High gas prices fuel move to small cars

Memo to the auto industry: Small is in.

In case plunging sales of gas-guzzling sport utility vehicles and big pickups didn't get the point across, a new report provided further evidence that sky-high pump prices were influencing car buyers' choices.

Small vehicles accounted for 31.8 percent of all new vehicle sales in the first quarter of the year, up from 26.3 percent in the first quarter of 2004, according to information compiled by data tracker J.D. Power Associates.

"We are seeing a broad, long-term &

but gradual &

movement to smaller vehicles," said Tom Libby, Troy, Mich.-based senior director of industry analysis for Power.

Gasoline prices, which this week hit a U.S. record average of $3.103 a gallon, are the reason. Sales of small cars and fuel-efficient gas-electric hybrids rose along with motorists' frustration at the pump, Power found. Owner loyalty to large SUVs and pickups, meanwhile, fell.

The trend clearly is affecting powertrain choices as well. Four-cylinder engines accounted for 35.7 percent of the new vehicles sold in the U.S., up from 27.5 percent three years ago, Power found.

Mid-size crossovers such as the new Ford Edge have resisted the trend, in part because of their fuel economy advantage over truck-based SUVs and the buzz generated by a flurry of new models in the segment. Owners of large cars also have remained surprisingly loyal, Power found.

A sharp downturn in gas prices could slow the pace of small-car sales, but significant relief at the pump doesn't appear to be in the cards for a while.

That's bad news for companies that sell a lot of SUVs and pickups, which typically are far more profitable than smaller vehicles. Much of the Detroit Three's recent financial strife has resulted from a lack of popular, fuel-efficient cars to replace their suddenly unpopular behemoths.

"We're expecting the small-vehicle segments to continue to grow, regardless of gas prices," said Bob Schnorbus, Power's chief economist. "But higher gas prices certainly will help these segments relative to others."

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