SUV Graveyard Is Filling Up Fast

It wasn't that long ago when Americas love of large vehicles caused SUV sales to skyrocket. However, now with gas prices headed ever closer to $5 per gallon – SUV's have not only fallen out of favor with the American driving public, but they are running the risk of becoming extinct in the near future. It is understandable why Americans love driving Sport Utility Vehicles. They are big and ride high off the ground which gives the driver a sense of safety and good visibility. Also, most Americans are still of the opinion that bigger is always better and that attitude added to the bottom line of SUV's for decades. A friend of mine that still owns an SUV told me last week that when he fills up his large SUV it cost him over $125. It is amazing that anyone is buying large SUV's anymore. Even people that earn above an average income will eventually find it difficult to justify spending $125 plus to fill up their large SUV's. Recently, one of the previous big selling SUV manufactures, GM, said they were looking for a buyer for their Hummer division which might not be an easy sale.

Recently, comedians have been joking around about the possibility that SUV's could disappear from American roadways all together. While those comments are a bit extreme, the days when SUV's packed U.S. highways and out numbered passenger cars are soon coming to an end. Just think, at some future date there could be more SUV's in museums and at antique car shows than are being driven by the general public. Of course, if by some miracle the price of gas does drop dramatically – one of the first things to return to American families will be the large SUV. However, I see little chance that gas prices will once again drop that low and the most likely result of high gas prices will be the fast death of most large SUV's. In the future, soccer moms will be forced to pack their children's sports equipment into the trunk of a small car, which will take planning and a bunch of patience. However, for all of those multitasking mothers that love to support their children in their sports activities – they will find a way to get their kids to the field of play.

It really wasn't that many years ago when sales people at Chevrolet and Ford dealerships would sell more SUV's and pickup trucks than cars by a 2 to 1 margin or greater. However, those glory days of earning high commissions on SUV's and pickup truck has faded to where now most consumers visiting an automobile dealership are walking right by the SUV's and pickup trucks and heading directly for the cars which get the best gas mileage. For automobile manufactures, dealers and sales people – this new trend of Americans wanting to buy economy cars is hurting the income potential of all three. While the profit margin of a large SUV or pickup could be as great as $5,000 – small economy cars only have a profit margin at or below $1,000. Simple math will tell anyone looking at that profit picture that U.S. auto companies will need to sell five times as many economy cars to make the same money they use to earn when SUV's and pickup trucks were best sellers.

My personal opinion is that there is no way that GM or Ford will be able to improve their unit sales by a factor of five, so in the end these huge automotive giants will be forced to downsize, layoff workers and become lean and mean if they really want to remain in business. The biggest factor working against GM and Ford are two companies by the name of Toyota and Honda. Rather than seek short term big profits on SUV sales, Toyota and Honda have always focused on passenger cars and over the years American consumers have grown to trust their automobile models for both fuel economy and reliability. To the contrary, U.S. auto companies like Ford and GM have used sales gimmick for most of the past two decades to sell their SUV's and pickup trucks while all but ignoring the cars that were also included in their model lines. Now when gas prices are forcing American consumers to rethink the automobile, GM and Ford are decades behind in research and promotion of their automotive lines of vehicles. The sad truth is there will be additional layoffs at Ford and GM and many families will lose a job which cannot be replaced either in salary or benefits.

Title: SUV Graveyard Is Filling Up Fast
Written: June 12 2008
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