SUVs are falling out of favour in the place where they first rose to prominence, the USA. In Australia however, they've never been more popular and their gain in sales coincides with the long-term sales decline of large cars -- a decline that appears to be picking up speed with each passing month.

Just as the typical Australian family unit can't be said to be necessarily 'nuclear' any more, nor is the typical family car necessarily large and rear-wheel drive.

It's easy to point the finger at record high prices for fuel -- and certainly Ford says as much -- but the sales malaise for large cars isn't just the product of that. And where the fuel pricing has affected sales, there are ripple effects that aren't as easily identified.

For example, one of the elements of high fuel prices affecting the whole market -- not just large cars -- is the recent slide in private buyers. Ford believes that private buyers are staying away because they can't afford to find the difference between what their current car is worth and what a new car will cost to purchase.

Why is their trade-in worth relatively less? To start with, new cars have never been more affordable and -- after two or three years -- they get 'dumped' by fleets, so there are a lot of used cars around.

Beyond that big-picture view though, if the used car is a large car, its value has dropped proportionately faster than more fuel-efficient cars, due to the rise in fuel prices. Because of the cost of fuel, the sort of person who might already own a large car won't necessarily trade up to a new one, where 12 months ago, that owner might have done so.

Ford's President, Bill Osborne, made the observation that used car prices represent an obstacle to new-car buying during the monthly sales briefing Ford conducts for the motoring media.

"I think that residuals have declined because there's a big supply of used cars on the market," he said.

"So interest rates don't seem to be an inhibitor, but the actual trade-in value of used cars has been deteriorating."

What about the Falcon specifically? How is the new FG Ford faring? Osborne is happy with his product's 30.0 per cent share of the large-car segment last month -- notwithstanding it's 30 per cent of a market segment that has dropped to 10.9 per cent of the total market, versus 12.5 per cent in June of 2007.

"I happen to think that one of the issues here for us is going to be continued momentum in Falcon -- in the face of declining segmentation," he says.

"So far, we've been meeting our segment share objectives. As you well know, the segment has declined significantly, year to date."

Falcon sales have picked up since the release of the FG model, but in a case of swings and roundabouts, the run-out BF II models accounted for approximately 30 per cent of Falcon sales in June, whilst the turbocharged FG variants didn't commence production until the very last week of the month.

"About 1067 of the BF IIs were in the figure and so a little over 2400 for the FGs," says Osborne.

"So the vast majority of the sales in June were the FG Falcon -- and I stress that we didn't actually start getting the Turbo units out into the field until the last week of the month."

From that, it appears that the kick-along for FG Falcon sales should come from the XR6 Turbo and G6E Turbo variants in July. The problem with that is that Osborne predicts July will be a very flat month for large-car sales.

"In June, there were a number of company cars included by some of our competitors in their sales -- and a large percentage of demonstrators in the fleet. So we actually think the underlying market for large cars is even weaker than what was displayed in June. That information is cause for concern for us.

"We've had no issue meeting our segment share objective, but the segmentation -- particularly with the recent rise of fuel prices -- has deteriorated even further. So we expect a weaker segment in July than we've seen in June."

Osborne sticks to his guns that fuel prices are scaring off large-car buyers, but by his own admission, governments have opted out of the segment over a longer period than just the recent past, during which private buyers have migrated to smaller cars and SUVs.

"The big drop-off in large cars, year-to-date, has been government fleets. Only recently have we seen a larger deterioration in private buyers. So we think that's been fuel-price related. We have a segmentation model that correlates quite well with fuel prices. If fuel prices remain stable, we would be projecting the large-car market to remain around this 11 per cent level that we see in year-to-date. If fuel prices continue to rise, our model would suggest further deterioration, but I don't think any of us know where fuel prices are headed."

Happily for Ford, the new Falcon and the run-out BF II have boosted numbers sold during June, relative to June 2007. By comparison, Holden, with 60th anniversary models and what Osborne says was very "steep discounting" to "blunt" the FG Falcon's launch, sold fewer Commodores during June '08 than in June '07 -- over 1300 fewer, in fact. Commodore sales, it must be said, are still well ahead of Falcon's, with the Holden posting nearly 800 more sales than the Ford in June. Holden will also be looking forward to retailing the new Sportwagon, which should certainly improve the large-car outlook for the company.

Despite the Falcon's gradually improving fortunes (until the next round of fuel price rises at least), Osborne believes there's more room for improvement.

"I'm not happy with [the Falcon's] 30 per cent [share of the large-car segment]," he said. "I expect to do better as soon as I start getting all my Turbos out there."

So the Turbo Falcons, which use more fuel than the lesser variants, will help the model pick up sales -- which seems slightly at odds with the contention that fuel poses such a crippling hurdle for new car buyers and that's why they're not buying large cars to the same extent.

But then, increased sales of SUVs -- which use more fuel still than the average large car -- are also blamed for the decline in large-car sales.

If Ford's position, that the sales slump for large cars is entirely -- or even largely -- due to the high cost of fuel, then increased production of LPG models and the introduction of diesel power for the Falcon -- and alternative fuel strategies for large cars generally -- should revitalise the whole segment.

With a diesel Falcon likely to be at least the best part of two years away, Ford will have all fingers crossed that Falcon sales can be sustained in the face of this downturn -- and just to add another teaspoon of worms to the can, diesel prices are rising rapidly too, with some buyers already indicating that diesel is not the answer for them.

Ford -- as undoubtedly is the case for Holden and Toyota -- will be working pretty hard at the sales pump to keep the large-car segment buoyant, for the foreseeable future.

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