Why the Death of S.U.V.’s?
The car companies can barely give away an S.U.V. these days. The latest evidence of this comes in the form of three more closings of factories making S.U.V.’s. According to that New York Times article, S.U.V. sales plunged by more than 40 percent this year, compared to a 16 percent decline for new vehicles overall.
Here is the puzzling thing. The apparent cause of death for S.U.V.’s was high gas prices. Doesn’t that mean that with low gas prices S.U.V. sales should come back to life?
I can think of a few reasons why that might not be the case:
1) Consumers think that the low current gas prices are temporary, and in general gas prices will be high in the future. Thus, they don’t want to get stuck with a vehicle that gets poor gas mileage. The question this raises is why consumers were so sure six months ago that gas prices were going to be high forever (which turned out to be wrong), but don’t believe now that gas prices will stay low.
2) The uncertainty of fluctuating gas prices takes the fun out of owning an S.U.V. Even if gas prices won’t be that high on average, it is so unpleasant to have an S.U.V. when gas prices are high that people don’t want to have them if gas prices are volatile. This explanation seems kind of dumb to me, but maybe it is possible.
3) When gas prices got high, it became uncool to own an S.U.V. Perhaps the process for going from cool to uncool is not easily reversible. Once something is uncool, it remains uncool for a long time, even when the forces that caused it to be uncool recede.
This might explain why the demand for pickup trucks remains strong, even as S.U.V.’s fade. Somehow the spike in gas prices didn’t make pickup trucks uncool in the same way as S.U.V.’s. Similarly, minivans have never been cool (or at least not for a long time); so if this explanation is right, minivan sales should stay strong.
My guess is that the third explanation is the most important of the three.