Rising petrol prices have some owners of large and midsize trucks trading to smaller vehicles, according to real-time retail transaction data from the Power Information Network.
US prices have surged more than 20 cents in recent weeks to a record nationwide average of $US3.10 per gallon, surpassing the previous record of $3.07 per gallon set in September 2005, according to the US Energy Information Administration.
As prices rise, owner loyalty in the large pickup and midsize and large utility vehicle segments drops, according to PIN data gathered between February and April 2007. Owner loyalty is measured by the percentage of owners in any given segment who trade for another vehicle in the same segment.
“We’re seeing a broad, long-term – but gradual – movement to smaller vehicles,” said Tom Libby, senior director of industry analysis at PIN, which is part of the JD Power group.
“For example, during periods of high gas prices over the past two years, we’ve seen movement from larger to smaller SUVs. However, the total SUV pie remains largely intact.”
While rising gas prices are having a negative effect on large vehicle segments, owner loyalty has increased for small cars. Additionally, sales of small vehicles, including cars and light trucks, as a percentage of total new vehicle retail sales, have risen from 26.3% in the first quarter of 2004 to 31.8% in the first quarter of 2007. The data also shows that higher petrol prices have had only a moderate impact on repeat purchases of midsize crossovers. The fact that several new midsize crossovers have just entered the market likely has softened the impact of rising gas prices on the segment, Libby said.
Not every new-vehicle segment has been affected by rising petrol prices. For example, PIN findings show that owner loyalty for large and midsize cars, small crossovers, and small SUVs has remained relatively unchanged in recent months.
Libby noted that all of these trends are consistent with the patterns observed in spring 2006 when petrol prices also rose.
Increased demand for smaller vehicles, coupled with higher gas prices, has also given four-cylinder engines a boost in powertrain market share. Four-cylinder engines as a percentage of total retail sales have increased from 27.5% in April 2004 to 35.7% in April 2007.
While vehicles powered by four-cylinder engines are receiving a lift from rising fuel prices, so are new vehicles powered by hybrid-electric engines. Hybrid vehicle sales have shown a strong correlation to petrol prices. For more than two years, hybrid sales have increased as prices have risen and have decreased as they have fallen.
The data also showed that the retail turn rates – the amount of time a new vehicle spends on a dealership lot before being sold – decrease for both new and used small cars as the price of petrol increases. In particular, these retail turn rates suggest that certain parts of the used vehicle market, such as small cars, compact basic cars and small luxury crossovers benefit when fuel prices rise.
PIN and JD Power and Associates data suggest that the small car market – both new and used – will continue to strengthen as fuel prices escalate.
“The recent strength of the small vehicle segments – pricing, styling and an increasing number of new models – is receiving an additional boost from high gas prices,” said Bob Schnorbus, chief economist at JD Power.
“We’re expecting the small vehicle segments to continue to grow, regardless of gas prices, but higher gas prices certainly will help these segments relative to others.”