We are already seeing gas prices this year begin an ascendancy that tends to peak sometime in the summer. Gas prices clearly impact consumers, especially people shopping for new passenger vehicles. What is not always clear is how that shift affects the auto industry, specifically which vehicle segments will see an increase in sales and which ones will lose market share and by how much.
Experian Automotive Survey
Experian Automotive has released the findings from a study it recently conducted on the impact of rising fuel prices. The company evaluated vehicle segment trends over a five-year period, finding that there is a direct correlation between fuel price fluctuations and new vehicle sales.
As expected, sales of full-size trucks routinely drop while sales of small cars rise as gas prices surge. Specifically, Experian noted that for every price increase of a $1 or more, sales of full size trucks dropped by 0.5 percent while sales of small cars rose by 0.7 percent. Notably, Experian found that sales of hybrid pickup trucks such as the Chevrolet Silverado actually fell by 0.1 percent. Hybrid vehicles and electric vehicles, supposedly the biggest beneficiaries of higher fuel prices, saw gains of just 0.2 and 0.1 percent respectively.
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Consumer Auto Trends
Experian Automotive then took the changes and tracked them across vehicle segments to gauge that impact on new car dealers. It found that the number of vehicles bought remained unchanged, but consumers shifted to other categories in search of vehicles offering improved fuel savings and good value. With 18,000 new vehicle dealers in the country, higher gas prices could shift sales to smaller vehicles, with sales increasing by an average of one unit every three months. That may seem like a small impact, but it does have broader consequences on dealer inventories that are planned months in advance.
Said Erik Hjermstad, lead analytic consultant for Experian Automotive, “Smaller cars definitely pick up market share, and full-size pickup trucks and SUVs definitely see a downturn. But, the magnitude of these shifts is also a function of how quickly gas prices increase or decrease.”
Rising Fuel Prices
Regionally, prices changes can be sharper in some areas of the country, perhaps having an even greater impact on local new car dealers. Those dealers that carefully monitor pricing trends, follow changes in consumer demand and align their inventories accordingly are “in a better position to react to fuel price changes” noted Hjermstad. As of publication, gas prices have already pushed above $4 per gallon in California, with some stations charging more than $5 per gallon reports the San Jose Mercury News. Likely, impacted dealers are already seeing a shift in consumer demand playing out locally.