With gas prices just below the $4 per gallon mark and possibly climbing to $5 per gallon later this summer, Americans are demanding more fuel-efficient automobiles. But U.S. automakers are having trouble keeping up with that demand, according to a poll by Reuters:
Higher car prices and a shortage of fuel-efficient vehicles likely threw a roadblock in the U.S. auto industry’s recovery path in May, when the Japan crisis had its biggest impact on U.S. sales so far.
If forecasts prove true, this will be the first time the annualized sales rate has dropped below 13 million since February. The sales figures, expected Wednesday, come as analysts are raising concerns about a slowdown in the broader economy.
Problems in the sector have been exacerbated by the earthquake in Japan that disrupted supply of components for smaller, more fuel-efficient automobiles. Manufacturers are now sitting on a rising inventory of American-made gas guzzlers and a dwindling supply of cars that consumers are demanding:
Adding to the issues facing the U.S. auto industry in May are tight supplies of highly coveted small cars and trucks.
The earthquake that rocked northeastern Japan in March disrupted the flow of auto parts and supplies to the global auto industry, forcing many automakers to curtail production.
Pre-existing inventories of vehicles provided a cushion, but that started to dry up in May as consumers look for vehicles with better gas mileage in the face of rising fuel prices.
“There are a number of smaller cars, primarily Japanese, that are going to be in really tight supply,” IHS production analyst Mike Jackson said.
Consequently, U.S. automakers are considering shutting down plants that churn out the biggest and most wasteful automobiles. These include GM’s Shreveport Assembly Plant, home to the 16-mpg Chevrolet Colorado, and Ford’s assembly plant in Avon Lake, Ohio, where the company’s 14-mpg Econoline vans are manufactured. Ford has already shut down one plant in Larion, Ohio, that produced the gas-hungry van.
However, American auto manufacturers are still pursuing large-scale vehicles: GM is investing $331 million to expand its Arlington Assembly Plant to make full-sized SUVs, including the 17-mpg Tahoe, the 12-mpg Suburban, the 12-mpg Yukon, and the 14-mpg Escalade. (To be fair, GM plans to produce 10,000 electric vehicles this year and has committed hundreds of millions of dollars to produce more fuel-efficient cars.)
But the question remains: As gas prices continue to rise, will American investment keep up with the shifting consumer landscape?