Extinction looms for gas-greedy dinosaurs

Fuel is expensive in the US but there have been few shortages. Picture / Reuters

Mark Twain once remarked famously that reports of his death were greatly exaggerated - he was still alive and kicking. The fate of the sports utility vehicle, or the SUV as Americans call their beloved four-wheel-drives, has also been a topic of great speculation for the past few years, its survival prospects linked to the inexorable rise in the price of petrol.

Now that US petrol prices have passed the symbolic US$3 a gallon mark ($4.7 for 3.8 litres) - and in some places are headed towards $4 - and with President Bush warning that high gas prices will "last for years", can the SUV survive?

The signs aren't good. Last year SUV sales slumped 100,000, the first fall in more than a decade.

"There has been a significant decline in sales of larger, heavier vehicles," says Jim Hossack, an analyst with research firm AutoPacific Inc. "People are going from eight cylinders to six, from six cylinders to four, and from four-wheel to two-wheel drive."

Significantly, SUV sales slumped in September and October last year, when the impact of Hurricane Katrina, which devastated oil refineries in the Gulf of Mexico, kicked in. Sales rose in December, but crashed again in March as petrol prices increased and have yet to rally.

"I think there has been a permanent shift in customers' minds," says Jesse Toprak, an analyst with Edmunds.com, which tracks auto sales. "The numbers may not show it dramatically yet. But we're seeing it with big SUVs. I think the numbers will take a while to show themselves."

The trend is is most evident in middle-income families, people who commute to work from often far-flung suburbs.

In the late 1990s, when gas was maybe $1 gallon, big SUVs were fashionable. "Fuel consumption was irrelevant," says Toprak. "Now it's one of the first questions people ask."

Manufacturers and dealers have responded with incredible incentives. One dealer in the Los Angeles market offers $6000 towards petrol for large SUVs.

Recent polls suggest that rising fuel prices are the leading concern for Americans. This is bad news for the Bush Administration, which says it can do little to alleviate consumer pain, even as oil companies post record profits. Exxon Mobil, the world's biggest oil company, made $36.1 billion last year, enough to buy almost 15.5 million gallons of regular gas.

And while many US consumers have yet to connect the dots between global warming, Katrina and the gas pump, the prospect of paying $100 to fill a SUV tank has given pause.

As the cost of gasoline filters through the economy - pushing up retail prices - the economic pain will intensify.

This is balm to SUV-haters, who brand the behemoths as gas-guzzlers, and draw a line to terrorism, prompted by oil-driven US foreign policy and climate change. Protesters have torched SUVs and harangued drivers.

Hardliners dug in, swearing that SUV critics would have to pry their SUVs' keys from their cold, dead fingers. The Sports Utility Vehicle Owners of America asked, "What Car Would Jesus Drive?" - as in former GM worker, Jesus Rivera, who was adamant he wouldn't give up his SUV.

"It's hard on the gas, especially my 2004 because it's got a V8," he told the Detroit Free Press. "But, you know, I wouldn't trade in for a car."

Americans have always loved big cars - the 1970s compact era was an aberration - but will 29 million SUV owners stand firm?

This is of intense interest to car-makers, who have ridden the SUV love fest all the way to the bank since the early 1990s. There is marked reluctance in car-making capital Detroit to concede that the SUV boom may be tanking.

The SUV has had almost as many premature obituaries as the novel in recent years, with sales slumps linked to fluctuating gas prices.

The devil is in the details. "When you lump all SUVS into one category - we have four: small, mid-size, large and luxury - they've held the ground," says Toprak. "But when you analyse categories, large SUVs have lost market share, from 5 per cent of the market in 2005 to 3.7 per cent this year."

There is also marked consumer resistance in some quarters to change.

"It's curious," says Art Spinella, who runs CNW Marketing Research. "New SUVs sell well. Old ones don't." Thus, die-hard Ford Expedition drivers will often stay with the brand - for now at least.

"Large SUV owners trade in vehicles that get 19 miles per gallon for those that get 21mpg. They're not trading up for better mileage but for newer vehicles."

At the same time drivers are diversifying within the middle-class "family fleet". Many use compact four-cylinder cars for daily use, reserving SUVs to pull the boat on holidays and long road trips.

Others are buying "crossovers" - more roadworthy SUVs mounted on car frames, as against the traditional truck chassis - and hybrids.

Yet, while hybrids have become a buzzword in the auto industry, they constitute barely 2 per cent of the market. Early adapters spent $50,000 on the Lexus hybrid, perhaps as a status or environmental gesture. But when Toyota rolled out a Highlander hybrid as a mass-market vehicle it didn't do as well. "The premium was over $5000 for the hybrid version," says Toprak. "It was too expensive. The magic number appears to be $2000."

Achilles' heel exposed

Many feel that Americans are still adjusting to fuel hikes. The last time the US experienced a price spike was during the Opec oil crisis in 1973. Back then many Americans traded in old road hogs for compacts.

"Two things happened in the 1970s," says analyst Hossack. "Prices increased radically. And there was a shortage of fuel. People queued at the gas pump." Washington intervened by lowering the top speed limit to 55mph (88km/h). Yet with few exceptions - notably in the southeast in the immediate aftermath of Katrina - there have been no shortages this time round. Thus, for many, there is no urgent reason to reduce vehicle size.

But rising prices also expose America's Achilles' heel. For the past century the US has run on cheap petrol. It has permeated the economy and the infrastructure, along with the political and consumer mindset.

Politicians have kept petrol prices low. The Cafe (Corporate Average Fuel Economy) law mandates that cars must get 27.5mpg. But small trucks, minivans and SUVs need get only 20.5mpg. This underpins the SUV boom.

Conserving petrol would take radical action, like pricing it at European prices. Politicians regard this as suicide.

"What people buy is directly related to what the fuel price is," says Hossack. "As long as our fuel is the cheapest in the industrialised world, people will use it."

And there's the rub. The US domestic vehicle fleet is currently 237 million cars. This total is expected to leap 38 per cent by 2030. Manufacturers must sell 16.6 million vehicles a year to stay in profit.

While oil stocks may be at or near a "tipping point" - where they decline - US opinion has yet to catch up.

At AutoPacific focus groups, people complain about gas prices yet do little to save fuel, such as driving within the speed limit, turning off the air-con or checking tyre pressure. The critical mass for change remains elusive - for now.

As such, the SUV remains the canary in the coalmine.

"There's something going on," says Toprak, "but we're not in a crisis mode. People aren't abandoning their petrol autos for hybrids. But they are considering more fuel-efficient vehicles."

Until that crisis kicks in, maybe with the next Katrina, America's love affair with the SUV will probably continue.