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Alternative-fuel vehicles gaining favor with motorists

This year’s near-record run-up in fuel prices has clearly had an impact on the choices American motorists are making when it’s time to buy a new vehicle – in fact, three in four U.S. drivers now say they’re ready to consider an alternative-fuel vehicle, according to a new study.

While many motorists still aren’t ready to trade in their roomy SUVs for high-mileage subcompacts — at least if recent sales are considered — there’s little doubt that there are significant changes under way in the American car market, with fuel economy now a much more important factor than vehicle quality or safety, according to research by the nonprofit Consumer Reports.

“These results make it clear that high fuel prices are continuing to impact driver behavior and influencing future purchase considerations,” said Jeff Bartlett, Consumer Reports deputy auto editor. “While quality, safety and value are still important, this may be foreshadowing a market shift by folks seeking relief at the pump.”

CR’s study reveals that 37 percent of motorists now put fuel economy as their top consideration while shopping for a new car.  Quality, a perennial chart-topper, was listed by just 17 percent, with safety close behind at 16 percent.  Other motorists said they put a priority on value, at 14 percent, and performance, at 6 percent.

Of those who listed fuel economy as their top consideration, nine in 10 said the primary goal was to reduce their fuel bills – but 62 percent cited the environmental benefits, with 56 percent mentioning a desire to reduce the consumption of foreign oil.

One of the more significant findings of the new study was the growing willingness of shoppers to consider alternative powertrain technologies, especially E85 ethanol and hybrid technologies.  Young motorists were particularly open to these new options, though the figure was still 73 percent among all the buyers surveyed by Consumer Reports.

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The new study suggests that the population strongly supports the Obama administration’s push for increased fuel economy, and the federal government is soon expected to lock in place a Corporate Average Fuel Economy, or CAFE, mandate that will jump to 54.5 mpg by 2025.

A full 90 percent of those surveyed agreed or strongly agreed with the statement, "Auto manufacturers should offer a greater variety of cleaner, more fuel-efficient vehicles in the near future.”

Significantly, 81 percent also agreed that they are willing to pay more for a fuel-efficient vehicle if they could then recover the added cost through lower fuel bills.  But whether they would actually follow that argument in practice is another matter entirely.  In recent years, motorists have shown a tendency to shift to more fuel-efficient models, as well as hybrids and other alternative powertrains when fuel prices spike – then shift back to less efficient and more conventional technologies once fuel costs begin to settle back down again.

Whether that will happen again is unclear. Small car sales have risen sharply since December 2011, and now account for roughly a quarter of the American market.  But SUV and crossover sales have remained surprisingly resilient.  And full-size pickups have actually regained momentum this spring.  That may reflect a rebound in the economy, however. And it’s significant to note that Ford has now sold more V-6-powered F-Series pickups over the last 12 months than those using traditional V-8s.

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Meanwhile, even though sales of hybrids have increased sharply – the Toyota Prius, in particular, is setting new records – all battery-based vehicles combined are still accounting for barely 3 percent of the overall U.S. market. And demand for the Nissan Leaf battery-electric vehicle has slid sharply for several months.

Alternative powertrain technologies will face a significant test during the remainder of 2012 as manufacturers expand the range of offerings with vehicles like the Ford C-Max Energi plug-in and Toyota RAV4 EV and Tesla Model-S battery-electric vehicles.

One area of uncertainty is how much the spike in fuel prices has affected overall automotive demand.  While analysts have warned that the increase could weaken the economy and hurt demand, quite the opposite has happened.  New vehicle sales are surging. General Motors is one of several manufacturers to recently increase its forecast for 2012 to as much as 14.5 million vehicles – about 500,000 more than its earlier prediction.

At least some of those buyers may simply be trading in, hoping to get a more fuel-efficient vehicle.  But trading in a relatively new model isn’t always a smart move, according to Consumer Reports’ Bartlett.

“When gas prices are high, it’s always tempting to rush to trade in for a more fuel-efficient car to save at the pump,” he cautioned. “But our research has shown that you’re often better off financially to stick it out with the vehicle you have if it’s less than three years old, because a new vehicle will cost you more in depreciation than you would save on gas.”

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