Americans' love affair with those hulking SUVs may be on the outs. A new survey by a unit of J.D. Power and Associates found the number of people who want to trade their cars or trucks in for full-size sport utility vehicles has dropped dramatically.
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Officials at General Motors, citing in part a plunge in sales of large SUVs, slashed its forecast for first-quarter and full-year earnings yesterday, saying it expects to burn through more cash than it generates this year by some $2 billion. For the industry as a whole, full-size SUV sales plummeted 21 percent in February after falling an even steeper 31 percent in January.
"Rising gas prices are certainly a contributing factor to this trend," said Tom Libby, senior director of industry analysis at the Power Information Network, the J.D. Power unit that conducted the study of customers' trade-in preferences.
It found that car and truck owners in 18 of the 20 vehicle market segments said they were less likely to trade their current vehicle for a full-size, gas guzzling SUV than they were during the same two months a year ago. "We've had two dramatic increases in gasoline prices in the past year, and that begins to have an impact on consumers," Libby said.
The slump has the backlog of SUVs piling up at dealerships. Full-size versions sat on lots an average of 84 days before being sold the first two months of the year, substantially longer than the industry average of 66 days. Sales of even smaller, more fuel-efficient SUVs are slumping, too, John K. Teahen Jr., a senior editor at Automotive News magazine, recently wrote.
Higher fuel prices aren't the only culprit, said Libby. He noted that many of the current full-size SUV models had been around for a while, causing consumer interest to wane.
Buyers also are beginning to "cross shop" full-sized SUVs with such luxury crossovers as the Acura MDX, Cadillac SRX and the Infiniti FX45 and FX35. Such consumers prefer the carlike ride, extra features, style and other advantages of these models, Libby said. Many of the crossovers also are flashier and sleeker than their SUV counterparts, including Infiniti's FX35 and FX45 and Chrysler's Pacifica. At the end of the day, many industry analysts say, style still sells and moves the product off showroom floors.
But even new SUV designs are struggling. Sales of the all-new Jeep Grand Cherokee dropped 11 percent the first two months of the year, reflecting styling that some dealers say is too similar to the old model.
The shift in tastes threatens what has been a big revenue producer for automakers, who have pumped a lot of product development money and staff time into SUVs in recent years.
GM has a lot riding on the upcoming introductions of new SUVs and pickups for the 2007 model year. Company officials profess not to be worried, saying it has been known that the current GM SUV and truck lineup is at the end of its life cycle.
"We expect that when our 2007 SUVs and pickups come out, they will more than hold their own in the market," said GM spokeswoman Deborah Silverman.