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28.9.04

The Market Vs. SUVs

Climbing Down From The S.U.V., And Liking The View

While there has not been a stampede of consumers out of S.U.V.'s - one of the auto industry's most popular and profitable segments - there are signs that their popularity is weakening. The market share of some popular S.U.V. models has declined even as that for some new station wagons, which have some S.U.V.-like features, has climbed.

... Several factors are at work. Although gasoline prices are down from their peak in May of $2.07 a gallon, on average, for self-serve unleaded regular, they still averaged $1.86 a gallon on Sept. 10, according to the Lundberg Survey. In many places, the price remains above $2.

And new safety warnings about the stability of truck-based sport utilities, especially in rollover ratings, have some people reassessing their belief that S.U.V.'s are safer. Such safety issues are starting to outweigh what many people say drew them to S.U.V.'s: the bad-weather traction of four-wheel drive and the ability to drive on rough terrain.


Abiola Lapite suggests that this is a case of the market succeeding where "years of harangues by environmentalists" haven't. In the sense that the market is creating an outcome (fewer SUVs) that environmentalists desired but failed at getting, he's right. But that's a basically coincidental fact. The market is reducing SUV purchases for two reasons -- gas supply is tight, raising the price of maintaining an SUV, and safety concerns have reduced people's desire to own an SUV. Neither of these are particularly related to the environmentalist anti-SUV rationale, which is that they generate a lot of pollution. The market has manifestly failed to translate the harms caused by pollution into reduced SUV ownership.

Environmentalist anti-SUV-ism is actually rather market-friendly in two of ist three avenues of attack (the exception being the push for better gas mileage requirements). A higher gas tax is meant to internalize the externalities of pollution, thus making the market responsive to environmental issues. And the "harangues" Lapite refers to are aimed at the same mechanism that has caused safety concerns to cut into the SUV market -- alter people's perceptions of the product, which in turn changes the demand.

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