per gallon were hot sellers. But suddenly, in May, gas hit $3.75 a gallon.
"I've been in the business now for almost 30 years, and I have never seen an abrupt about-face by consumers in terms of what it is they want to buy like what we've seen over the last two months," says John Wolkonowicz, a senior automotive analyst at Global Insight.
He says nearly everyone now wants a car that gets at least 30 mpg.
"So everybody got caught by surprise … the whole industry," Wolkonowicz says.
It costs about $50 now to fill the tank of even a smaller car.
Tom Wilkinson with General Motors says his company knew Americans would eventually want more fuel-efficient vehicles, but it didn't know they'd want them now. Full-size truck sales seemed to be doing well.
"They had been declining very gradually over the last couple years, and it was a manageable decline," Wilkinson says. "And it was still a very profitable market and a very large market."
But then in May, gas began to inch toward $4 a gallon — and the trucks stopped moving.
"Cars like Corollas and Chevy Cobalts and Ford Focuses and Honda Civics were selling at twice the rate they were manufacturing them," Wolkonowicz says.
Auto sales were low last month in part because dealerships didn't have enough smaller cars in stock, Wolkonowicz says. And Wilkinson at GM says the only people buying full-size trucks and SUVs now are the ones who really need them.
"The guy like me who goes to Home Depot twice a month and brings home a bag of mulch probably won't buy a full-size truck for personal use," he says.
Stuart Schorr of Chrysler says the big question is: Will truck sales rebound once the price of gas falls or at least stabilizes?
"Is this a cyclical change that we often see in the auto industry, and is it related to the current slowdown in housing starts, which is very much linked to pickup truck sales? Or is it something more permanent?" he asks.
Judging by their recent moves, it seems clear that many automakers think the change is permanent. Trucks still account for more than half of GM's annual sales, but the company recently transferred engineers from large truck divisions to work on smaller cars. CEO Rick Wagoner says he'll close four factories that build large pickups and SUVs.
That probably won't translate into lost jobs, but it will mean a lot of transfers and conversions, which are expensive. Analyst Ron Harbour says it's not as easy to turn a profit on a Ford Focus as it is on a Ford F-150.
"They've got to sell 10 of those to make the profit they do on some large SUV," he says.
Wolkonowicz says this change in consumer demand couldn't come at a worse time for the domestic automakers that are still implementing turnaround plans.
"We're kind of navigating uncharted waters right now," Wolkonowicz says. "The auto companies and suppliers are in a very difficult time, and I think you could argue they're in a fight for their lives."
Most agree that full-size trucks and SUVs will start to sell again as soon as the home construction industry rebounds and contractors need new vehicles. But even automakers say the days of seeing one person commuting to work in a seven-passenger vehicle are probably numbered.
Comments
Discussions for this story are now closed. Please see the Community FAQ for more information.