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Incentives, lower gas prices shift sales back from cars to trucks

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Back in August, when gas prices had settled in around US$3 per gallon, sales of the Toyota Camry, America's top-selling car, were booming as the market shifted from trucks and sport utility vehicles to more fuel-efficient models.

But since then Camry sales, as well as car sales overall, have fallen off as gasoline prices have dipped into the $2 per gallon range, and there's been a bit of shift back toward trucks.

The change has pleased Detroit's Big Three, which are more reliant on trucks for profits than their Asian competitors, but some industry observers are cautioning against pronouncing any trends.

``It's a little bit dangerous just to assume that it's all correlated to gas prices,'' said Rebecca Lindland, an auto analyst at Global Insight, an economic research and consulting company. ``There is certainly some level of correlation. But the other thing that you have going on is that manufacturers are starting to dump inventory.''

That means large discounts and other incentives on lots full of slow-selling, year-old trucks and SUVs. On some vehicles, dealer and customer incentives total upwards of $6,000.

``What you're seeing in this period is not a consumer response to lower gas prices, but a consumer response to year-end incentive programs to clear out the '06 model trucks and SUVs,'' said George Pipas, U.S. sales analysis manager for Ford Motor Co.

Despite the incentives, though, North American light truck sales were 12.5 per cent lower in October than in August, with pickups off 15.2 per cent. But sales of large SUVs rose 8.3 per cent and small SUVs rose 7.4 per cent, according to figures from Autodata Corp.

Car sales, on the other hand, dropped 24.2 per cent between August and October, and Camry sales alone were down almost 20 per cent, from 42,227 in August to 33,812 in October. Small car sales dropped 33.2 per cent during the same period, and sales of crossovers, which mainly are glorified station wagons, were down 15.5 per cent.

Many in the industry had predicted a continued migration from trucks to cars and crossovers, saying that consumers don't believe gas prices will stay around $2 forever.

But Rick Pulcino, general manager of Rick Hendrick Jeep-Chrysler in North Charleston, S.C., said the shift was only a summertime fad, led by people who panicked at $3-per-gallon gas and traded in their trucks for cars.

``That group's over with and we've settled back in,'' he said. ``The majority of people didn't jump for that. They still have those three children. They still have to go on trips,'' he said.

SUV sales were strong in September and October, Pulcino said, and he predicted that the market has stabilized for truck-based vehicles.

``The people that have come in here still want to sit up higher. They still want that room. They still want that lifestyle and they don't want to give it up,'' Pulcino said.

But Pipas said at Ford, the fourth-quarter months are typically low points for small cars. He predicts that truck sales may remain stable through the winter, but the market will shift back toward cars in the spring as gas prices go back up.

``Consumers believe that gas prices are going to be high in the future,'' he said. ``We're not going to go back to a buck and a quarter.''

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Incentives, lower gas prices shift sales back from cars to trucks
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