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overview


Murphy predicted that the fl ood of new models could lead to annual sales in excess of 20 million by 2018. A fair portion of these new vehicles are likely to be CUVs and SUVs, the fastest growing vehicle types today and into the foreseeable future—all things being equal. Pickup truck sales are also expected to grow. Not only are pickups and utility vehicles highly popular among buyers, they are also highly profi table, even though they tend to be more expensive to produce than many cars. In turn, cars—particularly small, fuel effi cient cars— have fallen out of favor with many buyers. As a result automakers are dropping some car models in order to add utilities. Other automak- ers are replacing small car production in US plants with pickups and sending the small cars to Mexican assembly plants. Profi tability of small cars improves when they are manufactured in Mexico thanks to lower wage rates there.


Sales of both utility ve- hicles and pickups have ben- efi tted from low oil prices. In a report issued Jan. 7 the Energy Information Adminis- tration noted US regular retail gasoline prices averaged


bottoming out at just below $27 per barrel in February, ac- cording to Oil-Price.net. The site’s analysts forecast that crude will jump another 12%, to $56 a barrel, over the next year. While a notable increase, it would still leave oil a good distance from $85 to $140 a barrel range it traded in during the decade pre- ceding mid-2014.


What may make car buyers—and automakers—less com- fortable is the possibility of higher interest rates. An increase


Because it is powered by both an internal combustion engine and an electric drive system, the Chevrolet Malibu Hybrid costs substantially more than its nonhybrid counterpart.


$2.43 per gallon over the course of 2015, 93 cents a gallon (28%) less than in 2014. Gas prices dropped even further early in 2016, dipping below $2.00 in much of the country.


High, But Not Too High Yet petroleum prices, as noted, are on the rise again. Ac-


cording to AAA, the average price across the US for a gallon of gas was $2.32 over the Memorial Day weekend, the high water mark for the year to that point. That, however, was the lowest price per gallon for the holiday weekend in a decade, the auto club said. On the crude oil side, Memorial Day prices hovered just under $50 a barrel, up more than 70% since


in interest rates by the Federal Reserve Board could sooner or later generate an increase in monthly payments both for those who lease their vehicles and those who take out loans to purchase them. An increase by the Fed could come before this publication rolls off the press. According to minutes of the Federal Open Market Com-


mittee’s April 26–27 meeting released May 18, “Most par- ticipants [in the meeting] judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen and infl ation making progress toward the committee’s 2% objec- tive, then it likely would be appropriate for the committee


12 — Motorized Vehicle Manufacturing 2016


Photo courtesy General Motors Co.


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