GM's gas price jitters

Posted by: David Welch on May 24, 2006

It looks like high fuel prices are making the marketing heads at General Motors a little nervous these days. The company won’t have gas-sipping hybrid-electric drive under the hood of its large suvs until late next year, so the carmaker is offering another way for its customers to save a few bucks at the pump. Anyone who buys one of GM’s mid-sized cars or large suvs—like a Chevrolet Tahoe, GMC Yukon or Cadillac Escalade—can get a pre-paid gasoline card that caps the prices consumers in Florida and California pay at $1.99 a gallon. Gasoline in both states is averaging well over $3 a gallon. Buyers using the card will get a credit every month.

The move makes some sense. If GM needs incentive to keep buyers interested in its big utes during a time of high gasoline prices, this is better than just slapping some cash on the hood. GM says suv buyers who drive 1,000 miles a month can save $60 a month in Florida and more than $100 in the Golden State. The card is good for one year.

I’ll tip my hat to GM for thinking of ways to assuage the frayed nerves of car buyers who are increasingly worried about gas prices. But I have to wonder how long spiffs like this can last. GM’s new suvs, which are best-in-class, have sold quite well. But sales of other big utes have been battered by the spike in fuel prices. In the long run, it will be tough for any car company to keep pushing middle class consumers to lay out $35,000 or so for a gas guzzler with prices near $3 a gallon. GM’s hybrid system could make a difference when it hits showrooms in large suvs late next year. But expensive gasoline and fashion trends are pointing consumers toward other vehicles. Since big trucks still pay the bills at GM, the company is doing all it can to keep the gravy train rolling.

Reader Comments

Stacey Wilson

May 26, 2006 2:33 AM

It's good, but it's a temporary solution to a possibly permanent problem. More fuel-efficient vehicles - that is the solution.

Don Buechler

May 27, 2006 9:48 AM

You make no mention of FLEX FUEL available NOW!

Automotive Web

May 31, 2006 8:53 PM

I believe gas prices will need to rise quite a bit before people really run away from SUV's. I'm used to the $3.00 prices, I don't like them, and it can get very expensive, but what is the alternative? A lame car that looks like a microwave that gets 45mpg? Maybe, but I have a hard time letting go of the nice cars. I'm hoping E85 gets a little more recognition.

Kenisha Sullivan

June 2, 2006 4:02 PM

Mr. Welch,

After reading your section of the Auto Blog on businessweek.com, I’ve noticed that you seem to stay current on not only the gas price issue, but perhaps more importantly, how it affects various facets of the automobile industry’s bottom line. With your knowledge, expertise, and advantageous position, it would be worthwhile for you to take a look at www.DivineGas.com . It could prove to be a very lucrative opportunity for you.

Thomas Anderson

June 5, 2006 11:36 AM

6 dollar a gallon gas is the best thing that could happen for the US. Necessity is the mother of invention.

Anthony Vagnetti

June 9, 2006 12:36 AM

What about consumers that want hybrid or electric vehicles from GM for the environmental benefits exclusively?

There are plenty of folks who are more concerned with the price of climate change than the price of petrol.

Thomas Anderson's comment on $6 gas is right on.

Wes

June 27, 2006 2:44 PM

SUV's are already on the downhill decline and have been for three years. The majority of people buying SUV's don't need them or could find similar functionality in a different vehicle but buy them solely because it was the cool thing to do.

Yet I am still amazed at the stupidity of people that will spend $40,000 on a Tahoe to lose $20k the first year in depreciation and pay $3/gallon gas just for the purpose of trying to impress the neighbors. Oh well, the good result is that it leaves a lot of unabused late model cars and trucks on the market for a fraction of the original cost that i can pay cash for and get some good miles from.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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