Posted by: David Welch on February 15, 2006
Just when everyone thought high gasoline prices would kill off the big-sport utility vehicle business, General Motors Corp’s new gas hogs are showing signs of real life in the market. Sales of the all-new 2007 Chevrolet Tahoe were up 53% in January—the truck’s first month on the market—and J.D. Power says buyers are paying a lot more for the newly-designed vehicles. In January, the 2007 model Tahoe had an average after-rebate sale price of $42,400—a $7,000 spike over the old model.
There are some other good signs, too. Dealers say the Cadillac Escalade is a pretty hot item. Dallas Cadillac dealer Carl Sewell says he has enough orders to burn through more than two months of stock. And last month, some Internet profiteers were trying to sell Tahoes on eBay for more than the sticker price.
One tailwind for GM: gasoline prices. Even though today’s average price of $2.27 a gallon is 38 cents above pump prices from a year ago, they’re way off the September 2005 peak of $3.07 a gallon, says AAA. That not only makes big suvs seem a little less foolish, but the recent drop in prices for gasoline and natural gas help out the household budgets of middle class consumers. That always helps domestic carmakers, whose buyers are less affluent—and by extension more exposed to inflation—than import buyers.
This doesn’t mean GM is saved. Not by a mile. They still need to find a way to make real money on smaller vehicles. And plenty of suv owners were already burned by last year’s painful price peak at the pump. Many may not go back to gas guzzlers. But for a company that has had nothing but bad news for more than a year, falling gas prices and a good start to their big suvs spell relief.