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Report: Gas Costs May Not Spur Small-Car Sales

March 15, 2012 by · 1 Comment 

The following is an article from Automotive News examining whether gas prices will push consumers toward smaller vehicles. To read the entire story click here.

It happens nearly every year: Gasoline prices rise in the spring and sales of smaller cars spike through the summer. Pundits declare that car-buying habits are changed for good. Then gasoline prices fall, and consumers go back to buying full-sized SUVs and cars with larger engines.

Some industry trackers believe 2012 will be different because this time Americans will realize that cheap gasoline isn’t coming back. But increasingly automakers seem to doubt that a permanent change in consumer behavior will ever occur.

As a result, they are focusing more on boosting the fuel efficiency of the entire vehicle lineup and not just adding small cars.

“I don’t see this reshaping the buying public,” said Bill Reinert, Toyota national manager of alternative fuel vehicles. “We’ve been through these cycles for two decades, but it’s never really taken. I don’t see this as a chance for a sales boom for the [Chevrolet] Volt and [Nissan] Leaf.”

Shopping behavior tracked by Compete Automotive in Boston shows that sudden spikes in gasoline prices lead to a sharp rise in demand for small cars. More gradual increases in the prices have less effect, “but at some point, even a gradual creep to insane prices is likely to drive behaviors,” said Lincoln Merrihew, Compete’s managing director.

Reinert says that the sales-weighted fuel economy of new Toyotas has gradually increased over the past several years, basically following the trend of gasoline prices. But sudden purchase spikes in fuel-efficient cars have been repeatedly followed by troughs once gasoline prices fall again. Reinert says that charting Toyota Prius sales in relation to gas prices bears this out.

Retail sales of the redesigned Ford Focus compact were up 123% in February in California, a market that bore the brunt of suddenly higher gasoline prices. But will that sales rate hold should gasoline prices decline?

“We saw increases in small cars and fuel-efficient vehicles move in tandem with the price of gas,” said Erich Merkle, Ford’s U.S. sales analyst. “Volatility shifts buyer behavior.”

To read the entire article click here.

 

 

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