Oil Surging -- Why are Big Rigs Still Selling?
CNBC Auto and Airline Industry Reporter
There was a time when the idea of crude oil hitting $100 a barrel would have sent the auto industry into a panic. Funny, with oil now trading at roughly $82 and with a growing number of forecasters saying $100 is a possibility, the bread-and-butter big rigs (SUVs, pick-ups, crossovers) are still selling. People still want them, even if there's a greater chance of gas prices rising. Why?
The most immediate reason is because gas prices have not move appreciably higher. Generally speaking, they are roughly around $3.00 a gallon nationwide. With the end of the driving season, gas prices tend to move lower, and that has helped keep them at a reasonable level. Throw in the fact we've seen gas prices at or around these levels for some time, and it's easy to see why many people have simply adjusted and incorporated higher gas prices into their budget.
But another reason big rigs continue to sell is the growing competition, particularly in trucks. Between the new Chevy Silverado, GMC Sierra, Toyota Tundra and still strong Ford F-series, there is more competition than ever before. That has translated into more advertising, greater incentives, and pick-ups that give buyers more of what they want. While truck sales are closely linked to housing sales, and the weak market there has dampened demand (especially earlier this summer), many truck buyers still want and need to upgrade. There's never been a better time to do that.
Finally, there are more crossover utility vehicles for sale. This has helped offset the decline in sales of truck-based SUVs. With the domestic automakers finally getting into the crossover game with the Ford Edge and GMC Acadia among the many offerings, consumers have more choices. They want the utility, and the feel of driving a car. Yes, crossovers get better mileage than SUVs because they are lighter, but they are still far from being the most fuel-efficient rides. You might think the prospect of higher prices at the pump would scare off buyers, but it's not. We need the versatility, and that's why more and more people are turning to crossovers.
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