Driving Miss Daisy Crazy

We’ve all been wondering where the cost of higher fuel is going to manifest itself in the economy. So far, we’re still buying gasoline…we’re still driving places. I’ve not seen any anecdotal evidence to suggest we’re shopping less, eating out less, buying fewer clothes.

The International Council of Shopping Centers (ICSC) says chain-store sales were up 0.7% last week. The Retail Chain Store Sales Index is ahead of last year by 4.3%. Nothing earth-shattering, but the evidence shows no slackening of consumer appetite.

So where might the bite be first felt?
Could it be in the automotive showrooms?

If you watch and listen to the car manufacturers, they’re all about building more fuel-efficient cars. They’re pimping the hybrids, and toning down the gas guzzlers…but I think it might be very instructive, certainly interesting, to observe how the big automakers’ business has been doing the past month…and keep an eye on the trend between April and June numbers.

Ford this week used the fuel economy spin in sugar-coating its results for April: their domestic car sales jumped in April, but a big drop in truck sales negated the effect to result in a 7% overall decline from a year ago. Remember, Ford boasts they’re the leader in Truck sales.

It would appear the smiley-face on the fuel gauge at DaimlerChrysler is belying its own 6% shrinkage in vehicle sales.

At the other end of the spectrum, Toyota and Honda posted better numbers.
So there is a wrinkle in this theory…

Ford sold 262,722 cars and trucks last month. Are you surprised that the Fusion, Mercury Milan and Lincoln Zephyr sedans, and the crossover Ford Escape and Freestyle showed increased sales, at the expense of thirstier vehicle lines?

Maybe that’s why Al Giombetti, the top sales banana for Ford and Lincoln Mercury sales, says the company has "never been in a better position to compete for customers in an environment of rising gasoline prices."

Ya think?

That’s the sugar coating to kill the sour taste of Explorer sales plunging 42% and Expedition selling 33% fewer vehicles. Even the F-Series truck, Ford's best-selling vehicle, fell 9%. Interestingly, April was its best month on record for the Ford Escape and Mercury Mariner hybrids--sales more than doubled. There's handwriting on the wall, and it's not your granpa's oil change log...

Honda had a 6.5% jump in April U.S. sales-- the car side gained 4.7% and the truck side was up 9.3%. The new Honda Ridgeline pickup sales grew 43.6% and the CR-V, Odyssey and Pilot saw sales improvements, too.

Same church, different pew for Toyota, showing an 8.5% increase in vehicle sales. Trucks increased 15.6% ...RAV4 sales doubled, and the 4-Runner gained 14.7%.

This suggests that while truck sales for Ford were down, the fuel efficient trucks were selling like hot cakes. Honda has known for years that fuel efficiency, not sex, is what sells to the general public cruising through the showroom…

Proving the theory of if this is the kind of thing you like, you’ll like this kind of thing--Mercedes-Benz had a 13% rise , and its truck business more than doubled. The S-Class sedan and the SL550 Coupe also had a strong month.

Chrysler cars and trucks fell 8%, but there are plans afoot for "the most aggressive product launch" ever on the horizon--ten new vehicles will hit show rooms this year, including the 2007 Dodge Caliber.

Remember the sales incentives?

The Scrooge that Stole Christmas has taken up residence in automotive showrooms… the average incentive offered per vehicle coming was down 6% from March and off 3% from April of last year, according to Edmunds.com.

Domestic manufacturers accounted for 70% of the total industry figure, with Chrysler offering the most ($3,675 per vehicle) which is off $364 from last month. Last year, the domestic automakers' incentive offers made up 77% of the rebate pie.

Ford increased it's incentive spending by just $6, GM cut spending $192 per vehicle.
What vehicle would you think has the largest mark-down?
Big Sport Utes…averaging $4,925 per vehicle. Edmunds.com expects that pattern will continue through the summer.

Why? The big SUVs and trucks are going to require more generous incentives as gas prices continue to go up.

In other words, they’re going to have to pay you—or charge you less—to buy their stuff. And as the price of fuel continues to escalate, watch the behavior of the automakers...and the buyers they're trying to entice.