Published May 20, A1


Ever since gas prices started spiking last month, customers have been flocking to one side of Lustine Toyota/Dodge in Woodbridge and ignoring the other.


"The Dodge truck business is way down," General Manager Jim Giddings said, because of what he called "this gas thing." He's on track to sell just 36 Dodge trucks this month, compared with 68 during the same month last year.


Toyota sales, on the other hand, are up 38 percent so far in May. One of the big drivers is the Prius, the gas-electric hybrid that has become a phenomenon in the past year. Giddings said he has a waiting list of more than 50 customers.


As average gas prices have topped $2 a gallon this month for the first time, cracks are emerging in America's decade-long obsession with bigger and bigger vehicles. Drivers are starting to think about the cost of cruising in two tons of steel, and some are turning to a new crop of innovative -- and more economical -- smaller cars.


Sales of truck-based SUVs fell in April, and sales of small cars went up. Automakers rushed to the aid of SUVs, which is where they earn most of their profit, lowering base prices and offering more incentives than on any other type of vehicle. At the same time, they raised prices on small cars.


"Gas prices seem to be the most likely reason why. . . . As long as they stay around where they are or higher, there is going to be some shifting of the market," said Jesse Toprak, director of pricing and market analysis for Edmunds.com. That's bad news for domestic automakers, who are "especially vulnerable because they make most of their profits from large SUVs and large trucks, and if demand softens, it's going to hurt their bottom lines for sure," he said.


No one is pronouncing the death of the SUV, and car companies insist they are not worried about long-term fallout from higher gas prices. "I think folks have their blinders on when they are just looking at gas prices because the much more important factor . . . is the overall economic environment," said George Pipas, U.S. sales analyst for Ford Motor Co. Inflation, interest rates and unemployment are so low, he said, that "we don't expect to see a substantial shift in sales mix" despite the bigger bite at the fuel pump.


But something is happening, even within the SUV segment. The consumer hunger once focused on big, truck-based SUVs has shifted to smaller, more fuel-efficient "crossover" utility vehicles, which are based on car frames. Crossovers such as the Nissan Murano and Chrysler Pacifica have spurred the segment to four straight years of double-digit sales growth.


"We think that this fuel-efficient segment of the SUV category will have sales growth of at least 30 percent" over the coming year, Paul Taylor, chief economist for the National Association of Automobile Dealers, wrote in a recent analysis. Sales of large SUVs, meanwhile, are expected to stay flat or even decline.


In keeping with that trend, Ford has seen far more interest than expected in its new Escape gas-electric hybrid, a small SUV that will go on sale late this summer. While Ford plans to build only 20,000 Escape hybrids per year, more than 34,000 people have already signed up for an e-mail newsletter about the vehicle, which is expected to get 35 to 40 miles per gallon in city driving, a marked improvement over the 20 mpg of the conventional Escape.


"We definitely expect demand to exceed supply," Ford spokeswoman Angela Coletti said. Since last week, Ford's Escape hybrid Web site has seen traffic jump 140 percent -- partly because of a round of stories in the media, she said, and partly because of concern about rising gas prices.


Similarly, Toyota Motor Corp. has gotten some unexpected results with its new Scion brand, which rolled out nationwide this spring. Aimed at the very hip and very young -- some marketing targeted 9-year-olds -- Scion has connected instead with middle-aged commuters who like its low price and 30-plus-mpg fuel economy. The typical buyer of the Scion xA, a small hatchback, has been a 37-year-old male with a $60,000 salary, according to company figures.


The emergence of such new products could help sustain the trend sparked by higher gas prices. Drivers not only are facing pressure at the pump, for the first time in years they're also being drawn to fuel-efficient products that have either a technological twist, such as hybrids, or a powerful "cute" factor.


The path blazed by Volkswagen's New Beetle has been carried further by BMW AG's Mini Cooper, which last month offered the least in discounts or incentives -- none -- of any type of vehicle on the market, according to Edmunds.com. Car makers have more such offerings on the way, from the "smart" -- a European micro-car that DaimlerChrysler AG's Mercedes Car Group plans to debut in the United States in 2006 -- to concepts from Chrysler Group and General Motors Corp. that should roll out in the next couple of years.


Chrysler's proposed Dodge Slingshot looks like a sporty roadster but features a gas-sipping 3-cylinder engine. The combination of fun and economy is the key to the concept, Chrysler chief executive Dieter Zetsche said in an interview. As long as gas prices increase slowly and steadily, he said, buyers will continue to be motivated more by style than by practical concerns about the cost of filling the tank.


"The only reason we can employ 100,000 people in the U.S. is because we're selling dreams and emotion, not just steel and rubber," he said.


One car aimed squarely at both hearts and purse strings is the smart, which has been a huge hit in Europe since being introduced in 1998. Engineered by Mercedes with design help from The Swatch Group Ltd., the stylish Swiss watch-making company, smarts look like something from the world of Teletubbies. Two feet shorter than a Mini Cooper, the smart is so tiny that four can fit in an ordinary parking space. Many motorcycles have bigger engines; the smart's radiator is about the size of a school lunchbox. More important, a smart gets about 60 miles per gallon on the highway.


The increase in gas prices has created an explosion of interest in the smart in the United States. "The response has been absolutely overwhelming -- e-mail from consumers, request lines set up by advocate groups, fanatic or fan Web sites -- we've really been overwhelmed by it," said Scott Keogh, general manager of Smart USA.


Nonetheless, DaimlerChrysler has no plans to hurry the 2006 U.S. rollout because it wants to set up a network of dealers and service centers. "We're preparing the marketplace, speaking to our dealers. . . . 2006 is going to come extremely quickly," Keogh said.


In the meantime, two small import companies have won approval from the federal government to begin importing smarts and converting them for use on American roadways. J.K. Technologies LLC in Baltimore expects to have 400 on the way to U.S. customers by September. G&K Automotive Conversion of California has far grander plans, forming a partnership with ZAP, an alternative vehicle distributor, to market up to 15,000 smarts nationwide by 2005.


J.K. Technologies President Jonathan Weisheit said his first batch of 20 little cars, which he'll sell for about $20,000 apiece, is already being shipped across the Atlantic, and he couldn't be happier with the timing. The higher gas prices climb, the more people call him to get on the smart car waiting list.


"I'm not worried about gas prices," Weisheit said. "I'm going to be driving a smart."



http://www.washingtonpost.com/wp-dyn/articles/A41132-2004May19.html

Like other Hummer dealers, Jim Lynch is spending millions of dollars to erect a giant glass and steel Quonset hut in Chesterfield, Mo., to replace his dealership near St. Louis. General Motors is insisting that its Hummer dealers plant these fortresses in chic suburbs across America, each announced by a 35-foot-tall "H" out front.


But most dealers are undertaking the ambitious construction project just as Hummer, the loudest and proudest of the giant American sport utility vehicles, has shown signs of losing its swagger.


Sales of the flagship Hummer H2 have fallen for eight consecutive months, and 24 percent in the first four months of the year, compared with the same periods a year earlier. G.M. has resorted to rebates and financing deals, which have become standard for every Detroit brand but Hummer. Inventories piled up as Hummers sat unsold 62 days on average in the first quarter, compared with 15 days a year earlier. And G.M. is now using leases, which are less lucrative than sales, to move a quarter of its volume of H2's, according to J. D. Power & Associates.


"I don't know what it is. I know in some parts of the country it became the poster child for large S.U.V.'s for people who didn't like them," said Mr. Lynch, who has sold Hummers for a decade.


"I know they're burning them in California," he added, referring to the arson of a dealership last year. The attack was linked to the Earth Liberation Front, a radical environmental group. "But we didn't see that here," he said.


Dealers and analysts say rising gas prices are contributing factors for the vehicle, which gets about 11 miles per gallon and has a smaller gas tank than some rivals. For the last two years, fuel economy has been among the top 10 complaints of Hummer owners in J. D. Power's initial quality surveys.


But other giant-sized S.U.V.'s showed signs of sales weakness only in April. To most analysts, the Hummer's main problem is that the H2's success was as a flashy new motorized toy whose time came and went.


G.M. is betting the brand will be revived next year by the H3, a smaller Hummer in the $30,000 range.


"We look at the higher-end S.U.V.'s as really being fashion statements," said Wes Brown, an analyst at Iceology, a market research firm in Los Angeles. "It had its moment in the sun when everyone had to have one. And now, that's it. It's done." The H2's initial success and subsequent cooling off was mirrored by other memorable vehicles, including late 90's revivals of the Ford Thunderbird and Volkswagen Beetle, he said.


Michael DiGiovanni, Hummer's general manager, said, "The brand has enormous growth potential. We're just in our infancy."


"If we had one vehicle line, like the H2, that would be hard to sustain the brand, but we've planned it well and we're going to grow next year."


G.M. owns the brand's retail rights, but Hummers are built by AM General, a privately held company based in South Bend, Ind., that also builds military Humvees. When Hummer was introduced more than a decade ago — Arnold Schwarzenegger bought the first one — it was little different from a Humvee and it sold for $100,000 and up.


But in 2002, G.M. brought Hummer to a wider audience with the $50,000 suburbanized H2 with creature comforts like heated seats. It was a roaring success. It sold for more than a year with almost no incentives, unheard of in Detroit, which has been offering free financing deals or $4,000 rebates on other vehicles.


Now Hummer lags other luxury S.U.V.'s in several categories tracked by Edmunds.com, an automotive data company, including how long it takes dealers to move vehicles off their lots.


Dealers say a new pickup truck version of the H2, coming this month, the H2 S.U.T., will revive sales. They consider the H3 the brand's savior.


"We're a little edgy, yes," says Dan Frost, owner of Detroit Hummer, who is building a new dealership in Novi, Mich. "Sales are weak."


"The big thing they have us on is the H3," he said.


"We're making a big investment in the hopes this will pay off," Mr. Lynch said.


Certainly, Hummers are passionately loved and hated.


"The look is enchanting," said Arnie Bergen, 62, an Oakland, N.J., software developer and retired teacher who test drove one recently.


"It looks like a fun car that you want to get into and drive," he said. "I haven't had that experience since I was a young kid."


To detractors, they are symbols of the nation's soaring oil consumption. Hummers are so large that they are not regulated by fuel economy standards governing most vehicles.


One Web site dedicated to what it calls the "ultimate poseur vehicle" has collected 553 photographs from people all over the country giving salutes to Hummers, Hummer executives, Hummer toys and pictures of Hummers in magazines. As one might guess, these are not military salutes. The site's name cannot be printed in a family newspaper.


The Sierra Club sponsors www.hummerdinger.com, a satirical site lampooning Hummers for, among other things, getting less than half the mileage of a Model T Ford.


Buyers of luxury S.U.V.'s are not counting pennies at the pump.


"If gas was $5 a gallon, I'd probably forget about the Hummer, but if it was $3 a gallon, I'd buy the Hummer," said Mr. Bergen. "I'm not being a big shot," he added. "It's not a major issue for me."




http://www.nytimes.com/2004/05/17/business/17HUMM.html?ex=1085807465&ei=1&en=bca85d483ca5fa02

Published May 12, 2004


Call it revenge of the nerds. Gas-guzzling muscle cars are being overtaken by unassuming little hybrids. And the Toyota Prius is leading the charge.


For the first four months of the year, sales of the Prius are up 80 percent from last year, and April sales are more than 150 percent higher than a year ago.


Prius sales have been so brisk that it's difficult to buy one. Waiting lists at San Diego County Toyota dealerships range from 60 to 330 people. Many would-be Prius owners are having to wait as long as a year.


David Featherman has been waiting since August. In the last few months, the Mission Hills resident has wavered about whether to hold out for a Prius or buy a regular car.


"The more the gas prices go up, the more I think I'll stick it out," he said.


No doubt record-high gas prices have something to do with hybrids' increasing popularity. In San Diego County, unleaded regular gas sold for an average of $2.27 per gallon Monday.


The Prius switches between battery power at low speeds and its gas engine at higher speeds to travel as much as 60 mpg, although owners say the average is more like 45 mpg. Although the Prius is powered by electricity and gasoline, it drives very much like a normal car.


Meanwhile, sales of low-mileage sport utility vehicles have dipped. In April, sales of the Hummer H2 were down 21 percent from the same month a year ago. Cadillac Escalade sales dropped by more than 17 percent, and sales of the lower-priced Ford Expedition plummeted 33 percent.


Sensing a growing opportunity, car companies such as General Motors and Ford Motor Co. are planning their own hybrid cars and trucks.


Fuel efficiency is only part of story, car industry analysts say.


The Prius, which made its U.S. debut with the 2001 model, and to a lesser extent other hybrids such as the Honda Civic Hybrid and Honda Insight are experiencing newfound popularity because they appeal to a niche of affluent, educated, technology enthusiasts whose politics are left of center.


George Peterson, president of AutoPacific, a market research firm, said if the Escalade is the car of rap stars and the H2 is the "the ultimate Billy Bob car," then the Prius is a car for a fledgling Bill Gates or Apple founder Steve Wozniak.


"Gas mileage is a small part of it," agreed Kevin Slater, sales manager at Kearny Mesa Toyota. "It's the technology of the car."


Sev MacPete, a new Prius owner, said he was drawn to the car partly because its low emissions create virtually no pollution.


MacPete, who started a local Prius owners club, said other members seem to fit the image of older, environmentally conscious consumers. Of the 21 people who came to the first Prius club meeting, 17 were past the half-century mark.


"Maybe we are all the free-speaking hippie types who are in their 50s and are going, 'What do we do now? Oh well, let's buy a Prius,' " he said.


On the younger end of the spectrum are people who buy the Prius because of its technology. Not only is the electric technology cutting-edge, but the Prius is equipped with a digital dashboard display that shows the number of miles per gallon the car gets when the battery is running the car and when the gas engine takes over.


People who are drawn to the Prius tend to have wireless technology in their homes and offices and are quick to buy the latest cell phone and computer, Peterson said.


Barrett Fabian is that kind of person. The 27-year-old information technology worker said he wanted a Prius because it was as close to a truly electric vehicle as there is. He said he looked at the Honda Civic Hybrid but decided on the Prius because it uses electric energy more readily than the Honda models.


"It's just a unique vehicle," he said.


The demographics of a Prius owner have made Featherman, 37, think twice about buying one. He wants the car because the size and price are right for him. New Priuses sell for $20,000 to $25,000.


"I'm not buying it because it's a cool techno geek car," he said, adding with a laugh that he gets dismayed because he usually sees older people driving them.


But with the Prius' appeal to environmental and techie types, it should come as no surprise that California has the most owners of hybrid cars. As of last year, California had 11,425 registered hybrid-car owners, according to R.L. Polk & Co., a market research firm. The next closest state was Virginia, with 3,376.


The hybrid buzz also has been helped by celebrities such as Tom Hanks, Cameron Diaz and Susan Sarandon, who drove Priuses to this year's Academy Awards. Toyota has been so overwhelmed by demand that it hasn't launched much of an advertising campaign.


"They have done a nice job of product placement," Peterson said. "The word of mouth has been quite powerful. Even my wife who never looks at cars says, 'Maybe, I should get a Prius.' "


Alan Rahbari, general sales manager at Cush Honda in San Diego, said sales of the Civic hybrid have been helped along by the backing of stars.


"If the stars are buying it, then people tend to want to at least look at it," he said. "In the past, it was just a car with new technology. Now it is the car to buy."


But there's a question as to how widespread the Prius demand is.


The waiting lists are more a function of lack of supply than of overwhelming demand.


"Prius plays into the values and desires of a certain group of people – that's a relatively small percentage of the population," said Dan Gorrell, of Strategic Vision, an auto industry market research firm.


Local dealers say they each get only a few Priuses a month. The lack of supply has helped reduce the average number of days a Prius stays on dealer lots nationally to six, the lowest in the industry.


"The factory wasn't ready," Slater said. "They are so far behind it'll be a while before they catch up."


In comparison, a Hummer H2 stays on the lot for an average of 60 days and a Cadillac Escalade remains on the lot an average of 49 days.


That hybrid sales are up and SUV sales are down doesn't mean that the reign of large SUVs is over. The cars appeal to widely different audiences, Peterson said.


"You can never make the connection that people leaving Hummers are buying Priuses. That ain't never happening," he said.


Or as MacPete said of the Prius: "It's the absolute polar opposite of a Hummer."


Even with rising gas prices, SUVs are still going to be the car of choice because consumers have become too accustomed to their convenience, Gorrell said. "I don't see people walking away from the performance and intangible benefits that larger SUVs provide, unless gasoline becomes very expensive," he said.


Car buyers soon may not have to decide between high-mileage hybrids and SUVs. Ford is planning to offer a hybrid version of its Escape model, a smaller SUV, later this year. A Lexus SUV hybrid is in the works as is a hybrid Highlander, one of Toyota's SUV models. (Lexus is Toyota's luxury-car line.)


Interest in the Highlander appears to be intense. Local Toyota dealers say customers are already coming in to ask about the hybrid Highlander even though Toyota hasn't announced when the 2005 model will be released.


Said Slater: "There's already 30 people on the waiting list."


http://www.signonsandiego.com/news/nation/20040512-9999-1n12hybrid.html

Published May 5, 2004

Detroit was recently ranked as the nation's most obese city by Men's Fitness magazine. Perhaps it is no surprise, then, that the Motor City's chief product is also losing the battle of the bulge.


The average new car or light-duty truck sold in the 2003 model year tipped the scales at 4,021 pounds, breaking the two-ton barrier for the first time since the mid-1970's, according to a report released by the Environmental Protection Agency last week.


The fattening of the nation's automobiles is a principal reason that average fuel economy has stopped improving and the nation's consumption of crude oil has been swelling: all else being equal, moving more weight takes more energy. Add in the additional pollutants and greenhouse gases released by burning more fuel, and it is not surprising that the upsizing trend is condemned by environmental groups.


But ranged against them in an increasingly bitter debate are industry lobbyists and conservative groups who argue that girth is good, for crashworthiness and because people want more space and power, though Honda is a notable dissenter in the industry.


At the center of the debate is the Bush administration's proposed rewriting of national fuel economy regulations. Though work on the plan is still in its early stages, one important aspect of it could lead automakers to make their vehicles even heavier on average. Environmentalists are distressed by the plan, but it has not been embraced by the auto industry, either.


In recent months, the National Highway Traffic Safety Administration has been flooded with nearly 50,000 letters and detailed comments about the plan. Many have come from organizations with an interest in the outcome - automakers, lobbyists, environmental and consumer groups - but the majority have been from individuals, some of them angered by increasingly tanklike vehicles and others by the claims of industry lobbying groups that S.U.V.'s will somehow be regulated out of existence.


And there are other motivations. "One of the things that triggers asthma is air pollution, and vehicular emissions are a significant source," said Dr. Ronald Saff, an asthma specialist in Tallahassee, Fla., concerned about rising asthma rates. Dr. Saff, 45, wrote a letter asking the agency "to make S.U.V.'s safer for families and the environment."


But Carroll Boyle, a 65-year-old retired educator from Manchester, N.H., wrote that tougher regulations "may force people into vehicles that are smaller, less powerful, and not as safe as our current options." She added, "In New Hampshire we have weather that requires an S.U.V. many days a year."


The E.P.A.'s weight statistics show that the average weight of a 2003 car or light-duty truck, like a pickup, sport utility, van or minivan, was heavier than in any model year since 1976, when the average peaked at 4,079 pounds. Just five years later, after the oil shocks of the 1970's, the average had fallen by more than 20 percent, to 3,202 pounds. The figures take into account the sales volumes of different models.


Average fuel economy peaked at 22.1 miles to the gallon in the late 1980's, according to the agency, but has eroded since then to 20.7 miles for the 2003 model year.


The agency expects the 2004 model year to finish with an average weight of 4,066 pounds.


New noncommercial vehicles are actually even heavier than the statistics show, because the largest vehicles sold to consumers, including Hummers and Ford Excursions, are not classed as light-duty, so they are not covered by fuel economy rules or counted in average weight calculations. They are also exempt from many safety standards and crash-test requirements.


Government studies say these giant vehicles are increasing the overall number of deaths in accidents, mainly because of the threat they pose to people in cars they hit in collisions. The administration's plan does suggest that manufacturers be pressed to slim down the heaviest of the heavyweights, like the Hummer.


Though new vehicles are back to weighing what they did in the 1970's, they are obviously very different in shape, in part because of the fuel economy rules introduced then. Automakers must meet average mileage targets, now set at 20.7 miles to the gallon for light-duty trucks and 27.5 for passenger cars. By scrapping station wagons and large sedans in favor of minivans and S.U.V.'s, manufacturers have greatly increased the share of their total sales subject to the lower truck standard, and they have fought to preserve the two-tier system.


Federal regulators say safety has suffered as a result, both because S.U.V.'s and larger pickup trucks are more prone to roll over than cars are, and because they do more serious damage to vehicles they hit.


Traffic deaths in the United States rose to 43,220 last year, the most since 1990. Before the S.U.V. boom, the country had the world's lowest highway death rate, taking miles driven into account, but it now ranks behind at least eight other developed nations, including Canada, Australia, Britain and Sweden. Lower rates of seat belt use and other factors play a part, but much of the difference stems from the composition of the national vehicle fleet, researchers say.


The Bush administration contends that most sport utilities should be given room to grow in any new fuel economy system, citing a government study that said lightening any but the largest vehicles would do more harm than good. Thus, one of the administration's leading proposals is to divide the light-duty truck category into classes, with more stringent requirements for heavyweights.


Most major automakers have reacted cautiously, especially to the idea of broadening the system to cover the largest S.U.V.'s.


"Studies show that making vehicles lighter has an adverse effect on safety," said Eron Shosteck, a spokesman for the Alliance of Automobile Manufacturers, which lobbies on behalf of General Motors, Ford Motor, DaimlerChrysler, Toyota and others. "If all vehicles were made heavier, it would have a positive impact on safety," Mr. Shosteck said.


But Honda, which makes some of the most fuel-efficient vehicles, said its own research found that dimensions, design and materials often made more difference than weight. Honda cited government statistics showing that midsize cars have lower death rates than sport utilities, and that smaller S.U.V.'s do better than midsize S.U.V.'s.




http://www.nytimes.com/2004/05/05/business/05weight.html?ex=1085225129&ei=1&en=e2eb8062ceb50ae9