Fuel-efficient vehicles are flying off lots as consumers adapt to high gas prices

Molly Boigon (0:03)

Hello, and welcome to the Automotive News Shift Podcast, where we bring you the latest on automotive technology, trends and transformation.

I'm Molly Boigon, tech and innovation reporter at Automotive News. Today's guest is Albert Gore, executive director of the Zero Emission Transportation Association. He talks about how 15 months of rapid policy change under the Trump administration are pulling through the entire EV supply chain, and why the companies he represents say what they really need is stability.

Albert Gore (0:36)

Whether it's Cafe or GHG or the endangerment finding itself, these are typically things that take into account the fact that companies have invested, in many cases, tens of billions of dollars in reliance on a policy that's been long standing.

Molly Boigon (0:53)

But first, let's talk about the week. For that, I'm joined by my colleague, Larry Vellequette, who covers Toyota, Subaru and Mazda for Automotive News. Larry, thanks for joining me.

Larry Vellequette (1:03)

Molly, it's happy to jump in in the guest spot today.

Molly Boigon (1:06)

Love it. Love it. Yeah, now you're in the hot seat.

You published a story this week about new vehicle inventories hitting 3 million units for the first time since November, but it's not evenly split across the segments. Full-size pickups and heavy-duty trucks are piling up, while smaller vehicles, small SUVs and crossovers are selling about as fast as they arrive. One of the experts that you spoke to says that fuel costs are driving the divide. So Larry, how much of this is about what people are paying at the pump these days versus something else going on in the market?

Larry Vellequette (1:39)

Well, Molly, what we're seeing right now in the market is automakers are still producing cars. They're still delivering those cars to dealers to sell. The problem is that is the mix. We have vehicles that are inexpensive, that are moving very quickly, and we have vehicles that are expensive. Their dealers are starting to feel shoppers pull back on what they're willing to buy. So you see shoppers move down and buy smaller, more fuel efficient vehicles because of the price of gasoline and diesel especially.

And where that translates to is in inventory. We see dealer inventories creeping up past 3 million for the first time in 11 months.

And that mix is now largely made up of full size trucks and full size SUVs, some luxury SUVs that are very expensive, and anything that's being powered by diesel.

Molly Boigon (2:46)

So this is so interesting to me, because I feel like the sort of affordability crisis conversation has been, yeah, you know, there are all these vehicles at or above a $50,000 average transaction price, but consumers are still really interested in purchasing these larger vehicles. And Americans for all of their talk about wanting cheaper cars are still shelling out. And now it appears like finally the fuel prices and the expense of these larger vehicles is actually impacting consumer behavior.

What are you watching in the next month or two to tell us if this is, you know, just a seasonal thing, just a short term thing, or whether, you know, the American consumer is turning away from the gas guzzler once and for all?

Larry Vellequette (3:35)

Well, I don't think we're ready to stick a fork in the gas guzzler because we've tried that once before and it didn't really stick, right? But what it is is that we've heard it up and down the economy. Consumers are at the breaking point of their wallets. And when they need vehicles right now, they are choosing smaller cars. The problem is that automakers can't turn on a dime, right? A lot of this, what we're dealing with right now started in February with the Iran War.

Well automakers can't just adjust and go, oh, well, you know, prices are going to go up. We'll make a bunch of small cars.

That's not the way this industry works. We have, you know, they have supply contracts that they have to adjust. They have production constraints that they have to deal with. It's just too difficult. So they keep putting out these vehicles that are large. And they were what consumers wanted a year ago, 18 months ago. The problem is, you know, consumers' wallets got stretched, and now we're going to start seeing the aftermath of that.

Molly Boigon (4:47)

Larry, you know, you're a couple of years older than me. We'll let the audience just sort of fill that out.

So I was not super, let's say, politically news conscious in 2008 I was alive at that time. But, you know, in learning about the auto industry, having been at auto news for the last few years, you know, I understand that part of what contributed to the crisis in 2008 was another one of these mismatches where automakers were producing larger vehicles, fuel prices spiked, and then, you know, we all know what happened next. Is there any way to sort of avoid this mismatch in the future? It's sort of stunning to me that we're in a similar position 20 years later and, you know, for all of the sort of consulting dollars and projections and all of this other stuff that the industry has spent time and money on, there's still not a way to really align the product cycle with consumer demand, it seems like to me.