Experian Automotive: Segment Sales Still Driven by Gas Prices
New study from Experian Automotive shows that a $1 spike in a gallon of gas could increase the volume of the small-car economy segment by 7,000 units.
SCHAUMBURG, Ill. — A rise in gas prices translates into a significant increase in the market share of the small-car economy segment, but a decrease in the full-sized pickup truck segment, according to study conducted by Experian Automotive over a five-year period.
The analysis showed the biggest market share gainer to be the small-car economy segment, with its market share rising by 0.7 percent for every dollar increase in fuel price. This means that if gas prices increased by $1, in an average month with 1 million unit sales, the small-car economy segment volume would increase by 7,000 units. Conversely, the same price increase would cause the full-size pickup truck segment to lose 0.5 percent market share.
With approximately 18,000 new-vehicle dealers in the country, these findings show that on average, a $1 spike in a gallon of fuel means every dealer in the nation could see one more small-car economy vehicle sale approximately every three months.
“Everyone knows that a rise in fuel prices changes consumer purchasing behavior,” said Erik Hjermstad, lead analytic consultant for Experian Automotive. “But the question is, how are various segments influenced by a specific rise in fuel prices? In some cases, the shift in market share can be significant.”
Furthermore, sales of hybrid trucks actually fell by 0.1 percentage points. Hybrid cars went up by just 0.2 percentage points, and electric vehicle sales were up by only 0.1 percentage points. While these vehicles are still likely to be solutions to long-term transportation challenges, currently, there is low market demand, even when gas prices increase significantly.
“While higher fuel prices tend to get people talking, actual consumer behavior is affected primarily at the vehicle segment level. What this means for dealers is not necessarily a change in the number of vehicles sold, but rather a shift in which vehicles people are buying,” Hjermstad said. “Smaller cars definitely pick up market share, and full-size pickup trucks and SUVs definitely see a downturn. But, the magnitude of these shifts is also a function of how quickly gas prices increase or decrease.”
Hjermstad also suggested that dealers who closely monitor their market and have a better understanding of the vehicle sales in their region will be in a better position to react to fuel price changes, making better business decisions that keep sales up and inventory at the right level to meet demand.
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