Pump prices are low, but the car business plays the long game on fuel efficiency and emissions, so the parade of cleaner and “greener” vehicles continues.

Car companies play this game because they must. Their business plans must balance consumer demand with macroeconomic conditions (interest rates, overall employment, commodity prices and such) and a long list of often unpredictable variables — government regulations, political expediency, demographic trends, social and cultural developments and even natural disasters.

Look closely and you’ll see that when car companies plug in the variable, out pops fuel efficiency — a key differentiator with car buyers. The relentless drumbeat of rising and falling pump prices has taught us all to expect uncertainty at the pump. That’s the economic reality.

Sales of subcompact SUVs like the Mazda CX-3 surged 65.5 per cent to 43,432 units in 2015.

Sales of subcompact SUVs like the Mazda CX-3 surged 65.5 per cent to 43,432 units in 2015.

Meantime, a warming planet, the emergence of megacities, younger buyers more interested in connectivity than horsepower and other factors are shaping how car companies respond to consumers.

Then there’s government regulation. Globally, regulators are pushing ahead with increasingly tougher fuel economy and emissions rules.

“One of my observations from NAIAS (North American International Auto Show) was that not only did every vehicle company introduce a more fuel efficient vehicle but every vehicle introduced by every manufacturer was more fuel efficient,” says auto analyst Dennis DesRosiers in a note to clients.

“Virtually every vehicle now comes in a hybrid, plug-in hybrid or battery electric version. And every ICE vehicle (internal combustion engine) is also significantly more fuel efficient. The average ICE vehicle bought last year was about 50 percent more fuel efficient than the average vehicle on the road in Canada that was at least 10 years old.”

But there’s a disconnect: consumers significantly value fuel efficiency and governments push it and electrification, yet buyers still love bigger, more functional vehicles. Sales of thirstier light trucks surged 8.9 per cent in 2015, while passenger car sales slumped 6.3 per cent. DesRosiers notes that subcompact car sales crashed 21 per cent last year, while compact car sales slid 5.3 per cent.

At least Canadians are giving the biggest nod to compact SUVs (sport-utility vehicles) and compact cars. Combined sales of the latter out-paced large pickups more than 2:1 (744,000 to 324,000).

Canadians in particular have taken to heart this new wave of the smallest of SUVs such as the Mazda CX-3 and Honda HR-V, Buick Encore and Chevrolet Trax. As well, General Motors and Toyota — by remaking the Chevrolet Colorado, GMC Canyon and Toyota Tacoma — have injected new life into demand for smaller pickups.

“The fastest growing segment was actually subcompact SUV, up by 65.5 per cent to 43,432 units,” notes DesRosiers, adding, “Small pick-up trucks followed, up by 59.3 per cent to 25,353 units.”

Toyota reinvented the Tacoma pickup, which helps explain why smaller pickup sales jumped 59.3 per cent to 25,353 units in 2015.

Toyota reinvented the Tacoma pickup, which helps explain why smaller pickup sales jumped 59.3 per cent to 25,353 units in 2015.

Total SUV sales in 2015 were up 12.1 per cent last year and big SUVs were up 16.9 per cent. So despite the industry’s drive to improve fuel economy and add electrification to the overall mix, the “average fuel efficiency of a new vehicle put on the road in 2015 worsened,” says DesRosiers.

Cheap oil in the short term, then, is bad news for a car business that has invested long-term in long-term fuel efficiency and electrification. Indeed, in 2008, President Obama set a goal of getting one million plug-in vehicles on U.S. roads by 2015, notes Reuters. But with a gallon of gas in the U.S. near $2 (US) a gallon, versus nearly $4 in 2008 — only about 400,000 electric cars have been sold.

After sinking billions into a current roster of 30-odd plug-in models (with more coming), sales in 2015 fell 6.0 per cent, notes Reuters. Plug-in vehicles accounted for less than 1.0 per cent of sales last year. But that hasn’t crimped the auto industry’s electrification drive. The Bolt EV from GM is just one of many hybrid and plug-in models coming this year and in the years to come.

Pump prices will rise again, of course. But this time – unlike in the last decade — the world’s car companies will be ready with a fleet of efficient vehicles that are generally unloved today. Finally, automakers – even Detroit’s — have learned to play the long game, and play it well, despite the short-term wants of so many buyers.

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