US Auto Myth #2: Blame the SUVs

On Wednesday, I explained that, contrary to what you often hear, Americans do not demonstrate any particular affinity for small cars, even with gas prices down. Today, we'll address another popular misconception. The second myth I've considered is this: That the shift towards big SUVs is to blame for our dependence on foreign oil, high gas prices, etc.

Fact: The shift towards larger vehicles in general hasn't exactly helped, but it hasn't hurt, per se, either.


Since my parents bought their first Chevy Suburban in the early/mid 1990s, I wondered why people thought mpg was the only important metric.  A Suburban, my not-quite-adult brain reasoned, could carry ~60% more people, and more stuff than a sedan, so mpg/person or some other metric made for a more apples-to-apples comparison. In this light, the Suburban was "equivalent" to a sedan getting ~20 mpg, while it may have only achieved 12mpg itself. Of course this logic was imperfect, but my curiosity back then was the same as it is now; are all the accusations lumped upon SUV inefficiency true? Are they really the gas-guzzling Earth-destroying behemoths many critics would have us believe, or is there more to the story?

Well, the results are interesting, although not too surprising in thindsight.
weighted averagefuelecon.png
Since 1990, Light Truck fuel efficiency (as measured by weighted average mpg ) has increased 72%, while car efficiency decreased 23%, although the latter appears to be affected by the substantial shift away from small cars we discussed yesterday.  So, despite the shift away from small cars, and Medium and Large SUV sales increasing 392% and 2575%, respectively, total fleet-wide fuel efficiency actually increased, but only barely so, at a paltry 1%.

On an absolute basis (i.e. not weighted for market share), large SUV fuel efficiency increased 25% and mid-size SUV increased 29%.  As a matter of fact, fuel efficiency has increased mostly across the board since 1990, and even more since 1980.  Here's the same chart including data from 1980 and 1985 showing the gains in fuel efficiency during the 1980's:
averagefueleconomycarsales.pngI should mention here that this data is fairly noisy, as firm's try to game C.A.F.E and other regulations, Automakers' marketing and incentive schemes change, etc.  Regardless, what we've seen over the better part of the past two decades is that while consumers consistently preferred larger new vehicles - both cars & trucks -  to smaller ones, overall fuel efficiency (again, for new vehicles) has effectively stayed constant, driven primarily by gains in fuel efficiency across virtually all vehicle classes.  Of course, if consumers and producers had incentives to purchase and produce more fuel-efficient vehicles, we'd see an increase, but that's a discussion for another time.  Besides, former Car & Driver Editor Csaba Csere said it far better than I can here, way back in 2007 even.


Editor's Note: Wednesday this author debunked his first US Auto Myth: That Americans want smaller cars.
Presented by

Jordan Terry

Jordan S. Terry is Founder & Managing Director of Stone Street Advisors LLC, which provides independent financial research & analysis services to institutional investors.

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