BUSINESS

Lower gas prices fuel SUV, pickup sales for a strong October for the US auto industry

11/03/2014 09:02 EST | Updated 01/03/2015 05:59 EST
DETROIT - Falling gas prices improved buyers' moods and boosted sales of SUVs and trucks in October.

GM, Toyota, Chrysler, Nissan, Volkswagen and Honda all reported sales gains last month. Only Ford's sales fell 2 per cent as it cut back on F-Series pickup sales ahead of the launch of a new F-150 later this year.

Analysts expected industry sales to rise 6 per cent over last October.

The national average price of gasoline fell 33 cents to end October at $3 a gallon, according to AAA. Gasoline is now the cheapest it has been in four years, and the decline accelerated a trend toward SUVs and trucks that has been going on all year.

"Gas prices coming down added a little bit of fuel to the fire, but that fire was already roaring," said Alec Gutierrez, a senior analyst with Kelley Blue Book.

Small SUVs have been the fastest growing segment in the U.S. this year, and now make up one out of every four vehicles sold, says Jesse Toprak, the chief sales analyst for the car buying site Cars.com.

But gas prices fueled sales of bigger SUVs. Kelley Blue Book saw renewed interested in the mammoth Hummer H1 last month, for example. Sales of the recently redesigned Lincoln Navigator eight-passenger SUV jumped 38 per cent, while Chevrolet Tahoe sales rose 6 per cent.

Gas prices also convinced small business owners to go ahead and buy pickup trucks, Toprak said. GMC Sierra sales jumped 12.5 per cent in October. Ram pickup sales were up 33 per cent.

Fuel economy is no longer top of mind for most buyers, according to annual survey taken by J.D. Power and Associates in June. Last year it ranked No. 3 on the list of reasons why people buy cars. This year it dropped to No. 6 behind reliability, styling, brand preference, ride and handling, reputation and price.

As a result, hybrid sales are suffering. Sales of Ford's C-Max hybrid dropped 22.5 per cent in October, while Toyota Prius sales were down 13.5 per cent.

But sales of some small cars rose. Lower gas prices can help first-time buyers and others feel comfortable enough to buy a new car. Sales of the newly redesigned Honda Fit subcompact were up 83 per cent in October, for example, while sales of the Nissan Sentra small car rose 56 per cent.

"Lower gas prices are actually a tide that floats all ships," said Jessica Caldwell, a senior analyst with the car buying site Edmunds.com.

General Motors' overall U.S. sales rose just 0.2 per cent to 226,819. Chevy Cruze compact car sales were up 51 per cent, largely due to increases in fleet sales to governments and rental car companies.

Ford's car sales declined 11.5 per cent to 188,654, but Escape SUV sales rose 12 per cent. Chrysler said its U.S. sales rose 22 per cent to 170,480 for its best October since 2001. The red-hot Jeep brand led the way with a 52 per cent increase over a year ago.

Toyota said it set an SUV sales record in October thanks to a 22-per cent gain for its RAV4 small SUV, and a 30-per cent jump in sales of the Highlander mid-size SUV. Toyota's sales were up 7 per cent overall.

Nissan, Honda and Subaru all reported their best October sales ever, fueled by demand for their small SUVs. Nissan sales were up 13 per cent to 103,000, with the Frontier small pickup chalking up a 25-per cent gain. Honda's sales rose nearly 6 per cent to 121,172, with a 30-per cent gain for the CR-V small SUV. Subaru's sales jumped 25 per cent to 43,012. Sales of the Outback small SUV rose 55 per cent.

Hyundai's sales dropped 6.5 per cent. While sales of its Tucson SUV rose 44 per cent, that wasn't enough to offset sagging sales of its Sonata and Elantra sedans.

Sales should remain strong through November and December and close out the year at 16.5 million, up 6 per cent from 2013, Toprak says. He says buyers should look for big discounts in small cars as well as full-size trucks and SUVs for the remainder of the year.

"At the moment, the picture is rosy. Sales are doing well, incentive levels appear to be higher but still in check," Toprak said. "Things are in a pretty healthy balance in the industry."