Experts discuss how gasoline prices affect trend in product sales

Article by Anita Panait, on June 8, 2012

Fuel prices typically influence the consumer demand for vehicles. Likewise, fuel prices also influence how dealers stock their supplies and mix their products. According to Dennis Virag, president of Automotive Consulting Group, when fuel prices fall, dealers are expected to stock more sports utility vehicles and pickup trucks, adding that the mix in vehicles sold changes with gasoline prices.

Virag remarked that larger vehicles like SUVs and pickups have higher profit margins, and they help the dealer as well as the original equipment manufacturer. Ford sales analyst Erich Merkle, meanwhile, said that dealer demand is dependent on consumer needs. In May 2012, consumer demand for fuel efficient vehicles was lower than in April and March.

According to data compiled by University of Michigan Transportation Research Institute researchers Michael Sivak and Brandon Schoettle, the average fuel economy of cars and light trucks purchased in the United States in May was 23.7 mpg; down from 23.9 in April and 24.1 in March. However, the figure in May is still the fourth-highest average mpg for a month on record and up 3.6 mpg from October 2007. The figures were derived from monthly sales of light-duty vehicles and combined city/highway ratings gathered from the EPA Fuel Economy Guide.

According to Schoettle, consumers are more likely to purchase larger models if there is a noticeable reduction in gasoline prices and the unemployment rate. Schoettle remarked that carmakers have been building more fuel-efficient vehicles, and even if consumers are sticking with their big vehicles, those vehicles are also becoming more fuel efficient.

Despite this trend, both Virag and David Champion, senior director of the Consumer Reports Automotive Test Center, agree that fuel economy will remain a major factor in the future.

According to Champion, consumers with large SUVs like the Chevrolet Suburban will “migrate” to smaller options such as the Chevrolet Traverse and the Ford Explorer. Merkle, meanwhile, predicts that consumers will prefer smaller cars in the long run.

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