Shift to Smaller Engines: Driven by More than Gas Price Hikes

Tyson Jominy

More than one-half (54.1%) of the new cars and light trucks purchased or leased in the U.S. during the first three months of 2012 were equipped with fuel-efficient, 4-cylinder powertrains, according to retail transaction data from our Power Information Network® (PIN) Division at J.D. Power. That’s up a dramatic 14.9 points from the first quarter of 2008, the early months of the recent U.S. recession, when 42.7% of new vehicles that were purchased or leased were equipped with 4-cylinder powertrains.

Gas price hikes this year that have seen the average price across the country increase to more than $3.93 per gallon for regular unleaded, in addition to an expanded array of 4-cylinder engine choices—including turbocharged variants and direct-injection diesel engines—from both mass-market and premium automakers may be providing some of that renewed demand for these smaller powertrains.

Consumers Move into New Vehicle Segments

However, we see some other factors driving this sea change. Consumers are shifting from large to midsize vehicle segments and from midsize to small or compact segments, which bring with it a decrease in engine size. In addition, we see that consumers who do not downsize are finding more fuel-efficient powertrain options at the segment and model level, where there previously were no options—such as large pickups. Ford is now offering EcoBoost 6-cylinder powertrains in its high-volume F-Series trucks, and the company says that 41% of its F-Series retail sales in March were equipped with EcoBoost powertrains.

Powertrain Shift is also Due to Changes in Technology

As recently as two years ago, vehicle size was still synonymous with engine size. In most cases, large vehicles were equipped with V-8s and midsize vehicle models were powered by V-6 engines, while 4-cylinder engines powered compact and sub-compact models. All of that is changing. In fact, in the next few years, there will be more 3-cylinder engines available.

In addition, the triple technology of direct injection, turbocharging and variable valve timing has made it possible for 4-cylinder powertrains to replace V-6s in midsize segments. We are seeing this in the high-volume Midsize Conventional segment, where the Ford Fusion, Chevrolet Malibu and Hyundai Sonata are exclusively powered by 4-cylinder engines. Our PIN data indicates that in the first quarter of 2012, 85.5% of the cars in this segment’s sales mix were equipped with 4-cylinder engines, up from 73.5% in the same period of 2008.

What’s Behind the Shift to Smaller Powertrains?

More interestingly, we are also seeing this in SUVs, where Ford is using the EcoBoost in its Edge and Explorer midsize crossovers (CUVs). If a consumer traded in a 2004 Explorer for the new-generation model, the buyer would experience a 20% gain in fuel economy with the new 4-cylinder engine. Previously, a buyer who wanted good fuel economy from their new vehicle would have had to downsize to the Escape compact CUV to achieve that kind of mpg gain.

Why is this kind of change so significant? It’s good for the automaker, the dealer and the consumer. Larger vehicles have higher transaction prices and earn more profit for OEMs and for dealers. At the same time, the consumer has the choice of a compact or midsize vehicle with a more technologically advanced smaller, more fuel-efficient powertrain.

The trend of consumer downsizing was a key story during previous gasoline price spikes, but our PIN data shows that this trend has slowed. The current gasoline spike has not had nearly the same effect on consumer behavior as previous macroeconomic events. If a consumer bought a large SUV with a V-8 in the 90’s without a specific need for a large vehicle with room for 7 or 8 passengers and/or extra cargo space, there’s been ample opportunity since then to downsize—for example, as recently as in 2009, when the government’s CARS program was initiated. Of course, a consumer may still buy a large vehicle if there is a specific need for one. But even then, there are alternative, more efficient engine choices.

Our PIN data confirms these shifts and we would like to hear your perspective on what we see as an evolution by the consumer and the automaker rather than a sea change due to gas price fluctuations.Tyson Jominy, director, consulting and analytics, Power Information Network® (PIN) at J.D. Power and Associates

Powertrain Shift in First-Quarter Sales Mix over 6 Years*

Most PopularPowertrains 1Q-07 1Q-08 1Q-09 1Q-10 1Q-11 1Q-12  
4-Cylinder 34.0% 39.2% 41.9% 46.1% 51.0% 54.1%
6-Cylinder 41.0% 39.4% 40.1% 36.6% 33.2% 31.8%
8-Cylinder 22.8% 19.5% 16.3% 15.9% 14.4% 12.5%

*Source: Power Information Network (PIN) retail transaction data.

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