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Lower fuel prices in U.S. boost truck sales

Pickups, minivans, SUVs outpaced cars every month in 2014

The Columbian
Published: January 4, 2015, 4:00pm

SOUTHFIELD, Mich. — Fresh from a fifth year of growth in the United States, carmakers are rolling into the new year with yet another sign of good fortune: Cheap fuel is gassing up truck sales.

Consumers bought more pickups, minivans and sport utility vehicles than cars in every month of 2014. That’s something Detroit’s carmakers and their rivals haven’t enjoyed since 2004 when a barrel of oil sold for less than $40. And the industry’s bonanza in the world’s most valuable market should continue.

Hot-selling pickups like the Ram 1500 and luxury SUVs such as the Cadillac Escalade command higher prices and fatter profits than most passenger cars. Available credit, cheap gas, and good lease deals have given consumers the confidence to buy more of both. All automakers are projected to report on Monday that sales rose in December. Last month’s annualized sales pace, adjusted for seasonal trends, may have been 16.9 million — down slightly from November, but still the third fastest of 2014.

“What a way to close out this blockbuster year for the industry,” said John Krafcik, president of TrueCar, a website tracking car prices for consumers. “With the strongest demand in a decade, gains in highly profitable segments and modest incentive growth, automakers should be grinning as they close the books.”

Dealers last month may have sold 1.5 million cars and light trucks, the average of seven analysts’ estimates, which would bring the full-year total to 16.5 million and cap a 58 percent increase since 2009, when General Motors and Chrysler restructured in bankruptcy. Light-vehicle sales in the U.S. averaged 16.8 million from 2000 to 2007. The record, set in 2000, was 17.4 million. Buyers of new models have been undeterred by record recalls, mostly of older vehicles.

America’s rekindled love affair with light trucks played to the strengths of Fiat Chrysler Automobiles. Its U.S. unit, known for Ram pickups, Jeep SUVs and Chrysler Town & Country minivans, gained the most market share in the U.S. through November, rising to 12.6 percent from 11.5 percent a year earlier. The Auburn Hills, Michigan-based outfit is projected to lead the way again in December with a 23 percent sales increase, the average of six analyst estimates. It has reported rising sales for 56 consecutive months under Chief Executive Officer Sergio Marchionne, and dealers are loving it.

“Trucks is what we’re all made of right now,” said Chuck Eddy, who sells the brands of the old Chrysler Corp. near Youngstown, Ohio. “A big part of Chrysler’s DNA is what’s going on at Ram. You couple that with Jeep — those two entities have made Chrysler what it is.”

Old Detroit moneymakers like the General Motors’s Escalade and the Ford’s Expedition are popular again, with sales jumping 55 percent and 19 percent, respectively. While the models have been redesigned to improve fuel economy, gasoline prices at 5.5-year lows have given shoppers a little extra push, said Jessica Caldwell, an analyst for Santa Monica, California-based automotive pricing website Edmunds.com.

“It’s like people were waiting for permission,” she said in a telephone interview.

While some consumers have gone for big SUVs and pickups, the real strength of the market continues to be smaller sport utility vehicles like the Cherokee and Honda CR-V. Sales of these car-based SUVs — often called “cute utes” — grew almost 14 percent through November in a market that is up 5.4 percent. Honda’s CR-V leads the segment with 302,650 sales through November, up 10 percent. Ford’s Escape was up 3.3 percent to 280,609, and Toyota’s RAV4 gained 24 percent to 244,701.

“We are seeing more truck sales and people are getting into bigger SUVs,” said Jim Hardick, managing partner of Moritz Dealerships, which owns Chevrolet, Kia and Chrysler-Jeep dealerships in Ft. Worth, Texas. “But it’s not a knee-jerk reaction. We’re really selling everything across the board.”

Other companies, such as Nissan and Fuji Heavy Industries, which makes Subaru models, won big market share gains thanks largely to small utility vehicles. Nissan’s market share grew to 8.5 percent from 8 percent as its Rogue subcompact SUV and Frontier pickup were strong sellers. Subaru’s line of all-wheel-drive wagons and small SUVs has made the brand one of the hottest with market share through November jumping to 3.1 percent from 2.7 percent.

With consumer comfort at a seven-year high, the recovery in auto sales is clearly about more than just cheap gasoline. The U.S. economy is rebounding, which is another reason that sales should keep growing this year, according to Eric Lyman, TrueCar’s vice president of industry insights.

“The economy has moved into growth mode and the auto market is hot,” Lyman said. “Third quarter GDP grew 5 percent and the job market is steady, which is great news for both automakers and consumers. This puts the auto industry in a favorable position as we project 2015 will trump this year’s 16.5 million new-vehicle sales with a total of 17 million units.”