From: Purva Patel, Houston Chronicle
Published March 28, 2005 12:00 AM

Fuel-Efficiency Attitudes May be Shifting; Auto Dealers Hear Hints of a Shift

HOUSTON — Gasoline prices have some local motorists thinking twice about what they drive. While Houston car buyers aren't flocking to buy more fuel-efficient cars in a market dominated by trucks and SUVs, record high prices have some considering smaller cars instead of sport utility vehicles.


Average prices at Houston-area gas stations hit $2 a gallon Wednesday for regular unleaded, according to AAA. The average for premium in Houston rose to $2.19 a gallon. Nationwide, the average for regular unleaded hit $2.11.


Dealers have seen some subtle buying pattern shifts.


Truck sales are at an all-time high at Fred Haas Toyota World in Spring, but SUV sales there have fallen. The dealer has been selling as many Sequoia SUVs in one month as it would have sold in just a week during this time last year, Shahin Salehoun, general sales manager, said.


He credited strong truck sales to consumers who use the vehicles for work. "The truck buyers aren't paying much attention to it, but the SUV purchasers are looking at it."


The dealership has also seen higher demand for smaller cars like the Corolla and the Toyota Prius, a hybrid.


Bob Reilly, customer relations manager at Don McGill Toyota-Scion in west Houston, says prices are certainly on most of his customers' minds.


"Almost every single customer who sits at my desk mentions something about fuel economy and gas prices," he said. "In our particular neighborhood there are a lot of folks that don't concern themselves. But there are many more that do."


Nationally, sales of large SUVs have dropped in recent months in tandem with growing demand for compact cars, according to analysts at Edmunds.com.


Manufacturers have also increased spending on incentives, such as discounts on large SUVs, while cutting incentive spending for smaller cars.


Incentive spending for larger SUVs climbed to $4,120 per unit in February 2005, from $3,224 a year before. But incentive spending on compact cars dropped to $1,416 per unit in February 2005, from $1,940 a year earlier.


"Our conclusion is that manufacturers sort of forecasted that there is going to be a drop in demand for their larger vehicles, and they increased their incentive spending for those categories," said Jesse Toprak, director of pricing and market analysis for Edmunds.com.


Such incentives and resulting lower prices have helped buoy SUV sales for now.


Stephen Brown, an economist with the Federal Reserve Bank in Dallas, says it takes a full seven years to turn over the country's fleet of cars, for example, making fuel-efficient cars more prominent in the mix.


"We've seen some trouble for big SUVs and stronger demand for hybrids," he said. "Of course, manufacturers aren't really geared up for this, so dealers are collecting close to sticker price for hybrids, and there are waiting lists, and the SUVs simply get discounted. They're more expensive to operate, so they're saying, we'll make it cheaper for you to own."


Experts at Edmunds.com say upper- to middle-income consumers are less likely to let gasoline prices influence what they drive unless they're trying to make a political or environmental statement by buying hybrids or fuel-efficient cars.


A recent study released by the Civil Society Institute, an environmental and health care think tank, found that 89 percent of 1,013 people surveyed thought it important for the government to demand that U.S. vehicles reach an average of 40 miles per gallon, to cut greenhouse gases and dependence on Middle East oil.


But a shift in attitude isn't necessarily translating into a shift in buying patterns, as evidenced by some dealers who say their consumers aren't reacting much to the record gas prices.


"Honestly, I don't really see people bringing their gas guzzlers to trade for a more economical car," said Cary Wilson of Ron Carter Automotive Center in Alvin. "People are aware of fuel-efficiency, but when you get down to it, the soccer mom still needs to haul her kids to practice. Gas in the U.S. compared to the rest of the world is still such an incredible value, with our gas prices below $3 a gallon."


Chronicle reporter Lynn J. Cook contributed to this story.


To see more of the Houston Chronicle, or to subscribe to the newspaper, go to http://www.HoustonChronicle.com Copyright (c) 2005, Houston Chronicle Distributed by Knight Ridder/Tribune Business News.


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