Car Makers Adjust to Buyers’ Changing Choices

At the North American International Auto Show, many of the vehicles featured are designed to cost buyers less at the pump, such as the new Chevy Bolt all-electric and the Hyundai Sonata plug-in. However, plummeting gas prices are leading consumers away from economy and back to the bigger trucks and SUVs that are less fuel efficient. Automakers are scrambling to keep up with the changes in new government requirements for emissions as well as appealing to today’s consumer, who is less concerned with gas prices. senior analyst Jessica Caldwell said that the rock-bottom gas prices (now at $2.13 per gallon on average) have had an “immediate impact on consumer psyche.”  The site says that trucks and SUVs outsold cars in 2014 for the first time in ten years. Helping this trend along is the fact that these vehicles are now built to be much more fuel efficient than previous models. Caldwell says, “People want to buy these cars, and low gas prices give them the justification they need to do so.”

To illustrate this turnaround, take the fact that interest in hybrids surged around the year 2000 with the introduction of the Toyota Prius. High gas prices and new fuel economy laws have forced carmakers to constantly improve gas powered engines as well as vehicles that use little or no carbon based fuels. But in 2014, sales of the Prius dropped a whopping 11.5 percent over 2013.

The lower gas prices get, the harder it is for buyers to justify the higher sticker price of a hybrid or all electric vehicle.

Caldwell reports that not all small car sales are suffering. More people are in the market to buy vehicles today due to low fuel prices. For example, sales of the new Honda Fit subcompact were up 40% in December, and sales of the Nissan Sentra rose 43%.

Of course, auto companies have to think about the long term. Fuel efficiency must remain in the forefront, and, as GM CEO Mary Barra said recently, production will likely be adjusted to sales. She says that GM will be making more trucks to meet demand if necessary, but the company won’t stop its push for more fuel efficiency throughout its lineup.

Caldwell says that when gas prices soared in 2008, automakers learned to have more complete lineups and more flexible manufacturing processes to adjust to changing markets. She said, “It’s insane for them to make a long-term strategy based on current gas prices.”

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