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The Honolulu Advertiser
Posted on: Wednesday, August 13, 2008

Interest in small cars drops with cost of gas

By Sharon Silke Carty and Chris Woodyard
USA Today

Car shoppers who panicked in June and July about gas prices are losing interest in small cars and hybrids as fuel prices have declined.

As gas prices topped $4 a gallon for about seven weeks this summer, truck and SUV sales plummeted, and small car sales soared. But www.Edmunds.com, which attracts about 50 percent of people using the Internet to research their next car purchase, says research interest in compact crossover SUVs now is on the rise.

"In May, June and July, people were just stunned" by $4 gas, says Jeremy Anwyl, CEO of www.Edmunds.com. Now, "it's kind of a return to rationality, where the singular fixation on fuel economy is gone. As people think things through clearly and a little more calmly, they'll make different decisions."

While still about $1 pricier than last year, the national average for regular gas is about $3.80.

In recent months, executives at General Motors and Ford Motor have said they believe a consumer shift from big SUVs and trucks may be permanent. Small cars sales are up 10.9 percent for the year, while SUV sales are down 16.2 percent, and trucks are down 23.4 percent.

While all automakers have increased production of their smaller, more fuel-efficient cars, they haven't been able to meet demand, and lost sales.

But the future of compact and smaller cars may not be as bright as some predict. In addition to www.Edmunds.com's report, a study by consulting group Acxiom found most buyers won't look to small cars for their next purchase, but may downsize in the class of vehicle they drive. Owners of big SUVs, for instance, would more likely buy a smaller SUV or crossover instead of skipping to a small car just to save gas.

But while some experts have predicted Americans will begin driving much smaller cars, as do many in Europe, where fuel is heavily taxed, Anwyl says Americans have built lives around larger vehicles that can carry lots of stuff, such as their children's sporting equipment.

"At the end of the day, people need space," he says. "There are unique needs in the United States. ... The types of vehicles that resonate with consumers will be the ones that offer reasonable utility and pretty good fuel economy. Not the super-small ones with high fuel economy."