Soccer Moms, Car-Based SUVs, Truck-Based SUVs, And CAFE Standards -- July 19, 2016

John Kemp posted this graphic today.

Idle comments regarding the graphic above:

• minivans are falling out of favor; gradually disappearing; folks who like minivans are probably transitioning to car-based SUVS
• car-based SUVs are increasing in sales whereas minivans are decreasing; the number of truck-based SUVs seems to have plateaued over the past five or six years
• pickups -- interestingly enough -- have actually been decreasing in sales in the past five years compared to the late 1990s / early 2000s
• if the US "manufacturing economy," housing, general economy picks up, we might see an increase in the sales of pickups, but it certainly looks like the soccer moms are calling the shots -- having moved to car-based SUVs over the past ten years

CAFE Standards:
 
Now, some thoughts on car-based SUVs, truck-based SUVs, and CAFE standards and how the federal government influences manufacturing patterns (and buying patterns).

Note that "car-based SUVs" and "truck-based SUVs" are differentiated. Hold that thought.

Back on February 21, 2015, I posted:

Pick-Up Trucks

I don't know if folks have noticed -- it's hard not to notice: pick-ups are getting bigger and bigger. In Texas they are really getting big. I never understood it; with the CAFE standards I thought automobile and light truck manufacturers would have been forced out of the "big pick-up" business. It turns out that, in fact, things changed. The change must have been seen by no one except the light truck manufacturers. BloombergBusinessweek has a huge story on why pickup trucks are getting bigger and bigger. The fact that BBW did a story on this suggests to me that a lot of folks were caught unaware. The link to the story is here. 

Many, many story lines. It has to do with CAFE standards which some doctorate student figured out in 2011:

Kate Whitefoot, a researcher at the National Academy of Engineering, came to believe that the new CAFE rules were tilted in favor of large pickup trucks while working on her doctorate in design science at the University of Michigan. In a 2011 article in the journal Energy Policy, Whitefoot and a mechanical engineering professor, Steven Skerlos, concluded on the basis of computer simulations that it would be cheaper to meet the new standards for big pickups than for small pickups, SUVs, or cars. “The goal of the policy was that vehicle size wouldn’t change at all,” Whitefoot says. Instead, “We’re seeing that it clearly is going up for trucks.”

Light truck manufacturers are reaping huge benefits from the new CAFE standards and their goal is to put every American in a pickup truck (although that's a bridge too far in Boston).

If you're read this far, then consider this, some dots to connect. Regular readers know that there will be a relative shortage of oil in 2017, possibly as early as 2016, as the majors shut down / delay / cancel "big cap" projects in 2014/2015 due to the slump in the price of oil.

Now, add that to the fact that auto and light truck manufacturers are out to put every American in a big pick-up truck. Those big pick-up trucks are gas guzzlers.

So, a perfect storm for some folks in 2017, maybe in 2016, certainly by 2018.

But it gets even better for oil and gas investors (see disclaimer): the CAFE standards that favor big pickup trucks (and possible bigger SUVs) do not change until 2022.

The NHTSA says it will look at the rise of big pickup trucks as part of a review of the CAFE rules that will apply to model years 2022 to 2025. That review doesn’t have to be finished until 2018, but the skirmishing has already begun.

But regardless of the new rules, they don't come into effect until model years 2022. That's seven years from now. Seven more years during which light truck manufacturers will try to get every American into a pickup truck. With an Apple dashboard.

For those who survive the current slump in the oil and gas industry, 2017 - 2022 should be awesome. That's still within my investing lifetime.

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The post on January 26, 2016, also dealt with the "perfect storm."

An additional thought. My hunch is that a new SUV purchased today will be on the road for ten (10) years. Think about that when looking at the John Kemp graphic above.