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Americans Are Back in Love With SUVs and Pickups
The car as we have known it appears to be doomed in the U.S.
No, not because we’ll all be biking or taking buses or flying with jet packs or riding around in automated vehicles. Sure, a lot of people think that last one is coming soon. Technology analyst Horace Dediu is betting on bikes. And I’m not willing to totally count out the possible triumph of buses or jet packs.
But until that glorious day comes — whichever kind of day it is — it appears that Americans will be driving around not in cars but in sport utility vehicles, minivans and pickups.
Cars Resume Their Decline
Car sales as a percentage of total U.S. light-vehicle sales
Source: U.S. Bureau of Economic Analysis
This exercise in chart making was inspired by a new paper from Michael Sivak and Brandon Schoettle of the University of Michigan’s Transportation Research Institute. After decades of losing market share to the vehicles classified as “light trucks,” cars staged a bit of a comeback starting in 2005. It was yet another of those data points — along with declines in vehicle miles driven, slowing population growth in the suburbs, and millennials not buying houses or cars — that seemed to point to a more compact, more urban, more sustainable future for the U.S.
It’s increasingly looking, though, as if most of these “trends” were mainly just the temporary result of a weak economy and high gasoline prices. Cars’ market-share decline resumed in late 2013. When Sivak and Schoettle tried to match the market-share data from 2007 through 2016 to some explanatory variables, the best-fitting equation they came up with was:
Percent cars = 100.572 – (1.684 * disposable income) + (1.841 * price of gasoline) + (0.435 * unemployment rate)
The logic behind this is that SUVs and their ilk are generally 1) more expensive and 2) less fuel-efficient than cars. To focus on just one of those factors, here’s what real gasoline prices have done since 1976:
What Gas Costs
Average U.S. regular gasoline price per gallon, in 2017 dollars
Source: U.S. Energy Information Administration
Eyeballing this chart and the preceding one leads me to an even simpler equation: When gas costs less than $3 a gallon (in today’s dollars), cars lose market share to SUVs, pickups and their ilk. When it costs more than $3 a gallon, the decline halts.
My rule can’t hold indefinitely, because that implies that cars’ share of light-vehicle sales could someday turn negative. But where’s it going to stop?
Schoettle and Sivak offered some hints in another paper, published in April, for which they asked car and light-truck owners why they drive what they drive and what might lead them to switch. 1 Light-truck owners mainly listed utility-related reasons (“greater general utility,” “need larger vehicle due to family size,” “need to move large or heavy items”) for their choice, while car owners focused on expense (“better fuel economy,” “lower initial purchase price”). Only 8.7 percent said they owned a car because it was “easier to drive or maneuver,” 5.9 percent because they “prefer the image more than other vehicles,” 5 percent because it was “more environmentally friendly” (they could give multiple reasons). Only 37.2 percent of car owners said they would not consider switching to a different type of vehicle if gasoline prices fell further.
Multiply that times cars’ share of light-vehicle sales in May, also 37.2 percent, and you get 13.8 percent, which seems like a reasonable if very rough estimate of how low cars’ market share could conceivably go if the economy stayed strong and gas prices low. In other words, it could decline some more.
As already noted, light trucks are less fuel-efficient than cars. Not only that, but they have made slower gains in gas mileage over the years than cars have.
Light Trucks Use More Gas
Average fuel efficiency of new vehicles, by model year
Source: U.S. Environmental Protection Agency
The rise in light trucks’ popularity from the early 1980s through the early 2000s thus resulted in declining fuel efficiency for the overall U.S. light vehicle fleet. Cars’ modest resurgence after 2005, following by the Barack Obama administration’s focus on raising fuel economy standards, brought big fuel-efficiency gains. Now those are at risk.
Why does this matter? First, while it seems a little retro in this era of resurgent U.S. oil production to worry about dependence on imports, the U.S. is actually still quite dependent on oil imports. Net imports accounted for one-quarter of the country’s oil consumption in 2016. The trade deficit in petroleum products also amounted to 12 percent of the overall goods trade deficit in the first quarter of this year, which is way down from 50 percent in 2008, but still big. That share will rise again if and when oil prices rise.
Then there’s climate change. Transportation is responsible for close to a third of U.S. carbon dioxide emissions, according to the Environmental Protection Agency. Better fuel efficiency combined with a weak economy to drive a 10 percent decline in transportation-sector carbon emissions from 2005 to 2012. Since then, they’ve been rising again.
Cars, Trucks and the Climate
Carbon dioxide emissions, U.S. transportation sector, in metric tons
Source: U.S. Environmental Protection Agency
The Obama administration cut a deal with automakers in 2011 to bring the average mileage of new cars and light trucks up to 51.4 miles per gallon by 2025. 2 In part because of the rise in light trucks’ market share, automakers missed their mileage target in 2016 for the first time in more than a decade. President Donald Trump announced in March that the EPA will reconsider the future targets.
QuickTake Why Trump Would Want to Slow Tough Fuel Standards
Writing in Slate just before Trump made that (widely expected) move, Daniel Gross decried it as not just environmentally suspect but also a “bad long-term strategy” for Detroit, as the U.S. risks becoming a gas-guzzling backwater in a global market dominated by smaller vehicles with higher gas mileage (or electric motors). It’s a profitable backwater, because SUVs and pickups have higher margins than cars, but one that doesn’t have great growth prospects.
That’s a credible argument. But it’s hard to swim against the tide of U.S. consumer demand. And what American consumers appear to demand — unless gas costs more than $3 — is SUVs, pickups and minivans.
17 Comments on "Americans Are Back in Love With SUVs and Pickups"
makati1 on Thu, 22nd Jun 2017 7:38 pm
Headline said it all. The U$ is full of uneducated fools More proof that the empire is in steep decline.
rockman on Thu, 22nd Jun 2017 7:50 pm
“And what American consumers appear to demand — unless gas costs more than $3 — is SUVs, pickups and minivans.” The data shows this is not the correct interpretation. Yes, when the inflation adjusted gasoline price hit $3.54/gal in 2008 sales dropped. But from that low point of SUV and light truck sales there was a continuous growth of to the current record level. But that also includes during 2012 when the price actually exceeded the 2008 price: $3.66/gal.
https://inflationdata.com/articles/wp-content/uploads/2015/01/Inflation-Adjusted-Gasoline-Jan-2016.jpg
http://www.detroitnews.com/story/business/autos/2016/01/05/auto-sales/78295542/
It would seem there’s a closer (but not perfect) correlation to economic health.
Go Speed Racer on Thu, 22nd Jun 2017 8:55 pm
Fat Americans have to ride in pickup trucks.
Three or four of those 400 pound Americans
and it takes truck suspension, truck axles and
wheels to carry the load.
Might be a reason to bring back passenger trains.
makati1 on Thu, 22nd Jun 2017 9:07 pm
GSR, I think you hit the real reason perfectly.
Apneaman on Thu, 22nd Jun 2017 9:13 pm
GSR, don’t forget that in addition to their fat asses they need a minimum 400lb payload capacity to haul home their snack cakes and carbonated high fructose corn syrup drinks.
2 liters of Coca-Cola = 800 calories
2 liters of Mountain Dew = 1020 calories
Sissyfuss on Thu, 22nd Jun 2017 10:07 pm
The profits in the auto industry are tied to the larger vehicles. The US carmakers put very little effort in making quality small vehicles in the past and let the foreign makers take over the market for years. With competition getting tougher every year, the US makers put out much better quality cars in the last decade but still the profit margin is slim. An example of this is Ford changed its mind about moving its Focus production to Mexico partly because President Bluster called them out. Well now they announced they are moving the production to China, probably got a better deal. Can’t wait for the tweet on that move.
DerHundistlos on Thu, 22nd Jun 2017 10:51 pm
What is equally grotesque is the bast majority of the pickups are spotless clean and will never be allowed to work a construction site. Plus, I note that the trucks just keep getting bigger and bigger. Women just as much as men if not more, love the power they project over others in those big nasty gas guzzlers,
Go Speed Racer on Fri, 23rd Jun 2017 12:01 am
Hi Makita and Sleep Apneaman,
LOL yeah.
Did ya ever read the front of the box,
the Kraft Macaroni & Cheese?
It says “Serves 4, or 1 American”.
(O:
deadlykillerbeaz on Fri, 23rd Jun 2017 4:27 am
You can’t haul a thousand bushels of wheat in a Honda Fit.
You need a tractor-trailer.
You can’t combine a field of corn with a lawn mower, you need a real combine.
And diesel fuel, you will need some to get the engine to go.
A truck will get about 5 mpg, 200 gallons will take you a thousand miles.
Dinky little cars will haul you and your mother to buy some groceries at Safeway, but that doesn’t count.
Trucks, trains, ag equipment and other machines are far more important than a 3/4 ton pickup filled with some tools and materials.
A ship to take the 50,000 tons of wheat over to Japan will be what you need.
Oil will be the energy of choice.
No trucks, no peace.
makati1 on Fri, 23rd Jun 2017 5:58 am
Deadly, so the wheat doesn’t get shipped. So what? That is, if climate change allows any wheat to be grown. Maybe you have not thought about what ‘climate change’ really means? Take a look at the posts from Ap for a reference. The end is nearer than you seem to realize. The Dust Bowl happened over a few years and lasted 10 years. Worse is coming.
As for oil, if there was none, there could be no wars. Think about that.
deadlykillerbeaz on Fri, 23rd Jun 2017 6:18 am
Climate change is real. 18,000 years ago, a sheet of ice a mile thick covered my spot on the planet, then it melted.
One of the cooler springs I have witnessed the past several years. 2015 in May was hot, August of 2015 saw record temps in my neck of the woods.
Much cooler temps this spring/summer season.
Although, I do expect temps to rise to normal.
Yes, feeding 7.5 billion biscuit traps is a challenge. At 9,000,000,000, there will be sacrifices.
Lots of cabbage, broccolis, Brussels sprouts and kale this year. Always plant potatoes and zucchini.
Twocats on Fri, 23rd Jun 2017 7:20 am
Crickets from the 1000% EV in two years crowd.
Hubert on Fri, 23rd Jun 2017 3:16 pm
There has been no effort made on part of the US government to educate these idiots.
onlooker on Fri, 23rd Jun 2017 3:26 pm
Hubert given that US govt is a subsidiary of the powerful corporations why would it?
TommyTommyWantsHisMommy on Fri, 23rd Jun 2017 11:54 pm
The only things that will cut consumption are sky high fuel prices, scarcity of fuel, mass loss of employment. Until then party on… $2 gas, 1.99% auto loans and good job market (at least up here in the north)…new cars all over. Pontoons… big houses…golfing, trips every other week…
makati1 on Sat, 24th Jun 2017 12:37 am
Sign of the times: “New CEO Cuts Costs: Ford shifts production of compact car from Michigan and Mexico to China.”
http://wolfstreet.com/2017/06/20/ford-shifts-car-production-from-usa-mexico-to-china-ceo-hackett-cuts-costs/
“… trucks and SUVs have fat profit margins, as Americans don’t mind overpaying for them.”
“… for vehicles built in China, components are mostly sourced in China, and to a smaller extent in other Asian countries. The component industry in China is huge as China has become by far the largest auto market in the world.”
Bad news for America.
rockman on Sat, 24th Jun 2017 12:42 pm
beaz – You make a valid point. But let me tell you about the pick up truck world I observe driving around Houston. Any given month I see thousands of shiny undented 4-door pick ups on the highways around Houston. Rarely is there more the one person in a truck designed to carry 5. And equally rare to see it carrying anything in the back.
But a very different situation when out in the countryside going to well sites: very serious and typically beat up work trucks. And a lot fewer then I see cruising around Houston.