Do plunging oil prices mean SUV rebound and the end of the Chevy Volt?

Over the last few weeks, oil prices have come crashing down.  Consumers are feeling those effects at the pumps.  In July, we were faced with record highs of over $4 per gallon.  Now, according to the Energy Information Administration, the US average is down to $1.811 -- Americans haven't seen these gas prices in a few years.

The real question is will Americans flock back to the gas guzzling SUVs and trucks?  Will this impact alternative vehicle innovation?  Will Hummer make a comeback?

Across the board, auto sales have dropped.  We continued the 13-month decline as November sales dropped 37%, a 26-year low.  General Motors fell 41%, Chrysler fell 47%, even Toyota fell 34%.  But suddenly, used SUV prices are seeing a bit of a comeback.  Falling gas prices have slowed the demand for hybrid vehicles and smaller cars.

Today, US auto companies, including Ford, Chrysler, and GM, went back to Capitol Hill to rally for emergency loans -- $34 billion of emergency loans.  President-elect Barack Obama said on Wednesday that any bailout should be based on "realistic assesments" of the market.  It remains to be seen if those realistic assements will include support of electric vehicle technology like the Tesla Roadster and the Chevy Volt.

Despite any economic downturn and desperate attempts for bailout, GM continues to say that plans to roll out the Chevy Volt are still underway.  According to Design News, GM spokesman Rob Peterson said "The Volt is the lead program for General Motors...We're moving forward with it and that's not going to change."

Either way, the auto industry is in a pretty bad way; and consumer demand may prove to be more fickle than any environmentalist might hope.  Time will tell if the Volt will hit the road or if Tesla Motors will be able to get the Model S off the ground.  As Rick Wagoner, GM CEO, said in a Fox News interview, "We're here today because we made mistakes which we're learning from."  Time will tell, Rick.  Time will tell.

 it's amazing how directly/quickly the gas prices impact car sales -- i'd hoped that the high gas prices would've made people stop and think about driving gas guzzlers at a more thoughtful/eco level than just how much they pay at the pump!  

Nah.  The only reason gas prices are so low is because of the global recession.  Which also means that all auto sales are down, which means people won't be flocking to any new cars.  Once the economy starts to recover, so will oil and gas prices.  GM and politicians know this. 

The only way the Volt goes down is if GM goes bankrupt, especially after the amount of money they've put into it.  And especially since politicians are you going to attach green strings to any big auto bailout.

There might be a very short-term rebound in relative SUV sales (if so, mostly because dealers are pricing them super low because demand has plummetted), but it will be a short-term effect if any.

Hah. Good luck w/ that.

I think your average consumer doesn't focus too much on eco-benefits (or harm)... it all comes down to the hit on the pocketbook. That's why I wish we could tax gas more... but good luck w/ that too. :-)

talk about impossible, right??  but i think that a gas tax long ago would've deterred people from buying big suvs...and helped us develop better gas consumption habits alongside encouraging green auto technologies...if only....   ;)

That would be pretty dumb to drop know technologies like the Chevy Volt. Just because oil is going down for the moment doesn't mean it will stay down. Simple economics shows that oil will rise again maybe even higher than before. Going with hydrogen and electric just seems to be smarter and in the long run more efficient.

I went to a lecture at UC Berkeley two days ago.  It was a talk by Professor Daniel Sperling of UC Davis, called "Two Billion Cars and California Climate Policy."  One of the questions after the talk was about a gas tax to help innovation and change consumer behavior.  Theoretically a gas tax (or price floor or sur-charge or however you want to call it) would be great.  But as Professor Sperling said..."The word 'tax' is an anathema in the political world."  We've set up a political system in which suggesting a tax doesn't really fly.

 Stins has a point in that a "tax" as such doesn't seem to be a politically acceptable action at this time.  That said, a tax on fuels, or more appropriately on carbon, if universally applied, is the most efficient way to influence consumer behavior.  Cap and Trade, in its more popular formats, can be impactful, but it is far from transparent in its application, and leaves our politicians and bureaucrats much room to wiggle, exempt certain industries, manipulate allowances, etc., etc....not cool.

While "tax" is a four letter word currently, if we all let our reps know that a transparent, universally applied carbon tax is the right step....you just never know....one or two of them might actually listen.  So speak..er, ah, write/type up folks......

One last point, I think big pick-ups and SUV's will exist for a long time, but in FAR, FAR smaller numbers than in the recent past, regardless of gas pricing.  I think they will still have a place n the market with farmers, other folks who need towing power, off road capability, etc.  I think the golf club set, and Mom's will go with more appropriate vehicles with flex fuel capabilities, electric, on board hydrogen, etc. - for a host of reasons.

From the peanut gallery,

Very true - in fact China has a nearly identical Chevy Volt clone, and several other clones of the Chrysler Pea Pod, Fords (Norways) Th!nk (all out and 'buzzing'; along with Venture Ones,, that Viper 4 wheel motorcycle, and so on); making this game of "chicken" awaiting bailout- or lack of- passing.  Economically, financial problems are aplenty so only time will tell.

Not necessarily, just because fuel is cheaper does not mean people will induldge completely with disregard to our current climate situations. Of course some will, but the majority of people who can look at our current situarion rationaly realize that fuel will soon climb right back up again and we will be stuck with gas-guzzlers if we don't jump on the green vehicle movement quickly. Renewable energy fueling electric cars is doable and a goal that it seems like we all should be able to share.

 Just read another shut-down temporary it said.  Exert from article: 

Think Halts Production; Looking for Funding

The quick run-up in fuel prices really shocked the consumer and led to some knee-jerk reactions that 'I have to get rid of that SUV.If you manage to get a buyer to bite, be prepared to get a lot less for your SUV than you originally expected. Over the past six months, used-SUV values fell 10%, a rate of depreciation that traditionally occurs over 12 to 18 months. Some parts like mitsubishi parts would really help alot in lessen fuel consumption.

** edited to remove link in violation of Commercial Use Policy

 I heard something on "Cruise Control" radio show that bigger cars at Chrysler are making more of a return in sales than smaller more efficient cars.  I do not know if that is true but the answer lies somewhere between oil and finances; and that might throw a monkey wrench into the best laid plans!  

I do see an SUV rebound here in Kansas City. Considering a recent poll that suggested a plrality of Americans think taht the recent GW is natural (44%), I do not have faith in the American people to do what is right for the country or planet (until all options are gone, history is on my side). I hope I'm wrong.

I have seen quite a few new SUVs out here in CA, but not in the numbers I used to.  What I see more of are "Crossover" vehicles that look like mid-sized SUVs but are built on passenger car chasis instead of those of trucks.  Means they are lighter, and get a little better gas mileage.  Not great mileage, but better than some of the big SUVs on the road.  That might explain the "bigger" cars that Chrysler is selling...

I dont think that the reason why gas prices are so low is because of the recession, its just an effect of the recession.

I think the reason for the recesssion was the HIGH gas prices. The reason for High Gas Prices were from the over bidding/pricing of oil as a commodity in the Futures Market. The banks were investing in this, and then we bailed some of these groups out. (Horrible).

So it all came to bite them back, the price of oil didnt go up (as they thought it would be in the future), so they lost on the futures market. People took action, demand went way down. Again the investment groups lost money. Had nothing to do w Saudi or Middle East racking up prices.

I'd like to see GM go bankrupt. I dont think we should bailout a company that really stuck it to us in the past with the EV and were the greediest of the bunch.

Okay you're kind of confusing me because you said the same thing in two different ways here.  It's not 'x' but it's 'x'.

However, my point was that low gas prices are an effect of the recession.  I also don't think it's correct to blame the economic downturn on high gas prices.  The economic collapse was due to many factors like the bottom falling out of the mortgage industry, for example.

I didnt mean to confuse you just wanted to say that I didnt think the prices are low because of the recession, they are low because of futures market wrongfully overbid, and came back to them with low demand after rising prices at the pump. The supply never changed.

I agree that there are many factors to the recession, including the housing market.

But oil/gas has a countrywide/worldwide effect. Mortgage industry crisis was in selective locations in the US.

Speaking of car sales...this was post on Reuters today:

DETROIT (Reuters) - Ford Motor Co posted a 40 percent drop in January sales in the United States, the sharpest decline for the No. 2 U.S. automaker in 10 months of double-digit sales declines in the world's largest market for new cars and trucks.

The results from Ford on Tuesday were among the first from major automakers for a month expected to show overall sales near 27-year lows, extending a stretch of 15 months of consecutive auto sales declines.

Chrysler LLC said it expected overall U.S. auto sales for January to drop by as much as 35 percent after a sharp decline in sales to car rental agencies.

Yikes.  As I call, that's right in the ballpark of the last few month declines in car sales (30-40%).  So things aren't getting better yet despite gas prices being low.  Which isn't surprising, since the economy is still in the crapper and people just can't afford new cars.  Especially since there aren't many particularly fuel efficient cars available anyway.

Bit of an update on this story.

Chrysler's U.S. vehicle sales plunged 55 percent [so much for "up to 35%"!] in January, while General Motors' tumbled 49 percent and Ford's dropped 40 percent, starting 2009 at an abysmal pace for the whole auto industry as lower sales to fleet buyers like rental car companies weighed down the results.

Toyota's sales dove 32 percent for the month, Nissan's dropped 30 percent and Honda's fell 28 percent, putting the overall industry on track for its fourth straight month in which U.S. sales plunged 30 percent or more.

But Subaru bucked the trend of declines for a second month in a row, posting an 8 percent sales increase, and Hyundai said its sales jumped 14 percent.

Hyundai credited its increase to its offer to cover a new vehicle's depreciation if customers return a car within 12 months because they are unable to make the payments.

When are the Hyundia EVs becoming available?  ;-)

No full EVs for a while, but they will have hybrids and plug-in hybrids before too long.

The Korean automaker's promised to put a hybrid subcompact, a hybrid mid-size and a plug-in competitor to the Chevrolet Volt on the road within five years. There's even some speculation at least one of them could be stamped "Made in the USA."

Hyundai's going full-bore with its electric program, launching a partnership with Korean companies LG Chem, SK Energy and SB LiMotive to develop the batteries its cars will need if they're to start hitting the road by 2010 as promised.

Fascinating!  I meant that question as a joke, but the joke is on me!  Thanks for the info Dana.

Haha no problem.  At this point just about every automaker is developing some sort of electric vehicle technology, and I just happened to remember hearing about Hyundai's recently.

 I think I heard part of the stimulus is based on buying American; such as American steel, American cars, and so on.  That would seem to be: buy a Volt or Venture 1, Tesla, or similar, financial assistance would be available

- BUT -

buy a Triac, Think, Zenn, Zap, et-c., from another country and no financial help would be offered. Full price only. Sounds pretty screwy to me, but all politics seem screwy to me!  Anyone else hear of this?

The EVCast had an interview with a guy from Plug-In America who played an instrumental role in the EV parts of the stimulus bill.  He said that because even American companies do manufacturing and get components from abroad, there's no 'buy American' clause in there.  I forget, it may have been something which got dropped late in the compromise process.