Tuesday, January 4, 2011

Surprise Pick Up Trucks Are Tops Once Again

 When 2008 is all said and done, the auto industry will have marked one of its worst years in decades. A slowing economy, high gas prices, and fickle consumers will be among the top reasons cited for the tough year, though the latter reason may not be fully explained. After all, if the economy stinks and gas prices are high, why wouldn't consumers avoid big cars, trucks, and SUVs?

 Now that gas prices have dropped - at least temporarily - consumers are once again flocking to the pick up truck market, making the Ford F-Series and Chevrolet Silverado the two top selling vehicles for October 2007, a position they regularly held month in and month out for years. Yes, pick up trucks are back, but maybe not for the reasons that you may think.

Let's take a look at this recent phenomenon and whether the sales boost for a key segment in automobile selling will last.

 Hammered since the beginning of the year by slow sales, the truck segment has found itself in an unusual position: more passenger cars than trucks have been sold month in and month out for a good part of the year. At the center of this change is high gas prices which pushed well above $4 per gallon for regular gas earlier this summer. That, along with a sour economy, took its toll on the sale of the Ford F-Series, Chevrolet Silverado, GMC Sierra, Dodge Ram, Nissan Titan, and Toyota Tundra. $100 fill ups scared off even the most loyal buyers, who decided to wait out the market.

 Throughout the toughest months, incentives for new trucks reached their highest levels ever as automakers dropped their prices in a bid to bring people to the showroom. Finally, in early September when gas prices began their current retreat, buyers started to show up and sales climbed. In October Ford, GM and Chrysler were rewarded with a nice boost in truck sales thanks to the combination of incentives and fast dropping gas prices.

Indeed, for the month the Ford F-Series and Chevrolet Silverado once again finished one-two in sales, easily besting the number three best selling vehicle, the Toyota Camry, by some fifty percent.

The sales increase should also be attributed to something else besides incentives and lower gas prices and that would be pent up demand. Figuring that quite a few owners would have traded up earlier in the year, but hesitated due to market conditions, the latest boost likely reflects the opening of floodgates to meet previously restrained consumer demand. Now has become a good time to buy and the market reflects that change.

Will the sales boost last beyond a month or two? That remains to be seen. If gas prices remain below two dollars per gallon and the economy stabilizes, then truck sales should remain strong. If the economy worsens, then all bets are off; the market could collapse regardless of how low gas prices go.

Not everyone is thrilled that trucks sales have rebounded, particularly those who think it will cause drivers to use more gas, thereby increasing our dependency on foreign sources of oil while causing more pollution. Yet, for the big automakers who are dependent on truck sales to drive profits, the rebound is welcome even if it turns out to be just a temporary boost.

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