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Oil Addiction Causes Bottom to Fall Out on SUV Market

Published 08/13/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

America’s oil addiction has caused the bottom to drop out on the once thriving SUV market. Automakers are now offering up to $10,000 discounts on SUV and most are being sold for, on average, 20 percent below sticker price.

The rapidly declining value of what was once Detroit’s biggest sellers are making leasing vehicles problematic for automakers and dealer. Ford absorbed a $2.1 billion charge in the second quarter to cover the rapidly declining value of used SUV's coming off lease. GM was forced to deal with $716 million in impairment charges because of lower SUV residual values. And Chrysler opted to stop leasing vehicles all together on Aug. 1 because of the depreciating value of used vehicles.

Once a boon for the auto industry, the gas-guzzling SUV's clogging up dealer’s lots across America now seem to be much more of a burden.

Industry-wide, SUV sales are down 32 percent this year and missed their target sales goal by 43 percent in July. The Ford Explorer, the best-selling SUV in history, only totaled 5,404 sales last month and is expected to be below the 100,000 mark for the first time ever.

Source CNBC.com:

The market for sport utility vehicles is starting to look a lot like the housing market, spreading pain to consumers, automakers and dealers. Even the vocabulary is sadly familiar.

Bloated inventories? Days spent on the market? Well, in July, General Motors dealers had a 174-day supply of the Yukon XL/Suburban on hand, on average, up from a 92-day supply a year earlier.

Inventory of the Chevrolet C/K Suburban nearly doubled over the same period, to 116 days from 63 days.

Just like hapless homeowners, countless car owners are now “underwater,” driving vehicles that are worth less than the balance on their car loans.

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