Resurgence of the American-Made Car Expected, Hybrid Sales to Go Up and SUV Sales to Go Down in ’05

Sales of “American-made” cars, many of which are manufactured in the United States by foreign car companies, will be strong in 2005, as will demand for hybrid vehicles, but SUV sales may decline, according to a University of Alabama expert on the automotive industry.

” ‘American-made’ car sales are booming, like Hondas made in Alabama, Nissan Titans and Armadas made in Mississippi, Camrys made in Kentucky, and Hyundais soon to be made in Alabama. There will continue to be a trend of foreign car manufacturers moving production facilities to the U.S.,” said Dr. Clark Midkiff, associate professor of mechanical engineering and director of the Center for Advanced Vehicle Technologies at UA.

For many years, the Big Three American car manufacturers were hurt by the quality of foreign cars. In the last five years, the Big Three have started making a dramatic comeback. For example, Cadillac has been the number two brand worldwide on the J.D. Powers survey of new owner satisfaction for the past two years with only Lexus ahead of it.

“While many of the Big Three’s automotive products continue to improve, I believe dramatically higher fuel costs will hurt the Big Three products because they make much of their profit from SUVs, and I think SUV sales growth will slow or decline because of fuel costs worries,” Midkiff said.

“I think SUV sales are hurt by higher fuel prices to some extent, but much more by fears of fuel non-availability or fuel price volatility. In other words, if fuel prices hit $2 per gallon, it would temporarily hurt SUV sales. But if they stay around $2 or only very gradually rise, people will adjust psychologically and continue to buy SUVs,” Midkiff continued.

Fueled by gas price worries, the popularity of hybrid vehicles continues to climb. This past year, the introduction of the second-generation Toyota Prius coinciding with rapidly rising fuel prices resulted in huge demand for the Prius and other hybrid-electric vehicles with waiting times as long as eight months and premiums of up to $5,000 above list price for the Prius.

“I predict Ford’s Hybrid Escape, the Hybrid Toyota Highlander and Hybrid Lexus SUV will experience strong sales as they are introduced in 2005,” Midkiff said.

Most automotive companies have been timid about committing resources to hybrid vehicle design and production because they were burned on earlier ventures in non-conventional power, such as alternative fuel and electric vehicles. For example, GM is selling a hybrid full-size pickup now, but only in certain limited areas of the country, not in Alabama. Ford only plans a modest first-year production of 20,000 vehicles for the Hybrid Escape. The car companies will get bolder as well-made hybrids continue to enjoy strong sales