Days of the Oversized American Vehicle Over?
As many of you might already know, General Motors announced Tuesday that it was shutting down four of its plants that produce large sized trucks and SUVs. Why is it doing this? High gas prices primarily. It is no longer profitable for auto makers to mass produce these gas guzzling machines. The target market for these types of autos is drastically decreasing with every passing day. America has been very lucky it has taken it this long for gas to become as high as it is. European countries that share many of the same economic freedoms and prosperity as we do have little or no market for SUVs and pickup trucks. Although there are many reasons one giant one is the fact that their gas prices have been at the 4 dollar mark and higher for many years now in some countries. As consumers look for more fuel efficient vehicles, the SUVs and large trucks are being taken from the showrooms and front lots and taken to the back lots and small 4 cylinder cars and hybrids of all kinds are being pushed into the spotlights. So the question is simple, are the days of the SUV and heavy truck finally nearing an end in the United States?
5 comments:
I agree that the day of the SUV and large trucks for every day commuting is coming to an end. However there will always be a need for larger trucks for industrial use. I also believe that in the years to come large trucks and SUVs will be a sign of wealth much like expensive sports cars are today. In the economic view GM and all other automotive companies must create models to determine how many SUVs and large trucks they can produce to still create an overall profit. The companies may also create a production possibility model in order to determine how many compact cars they can produce compared to large vehicles. So to put it clearing the overall production of SUVs and large trucks will surely decrease, however the total production will probably never reach zero.
The shift away from large trucks and SUVs that we are seeing now reminds me of what happened here in the US during the 1970s (yes, I am old enough to remember those days!). While we didn't have SUVs back then, we did tend to drive very large sedans ("your father's Oldsmobile")that were incredible gas guzzlers. As gasoline prices rose, Americans began to shift towards smaller, and lighter, cars. Indeed, Japanese companies such as Toyota and Honda made significant inroads into the US market during this period. American auto companies also responded by producing Ford Pintos, AMC Gremlins, and Chevy Chevettes. But where did the SUVs come from then? Well, the price of oil (and gasoline) fell during the 1980s as dramatically as it rose during the 1970s and Americans responded by buying larger vehicles. Thus, I wonder if we're going to see the same thing happen again a few years down the road.
It could very well be doom for the U.S. big three in the short-run. I don't see the oil market going down any time soon. Look what happens when just one analyst makes a prediction of oil prices:
http://worldlyeconomicthoughts.blogspot.com/2008/06/oil-prices-up-7-on-analyst-prediction.html#links
In the long-term, the big three will either merge or be purchased by others. My guess is someone will figure out how to make a really good hybrid engine for SUV's. If SUV's can get 60 miles per gallon, they will make a come-back.
I completely agree that the age of the SUV is coming to an end. I believe it is only coming to and end in the eyes of the average man and family. As gas prices are rising less and less families are being able to afford the costly maintenance and gas for an SUV, leaving it unavainlabe for the average man. SUVs will soon have no purpose for average citizens but will still be used for companies and corporations.
I think that for many people it is just impractical for these vehicles. Their families can fit in the smaller cars and the only reason for the bigger SUVs and trucks was not to haul people but, rather, just stuff, and now people will just have to figure out a different way of doing that. This trend isn't something that the car manufactures woke up and saw one day, they noticed the trends when the gas prices started to rise, and when the gas goes down again the bigger SUVs will begin to be marketed once again. In no way is this the complete end to these types of cars. Companies that can afford the gas and will use the trucks and SUVs for various activities in their business transactions will use these vehicles, so the production of these cars will never completely stop. But for now it is just not profitable for the everyday American.
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