Americans looking to offset rising gas prices with a more fuel-efficient car are unlikely to find many cars in the parking lot today.
Soaring fuel prices, fueled in large part by the war in Ukraine and its associated turmoil, have been another shock to the automotive business and brought fuel economy back into focus after years of booming sales of SUVs and pickups. It’s also because dealership stocks of new and used vehicles are at historic lows, dealers, executives and analysts say, leaving shoppers with little choice for those looking to switch.
Average U.S. gas prices hit $4.33 on Saturday, after recently breaking a record set in July 2008, according to AAA. The US ban on Russian oil imports, unveiled on Tuesday, could push up fuel prices in the near future.
While it’s still early, buyers are already showing more interest in petrol models, including hybrids and electric vehicles, dealers and analysts said.
Bret Bjornstad, a 62-year-old teacher who lives in Portland, Oregon, said rising gas prices prompted him to consider replacing a Kia Rio sedan he bought just a year ago with an all-electric car.
“With gas prices and the invasion of Ukraine, it was like, ‘I’m going to take this very seriously,’” Mr. Bjornstad said.
Over the past decade, the automotive business has moved away from the small cars and sedans historically used for better fuel economy to focusing on larger, more profitable trucks and SUVs in an era of low gas prices.
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Buyers have also gravitated towards larger, more fuel-efficient models, which has led many automakers to discontinue some of their most fuel-efficient models in the US, such as the Ford Fiesta, Honda Fit, and Toyota Yaris.
Nearly 78% of all vehicles sold last year were SUVs and trucks, according to Wards Intelligence, a sharp contrast to a decade ago when these types of vehicles accounted for about 55% of total U.S. industry sales.
Automotive executives are hoping for increased sales of electric vehicles, but the choice of dealer lots is still limited.
Many models, including those sold by Tesla Inc. TSLA -5.12% and Ford Motor Co., have long wait times that stretch for several months and have higher price tags – selling nearly $15,000 more than the average price paid for all vehicles in February, according to data , assembled by the automotive firm Edmunds.com.
“Are dealers ready? Yes. We are excited. We are all on electric vehicles,” Mike Stanton, president of the National Automobile Dealers Association, said at a dealer meeting in Las Vegas over the weekend. “We just don’t have a product right now.”
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Adding to the problems for buyers is an almost year-long shortage of both new and used vehicles, which has driven up prices and caused batches of new cars to run out of stock.
Inventory shortages are particularly acute in passenger vehicles such as compacts, sedans and even some hybrids, industry data show. That’s because supply chain restrictions have forced many auto companies to move away from making these vehicles to focus on more profitable trucks and SUVs, analysts and executives say.
Just over 1 million vehicles were in transit or in stock at US dealers at the end of February, compared with 2.7 million in the same month last year, according to Wards Intelligence. And most of the cars are already sold out in advance, meaning shoppers going to showrooms won’t find many options on the spot, dealers and auto executives say.
Typically, a $2-a-gallon jump in the price of gasoline is enough to change consumer behavior, but it’s hard to quantify that change in today’s market, said Jay Joseph, vice president of marketing and consumer experience at American Honda Motor Co.
“We don’t see a true open market,” Mr. Joseph said. “If we had cars on the ground, I think we would see a temporary transition to passenger cars right now. But there is no delivery.
The auto industry has long struggled to adjust to the sudden increase in fuel costs. In 2008, when gas prices topped $4 a gallon, the rush to buy small cars was so sudden that the prices of some used models were close to new.
During the financial crisis, Detroit automakers, stung by higher fuel costs, vowed to better balance their truck and SUV lines with more fuel-efficient offerings, add more small cars and sedans, and even introduce new electrified options. But the move was short lived. Once the cost of fuel dropped again, buyers turned the other way and many of these models were destroyed.
However, the automotive industry has greatly increased the gas mileage of today’s SUVs and trucks by using lighter materials, smaller engines, and offering smaller versions of larger popular body styles.
SUV crossovers averaged 28.4 mpg real fuel economy in 2020, compared to 23 mpg a decade earlier, according to the Environmental Protection Agency. Sedans and station wagons are still more efficient, averaging 31.7 mpg in real driving, according to the Environmental Protection Agency.
“Even if you get something a little bigger, it will be more economical than before,” said Jessica Caldwell, automotive analyst at Edmunds.
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Some car companies such as Honda, Toyota Motor Corp. TM -3.75% and Hyundai Motor Co. are in the best position to cater to buyers looking for better fuel economy, largely because they stick to their small car and sedan offerings. The problem is they don’t have much in stock, she added.
Dealers say it’s too early to tell at this point how much gasoline prices will affect consumer behavior, especially as the lack of cars remains a focus for most car buyers.
JP Miller, chief executive officer of Paul Miller Ford in Kentucky, said the auto business has weathered previous gasoline surges in the past, making the rise less daunting. If anything, higher fuel costs are helping raise awareness of electric vehicles as car companies and regulators try to push greener options.
“I think there is a pent-up demand and that awareness allows them to see this new car,” Mr. Miller said.
Write to Christina Rogers at [email protected]
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