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Report: Will Gas Prices Derail Auto Sales Boom?

Posted By RVBusiness On March 23, 2012 @ 3:17 pm In Breaking News | No Comments

Pump prices keep rising

For automakers, 2012 looks like it will be better than expected — at least in the U.S.

USA Today reported that U.S. consumers are on pace to buy about 1.4 million new cars and trucks in March, or about 6% more than in the same month last year. That would put the industry on pace to sell 14.1 million for the year, which is higher than most industry analysts expected at the start of 2012, when they were predicting sales of less than 14 million.

“Results for the first quarter of 2012 suggest that the year will be better than current expectations,” said Jeff Schuster, senior vice president of forecasting at LMC Automotive. In March, LMC Automotive is predicting an annualized selling rate of 14.1 million cars and trucks.

That’s lower than the 15.0 million rate for February, but would be the third-straight month above 14 million.

But Schuster says the real test for the industry will come over the spring and summer. That’s when gas prices will test consumer confidence and as policymakers in Europe try to contain that continent’s debt crisis.

On Thursday, the average price for a gallon of gas was $3.88, or 33 cents higher than a year ago, according to AAA’s Fuel Gauge Report.

Higher prices aren’t hurting auto sales yet, Schuster said, but they are affecting what people are buying.

Through the first 18 days of March, subcompact and compact cars accounted for approximately 23% of retail sales in the U.S.

USA Today reported that over the last 18 months, almost every automaker has introduced a new or redesigned compact car, and the industry overall is offering features on those cars previously reserved for larger cars.

Examples include the Chevrolet Cruze, Fiat 500, Ford Focus, Honda Civic, and Hyundai Elantra and Veloster.

“I think the styling in many cases is more appealing and the content has increased,” Schuster said.

Today, consumers can choose from 41 small car models in the U.S. market compared with just 30 back in 2007.

The U.S. housing market, meanwhile, is only starting to show signs of a recovery, which means pickup sales are unlikely to outpace industry growth.

With higher gas prices, and more choices, the overall share of small cars in 2012 could climb to its highest level ever, at nearly 20% of industry sales, Schuster said.

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