Detroit Is Ready For Rising Gas Prices

Fri, 03/02/2012 - 10:09am
Dee-Ann Durbin, Tom Krisher, AP Auto Writers




This time, the Detroit Three saw a 13-percent sales increase. The difference: They have spent billions since 2008 to roll out new models such as the Dodge Dart and Chevrolet Cruze.


So far, the shift isn't as dramatic as it was in 2008, when small-car sales leaped to 27 percent of the market in May as gas suddenly spiked to near $4 per gallon. But prices have never been as high for this time of year. The price of a gallon of gas is up 46 cents this year to an average of $3.74. Analysts say gas could hit $4.25 by late April.




The story is the same at General Motors Co. In July 2008, Honda Motor Co. sold 12,266 Fit subcompacts, besting the Chevrolet Aveo by nearly 5,000 cars. But GM recently replaced the unappealing, underpowered Aveo with the sportier Sonic, which gets up to 40 mpg on the highway and has luxurious options like heated side mirrors. The company sold 8,000 Sonics in February, outselling the Honda Fit and Toyota Yaris combined.

Don Johnson, GM's U.S. sales chief, said that three years ago, just 16 percent of the cars and trucks GM sold got over 30 mpg on the highway. Now, it's close to 40 percent.


Even Chrysler Group, whose lineup is weighted toward SUVs and big cars, will become a bigger player in the small car market this spring, when the new Dodge Dart goes on sale. In the meantime, its Fiat 500 subcompact had its best month ever in February, helping Chrysler's sales climb 40 percent.



Japanese carmakers are also benefitting. In 2008, they saw sales slide because they couldn't make their most efficient cars, like the Toyota Prius hybrid, quickly enough to satisfy demands. But this February, Toyota's sales rose, led by a 52-percent jump in the Prius hybrid. Honda's sales were also up, thanks to a 36-percent increase for the small Civic.

Bigger vehicles from both U.S. and Japanese automakers are also less vulnerable to gas spikes, since they get better gas mileage than they did in 2008. Ford's new Explorer SUV, which came out last year, sits lower and is more aerodynamic to save fuel. It gets up to 28 mpg on the highway; its 2008 predecessor didn't even get 20. Honda's new CR-V gets up to 31 mpg compared to 27 for the 2008 model.


Gas prices were his main motive for buying.


For automakers, there's tough competition ahead for small cars. They're trying to make them more profitable by loading them up with pricey features such as leather seats and navigation systems. As a result, prices are rising. Vehicles sold for an average of $30,605 last month, up almost 7 percent from a year earlier, mostly due to more luxurious small cars, according to the TrueCar.com automotive website.



The shift to smaller cars is becoming a regular pattern. Buyers also leaned toward smaller cars at the beginning of last year, when gas prices jumped 80 cents between February and May before moderating in the summer. Last March, when gas prices reached $3.74 per gallon, 23 percent of buyers purchased small cars. But they went back into bigger cars once gas prices eased.

Edmunds chief economist Lacey Plache said rising gas prices won't make car buyers hold off on purchases altogether. That's because they're more confident about the jobs market and because cars on U.S. roads are getting so old that they have to be replaced. She says people will simply put more emphasis on fuel economy and cut back on the miles they drive.



Share This Story

The password field is case sensitive.