As Car Sales Slump, What's Still Selling
In an era of $4-a-gallon gasoline, it's no surprise that hybrids and
subcompacts are selling well. But what about the Lexus LX, a giant
sport-utility vehicle that averages 14 miles a gallon? Its sales for the
first five months of the year have more than doubled.
The latest auto-sales data, released earlier this month, show a glum
market -- sales of cars and light trucks were down 11% in May from a
year earlier. But a few cars have bucked the downward trend. A number of
them are small: Sales of the tiny Fit from Honda Motor Co., a four-door
hatchback that gets about 34 miles per gallon on the highway, have risen
64% since the beginning of the year. The Toyota Motor Corp. Scion xB,
another recently redesigned compact, is up 59%.
But there are also some surprising winners -- including a handful of gas
guzzlers. Sales of the Toyota Sequoia, a large SUV, rose 29% to 14,100
in May from a year earlier, making it the only vehicle in the "large
utility" segment for which sales have grown this year, according to J.D.
Power & Associates. Sales of the Dodge Viper, a sports car with a
fuel-swilling 10-cylinder engine, more than doubled to 515.
The reasons for the increases are varied. The Lexus LX 570 was
redesigned for the 2008 model year, according to Lexus, Toyota's luxury
division, and Chrysler Corp.'s Viper received mechanical and cosmetic
updates. Such styling changes typically boost demand for a vehicle. The
LX isn't a huge seller -- with 3,547 sold this year through May -- so an
increase of a few thousand vehicles makes a big impression. Still, any
boost in sales is surprising as consumers focus increasingly on fuel
economy and car makers like General Motors Corp. and Ford Motor Co.
scramble to adjust their mix of vehicles.
Karen Bean of Albany, N.Y., says she bought a Lexus LX 570 earlier this
year because she likes how it looks, drives and accommodates her tall
family. Having a comfortable, attractive interior and a vehicle that she
enjoys driving is important enough that she is willing to accept the
fuel expense. She can afford it, she says. Ms. Bean thinks that buyers
of higher-end SUVs haven't altered their spending habits, despite a
sluggish economy and high gas prices. "If you're buying an $80K+ car,
you better be able to afford the gas that goes in it," she says.
Another big vehicle showing a hefty sales jump is the Toyota Tundra, a
pickup truck that averages 15 mpg. Its sales have risen 8.5% to 66,278
since the beginning of the year, even as sales of large pickups have
slumped 22% overall. Toyota said the Tundra's sales gains in part
reflect low year-earlier sales, as production was just getting going in
early 2007. Whatever the reason, the bright start to the year doesn't
look sustainable. The truck's sales slumped in May, and Toyota has
applied incentives of up to $3,000 cash back or 0% financing to lure
buyers. Toyota also has slowed the assembly lines building the Tundra,
as well as Sequoia.
Sales of the Daimler AG's Mercedes-Benz M-Class luxury SUV are up 20%
for the year to date. Unlike some of the other sales winners, the car
wasn't recently redesigned. But increased awareness of the diesel model
might have helped, and the company attributes the uptick to subtle
marketing changes. First, the company added sporty-looking 19-inch
wheels, chrome trim and a different grille. Then it began running new
ads for the M-Class, which is unusual for an older design. The ads
reminded consumers of the vehicle's merits, says spokesman David Larsen,
and "the appearance package made it look refreshed."
The market for large vehicles is being supported not only by high-income
consumers but also by families. Many of these shoppers are turning to
midsize "crossover" vehicles like the Ford Edge, driving the segment up
7.1%. Crossovers with three rows of seats, like the Mazda CX-9 and the
GMC Acadia, have also sold well, appealing to people who want a big
vehicle that's more efficient than a Chevy Suburban or other traditional
large SUV. The Mazda5 is the only vehicle in the midsize-van segment
whose sales are up this year, apparently because it is smaller and
cooler-looking than other minivans -- and it has better fuel economy.
A few vehicles that were once considered strange -- such as those that
combine elements of minivan and car -- are enjoying a sales renaissance.
Examples of models that have suddenly surged in popularity include the
van-like Mazda5, up 46%, and tall wagons like Hyundai Motor Co.'s Kia
Rondo, which more than doubled, and the Toyota Matrix, up 56%.
Crossover vehicles seem to be stealing the type of customer who once
gravitated to large, comfortable family cars like the Ford Taurus,
Chevrolet Impala and Toyota Avalon. That is fueling the popularity of
midsize crossovers such as the Ford Edge and the GMC Acadia.
"Realistically, who would want a large car when you can have a
crossover," says Tom Libby, analyst with research company J.D. Power &
Associates. "Midsize crossovers have emerged as the sweet spot of the
For many car buyers, however, gas mileage is the most important
consideration. This spring, Daniel Naturale wanted to replace his aging
Pontiac Bonneville with another large, powerful car. But with the price
of gasoline seeming to increase daily, he wound up buying last year's
Nissan Motor Co.'s Altima, a smaller sedan with a fuel-sipping
four-cylinder engine. "It was a bargain and it cut my gas bill almost in
half," says the Montclair, N.J., construction superintendent.
"I'm a muscle-car guy from way back, but the recent spike in gas prices
finally got to me," he says.