It's no surprise that at a time of $3.50 gas, sales of small cars would rise, sales of trucks and SUVs would slump. And yet these market forces have been curiously slow to appear.
No more. Last month sales of compact and subcompact cars exploded. "It's easily the most dramatic segment shift I have witnessed in my 31 years here," said George Pipas, chief sales analyst for Ford.
Ford's own Focus, which starts at $14,395, has seen its sales pop by 32% from a year ago. The Honda Fit ($13,950) has jumped 54%. And the Toyota Yaris ($11,350) has spiked 46% year to year. These trends are occurring in a decidedly down market for auto sales across the board. Small cars are clearly leaching sales from far more profitable trucks and SUVs. And this raises a provocative question:
How will Detroit survive?
The rise in small-car sales comes during one of the industry’s worst months in more than a decade. GM saw its sales drop 23 percent and Ford slid 19 percent, while Toyota fell by 5 percent.
GM's marketing chief Mark LaNeve says that to survive, car makers will have to raise prices on small cars and crossover vehicles, which are becoming a popular compromise between car and SUV. With GM's truck sales down 26.5%, the company will have to raise MSRPs on other vehicles, reduce incentives, slap on higher transaction prices--or find some combination to prop up the bottom line, according to LeNeve.
It will be no different for any other car maker. Look for more layoffs in the industry - GM is already cutting back. In the meantime, it's probably a great time to get a good price on a pickup or SUV. Sales of used ones are down 14 percent, so dealers are practically giving them away.
