Could big-SUV boom hint at fruits of U.S. 'energy security'?

Full-size SUVs rather suddenly are notching some of the biggest sales increases in the sizzling U.S. market these days, at least on a percentage basis. And with Americans’ growing sense of “energy security” because of burgeoning domestic gasoline supplies, and prices that are moderating somewhat, this trend might be just a harbinger of a further comeback for the automotive behemoths that many believed would be permanently relegated to the sidelines by $4-a-gallon gas and worries about “peak oil.”

General Motors GM -0.85% certainly is betting on a continuation of the big-SUV snapback: This week, unembarrassed, it unveiled the 2015 Chevrolet Suburban and Tahoe, along with their platform mates, the GMC Yukon and Yukon XL. It was only in 2009, as gasoline prices spiked past $4 a gallon, that GM executives had considered abandoning the big-SUV market altogether.

And while sales volumes for the models have been halved since 2005, GM certainly seems to be bullish enough about their future to invest in new, more aerodynamic designs for the vehicles, which are staged on the same platform as the company’s recently launched, overhauled pickup trucks. The new big-SUV versions have more room and improved interiors as well, a quieter ride, more power and better fuel economy.

Meanwhile, over at Ford, the company “can’t build enough” of its recently revised Explorer SUV, Amy Marentic, group marketing manager for global cars and crossovers, told me.

Consider these year-to-date sales figures through August for some of the biggest (and oldest) SUVs in the U.S. market:

• Chevrolet Tahoe, up 22 percent to 54,794 units
• Dodge Durango, up 47 percent to 39,686 units
• Ford Explorer, up 22 percent to 122,192 units
• GMC Yukon XL, up 54 percent to 20,626 units
• Honda Pilot, up 21 percent to 90,696 units
• Toyota Highlander, up 8 percent to 85,700 units
• Toyota Sequoia, up 9 percent to 9,045 units

What’s going on? Surely the general rise in auto sales and the stubborn improvement in the U.S. economy, as well as reliable ol’ “pent-up demand,” are boosting sales even of these aged nameplates just as surely as for the rest of the market. Also, moderating gasoline prices could be considered especially helpful in creating more demand for vehicles that get the worst mileage.

But on that score, there might be even more afoot — and a factor that could come into greater play for large SUVs, especially over the long term. As I argued this week in a piece for the Detroit News Think section (and please read it for my complete argument), thanks to horizontal drilling and hydraulic fracturing, or “fracking,” the auto industry is at a turning point with energy that could be similar in magnitude to the oil-price shocks of the Seventies. Notwithstanding some environmental concerns, newly accessible oil and natural-gas resources are being loosed across the United States at such a rate that the nation essentially now is awash in them.

During the Seventies, tremendous anxieties about the source and price of gasoline reshaped the auto industry and traumatized American consumers. We internalized the idea of a dangerous vulnerability to “foreign oil imports,” which in turn helped determine everything from the auto industry’s vehicle downsizing to the U.S. military focus on the Middle East, for decades to come.

Could it be that the accelerating turnabout in U.S. oil and gas production and proved reserves — making America flush in domestic supplies for as far ahead as anyone can foresee — could influence some sort of reversal in perspective, or at least a change in direction? This phenomenon already has practically vanquished talk of peak oil and nearly rolled back worries about where our next tank of gasoline is going to come from.

To be sure, the Obama administration’s mandate is still in place for each automaker to reach Corporate Average Fuel Economy (CAFE) of 54.5 mpg by 2025, and the auto industry globally is headed relentlessly in the direction of continuing to boost fuel efficiency across the board and in every way. Meanwhile, Americans continue to be concerned about greenhouse-gas emissions. There clearly is a long-term future for electric vehicles in an increasingly urbanized nation, even though — notwithstanding the one-off success of Tesla — rank-and-file Americans don’t yet feel compelled to go out and buy an EV. Natural gas is moving quickly into view as a mainstream vehicle fuel, perhaps in the very near term.

But it’s looking increasingly possible that moderating gasoline prices, a sense of energy “security” and a predictable increase in family formation by Millennials will cause today’s consumer enthusiasm for small vehicles to fade somewhat. And, just maybe, these factors may fuel even more interest in full-size SUVs. The Chevy Suburban may not be a complete dinosaur after all.

http://www.forbes.com/sites/dalebuss/2013/09/13/could-big-suv-boom-hint-at-fruits-of-energy-security/?ss=business%3Aenergy