Are Gas Prices Affecting Consumer Purchases? Automotive News Thinks No, Yes, Maybe.

Anyone with even half an ear to the ground knows that high fuel prices are causing consumers to think twice about which vehicle to buy or which car to take. Leave it to industry insiders, however, to be the folks least likely to understand what is happening beyond the "steel tower". Virtually every recent issue of Automotive News, the mouthpiece of the auto manufacturing industry, has some comment about whether the run of high gas prices is affecting buyers' attitudes. Yet, there is no consistency -- even within the same issue.

Take, for example, the June 7, 2004 issue of AN. An article on page 4 headlines with, "Dealers say costly fuel is changing sales, but automakers disagree". The piece details how dealers are reporting declines in sales of large SUVs and are scrambling to get more fuel efficient vehicles on their lots. The sales and marketing departments of the Big Three, however, stoutly deny that fuel prices are having any effect on buying preferences. GM's market and industry analysis executive director, Paul Ballew, claims that gas prices would have to rise to $2.50 to $3.00 per gallon before purchasing decisions would change, according to GM's research.

Yet, on page 14 of that same issue Mark Rechtin, AN's Los Angeles bureau chief, says that, based on his own research (he spent some time at the source -- the gas pump), the only people who have not changed their driving or purchasing habits are those who use their large vehicles for work. "Big 3 go whistling past graveyard again".

Now, doesn't it seem likely that dealers who are interacting directly with consumers are in a better position to know whether gas prices are having an impact on buying habits than analysts reviewing data? Ditto that with the gas pump survey? I have always been highly suspicious of statistics because the data sets are often flawed or compromised, and there is generally too much lag time between collection and analysis to make them worthwhile. But this time I really have to ask: Just where are the domestic automakers getting their information from?

A mere 4 weeks later in "Even Hummer can't ignore high gasoline prices", AN reported that sales of the gas-thirsty Hummer have fallen off significantly since gas prices reached a peak earlier this year. Hummer's marketing chief is now using phrases like "improving fuel economy", something the urban military vehicle needs with its low 10 to 13 mpg rating.

Of course, one of the reasons new vehicle sales have remained strong despite the higher gas prices is that automakers are artificially bolstering the market by offering enormous rebates and 0% financing. The net effect is that overall new SUV and truck sales may seem unchanged, but the rebates and incentive financing are siphoning sales from the used car market. Doing this is economically dangerous because it drives down the wholesale price of used vehicles which also reduces trade-in values, according to AN's, "Prices decline for large used SUVs", July 19, 2004. GM continues to insist that it has not experienced any slowdown in sales of new SUVs attributed to high gas prices, but it also doesn't address whether the increase in already substantial incentives has helped shore-up those figures.

Methinks, they protesteth too much.

Comments

[Pete Blackshaw]

Quick question. I'm trying to pull together a list of the best auto blogs out there. best content. most credible authors. have any thoughts or ideas. I have a short list so far. I'm the author of www.hybridbuzz.com

[EL Eversman]

I know of very few automotive related blogs. Lots of law students blogging, but not that many on cars, trucks, and anything motor vehicle. There is Autoblog.com which is an online magazine about cars. But just not many actually on cars -- hence the fact that as a lawyer and car person, I thought I would put some of the information I have on the net.

[Van Sales]

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