Cheap gas shifts car buyers’ habits

Associated Press

DETROIT

Inside the auto show here, automakers are showing off electric and other vehicles designed to cut our dependence on fossil fuels. Outside, car buyers are paying the lowest prices in years for carbon-based fuels.

That dichotomy has the industry scrambling to sell alternative vehicles and buyers making choices that seemed impractical just a short time ago.

Some of the cars that will tease visitors to the North American International Auto Show include a new all-electric Chevrolet Bolt, hybrid and plug-in versions of the Hyundai Sonata and other vehicles aimed at easing pain at the fuel pump.

But cheap gas prices across the country, driven by a surprising plunge in oil prices, are tempting potential buyers away from the small and economical and toward comparatively more gas-guzzling trucks and SUVs. That’s leading automakers to take the long view, adjust production and hope big research and development bets still pay off on better mileage to meet stricter government emissions standards. They also want to appeal to consumers, who once were anxious about high gas prices.

The plummeting pump prices — now pegged by AAA at $2.13 per gallon on average, compared with $3.31 a year ago — have had an “immediate impact on consumer psyche,” according to Edmunds.com senior analyst Jessica Caldwell. According to the car-shopping site, SUVs and pickups outsold cars in 2014 for the first time in a decade. It helps that SUVs are now built on car rather than truck platforms and have vastly improved fuel efficiency compared with their forebears.

High gas prices and stricter fuel-economy rules forced the industry to improve existing gas-powered engines — and to develop new vehicles that relied less on carbon for power, or not at all. Hybrids came to prominence at the turn of the millennium with the Toyota Prius. But last year sales of Prius models dropped 11.5 percent, compared with the previous year.

It’s tough to predict a turnaround. The lower gas goes, the longer it will take to make the purchase pay off for a higher-priced, better-mileage Prius instead of, say, a Corolla.

Not all small cars have suffered. Caldwell says falling gas prices have given first-time buyers and others more comfort and confidence to buy a new car. Sales of the redesigned Honda Fit subcompact were up 40 percent in December, while sales of the Nissan Sentra small car rose about 43 percent.

Automakers, however, have to think longer term. General Motors CEO Mary Barra told reporters Thursday the lower gas prices won’t change the automaker’s strategy to push for fuel- efficiency across its lineup but instead will adjust production to sales. She said GM is prepared to make more trucks if necessary.