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USING THE ARTICLE BELOW, Summarize the key points Explain the article language into economic language as is appropriate ( i.e. demand, quantity demanded, determinants of

USING THE ARTICLE BELOW,

  1. Summarize the key points
  2. Explain the article language into economic language as is appropriate (i.e. demand, quantity demanded, determinants of demand, shifts in demand curve, etc.)

"With gasoline prices topping $5 a gallon, fuel economy is suddenly top of mind again for car shoppers, reinvigorating interestinthe small cars, sedans and hybrids that have fallen out of favorinrecent years.

The problem: Those are among the vehiclesinthe shortestsupply.

Inrecent months, the average price of gasolineinthe U.S. has soared to records, pushing up fuel costs for drivers and prompting many Americans to seek out smaller, more economical rides, dealers and executives say.

The shift is sending another shock wave through the car business, which has spent much of the past decade giving priority to pricey fuel-thirsty pickups and SUVs that drive big profits -- often at the expense of smaller models with lower price tags and higher miles-per-gallon ratings.

Supply-chain disruptions have further complicated the market, leaving dealership lots sparse of any type of vehicle -- both new and used -- and auto makers scrambling to restock.

"As [interest] rates go up, and gas goes up, the pendulum swings back toward affordability," said Michael Kistemaker, an assistant vice president for American Honda Motor Co.

Online searches for fuel-efficient gas-powered models -- such as small cars and midsize sedans -- have climbed 33% since January, according to data from auto-shopping websites Kelley Blue Book and Autotrader.

Internet shopping for hybrids rose 25% during the same period, and searches for electric vehicles soared 73%, the data show.

The changing preferences are helping to give a lift to some brands such as Toyota Motor Corp., Honda Motor Co. and Hyundai Motor Co. that have stuck with previously unpopular sedans and hybrids, while other auto makers abandoned these categories for higher-margin vehicles, analysts say.

Toyota and Honda,inparticular, are seeking to sell more hybrid vehicles because they see their early investmentinthe technology as a competitive advantage, especially over rivals who skipped the technologyinfavor of developing fully electric vehicles.

For instance, Toyota said hybrid sales accounted for 26% of its total U.S. businessinMay, up from 24%inthe same month last year.

Bob Carter, Toyota's U.S. sales chief, said Toyota could have easily increased its hybrid sales to about 40% of the U.S. sales mix, given the currentdemand. "But we can't build that much," he added.

Sales of the hybrid versions of Toyota Camry and Corolla sedans, as well as its RAV4 SUV, all roseinMay, the company said.

The RAV4 hybrid is having its best-ever yearinterms of sales, which Toyota attributesinpart to more buyers wanting to save on gasoline.

Mr. Kistemaker of Honda said that vehicles such as the Civic and Accord have been the quickest to sell out as gasoline prices have gone up. And around half of the hybrid vehicles that Honda produces for the U.S. already had waiting customers, double the number for normal gas cars, he said.

"The last time gas went up to $5 [a gallon], everyone was tradingina truck or [Toyota] Sequoia and losing $10,000 on a trade-into get a Prius," Mr. Kistemaker said. "You're not seeing that this time. We just don't have the product," he said.

Among the 30 top-selling modelsinthe U.S., compact cars, sedans and hybrids, particularly those from the Asian auto makers, areinthe shortestsupply, according to data from Cox Automotive.

As of May, there was only about a two-weeksupplyof Toyota Corollas and Honda Accordsintransit or available at U.S. dealers, the firm's data show.

Meanwhile, the inventory of trucks made by brands such as Ford, Chevy and Ram were closer to prepandemic levels, with auto retailers carrying two months or more ofsupplies.

The shortage is also felt with the fully electric vehicles that auto executives have been hypinginrecent years.

Electric-vehicle sales have been risinginthe past year, accounting for 4.8% of the U.S. marketinthe first five months of the year, up from 2.2%inthe same year-ago period, according to research firm Wards Intelligence.

Still, many planned EV models have yet to go on sale, and those that are on the market have waiting lists that can extend from several months to more than a year, executives and dealers say.

Inthe years preceding the pandemic, auto executives and car buyers had grown accustomed to low gasoline prices, flocking to bigger and even roomier vehicles and away from the sedans that had for decades led the U.S. car marketinsales.

Ford Motor Co. and General Motors Co. jettisoned many of their small-car and sedan modelsinthe U.S., including recognizable names such as the Ford Focus, and Honda dropped the Fit, a subcompact car that achieved 40 miles a gallon on highways.

Now, even with preferences swinging backinthe other direction, auto executives say they remain focused on building the biggest moneymakers. That is because the availability of semiconductors and other parts are still constrained and what components are available are going to the most lucrative models, mostly SUVs and trucks, they say.

"The industry is looking at what we can build because of thesupplychain, and right now, it doesn't favor those high mpg vehicles," said Mike Colleran, who oversees North American sales at Nissan Motor Co.

Online searches among Nissan buyers for sedans, EVs and other fuel-efficient models were upinMay from the same month a year ago, while those for trucks and SUVs were down, Mr. Colleran added.

And yet, the models that areinamplesupplyright now tend to be pickup trucks, he added.

Mike Sullivan, who owns more than a dozen dealershipsinthe Los Angeles area, said he had little to nothing for shoppers looking for a sedan or hybrid.

"We might have a one-daysupplyof gas cars and zero days'supplyof any kind of electrification," he said.

Mr. Sullivan said he prefers the current low-inventory situation to the old model where he would have dozens of vehicles on the lot waiting for buyers. Instead, shoppers order a vehicle through him and pick it up when it is delivered to the dealership -- weeks or months later.

"Auto makers are notina big hurry tochangethis," said Michelle Krebs, an analyst with Cox Automotive. "They are making more money by selling fewer cars, and their costs are less."

"The only thing that would shift it is ifdemandfell off orsupplysurged. We don't think either of those will happen," she said."

Credit: By Sean McLain

Copyright 2022 Dow Jones & Company, Inc. All Rights Reserved.

REFERENCES

McLain, S. (2022, Jun 17). Demand for Fuel-Efficient Vehicles Increases, but Supply Lags Behind. Wall Street Journal http://ezproxy.umgc.edu/login?url=https://www.proquest.com/newspapers/demand-fuel-efficient-vehicles-increases-supply/docview/2677299061/se-2?accountid=14580

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