top of page

“Watershed” Month: Have High Gas Prices Finally Tipped the US Auto Market?

The dismal US auto sales figures released this week were no surprise to anyone who has filled their gas tank recently.

U.S. auto sales tumbled in May as consumers spurned pickup trucks and SUVs in the face of record gasoline prices, driving General Motors Corp, Ford Motor Co and Chrysler LLC to double-digit declines.

Car sales, which accounted for less than half of industry volumes in 2007, rose to 57% in May, while truck sales hit their lowest rate since 1995.

Honda’s Civic and Accord and Toyota’s Camry and Corolla sedans all outsold Ford’s F-Series pickup truck. It was the first time a sedan outsold the perennial Ford bestseller since 1991 . . .

The news was accompanied by GM’s announcement that it was planning to close four pickup and SUV plants in North America and expand output of compact cars at two plants to meet customer demands for more fuel-efficient vehicles. It was also considering “all options” with regard to its Hummer brand, including a possible sale. Production is scheduled to end at Oshawa, Ontario; Moraine, Ohio; Janesville, Wisconsin; and Toluca, Mexico. GM is investing in a range of fuel-efficient vehicles, including a next-generation compact Chevy for US and global markets, an update of the Chevy Aveo, a US production module for GM’s 1.4-liter four-cylinder engine, and the commercial introduction of an extended-range electric vehicle, the Chevy Volt. The moves are a result of high gas prices, which GM’s CEO Rick Wagoner now views as a “permanent market condition.”

Is it the end of the SUV? Don’t be so sure. Americans love big cars, we love fast cars, we love horsepower and bells and whistles, and that will never change. And if gas prices fall back to reasonable levels (what does that even mean anymore?) in coming months, then I’d expect to see sales of full size pickups and SUVs recover somewhat. But, if Wagoner is right and high gas prices are now a permanent condition, the May data suggest that the long-term trend toward larger vehicles has peaked, and the market share for these vehicles will continue to decline over time.

Those of us who cover the tire industry have been watching the steady growth in the average size of US tires over the last 10 to 15 years — 14-inch and 15-inch tires moving into the 16-inch and 17-inch sizes, as well as the introduction of ever more tires in the 18-inch, 19-inch, and even 20-inch and above sizes — wondering how far it could go. Perhaps 2008 will mark the peak of this trend. Of course, the replacement needs of existing vehicles mean that any shrinkage in the average size of US tires will be slow and gradual.

For raw material suppliers, particularly for carbon black suppliers, the trend toward larger tires has meant that North American sales volumes could be sustained even as the region’s unit output of tires has declined. Looking forward, this trend finally may be reversing. Conversely, these trends are highly favorable for silica suppliers, particularly as automakers focus on more fuel efficient vehicle designs.

1 view0 comments

Recent Posts

See All

Notch blog moves to Wix

Our blog, News from Notch Consulting, has been published continuously since November 2007 with free news and updates related to the tire, rubber, carbon black, silica, and rubber chemicals industries.

Webinar: Recovered Carbon Black for Investors

Notch will join the discussion for a new webinar, Recovered Carbon Black for Bankers & Investors. The time is Tuesday, January 24 at 8 AM EST (14:00 CET). The webinar will provide an introduction to c


bottom of page