The automotive retail industry has ebbs and flows, no question. The national and global economies are factors in year-to-year fluctuations, and new model releases have an impact also. But there’s a larger influence at play in the automotive retail market, and the correlation is obvious.
Fuel prices are the driving force in the automotive market, seemingly more than any other factor. A comparison of historical fuel prices over the past fifteen years overlays with vehicle sales nearly in exact proportions. Pure and simple, when gas prices are high, small vehicle sales are proportionally higher. And when prices at the pump drop, large vehicles skyrocket in popularity.
Prices Up, Large Vehicle Sales Down and Vice Versa
Pickup trucks and SUVs are the most notable difference. Before the economic recession earlier just a decade ago, the Ford F-150 was nearing 1 million annual sales in the United States. Within a year, F-150 sales were less than half of that. Coinciding with that time frame was an economic crash, true. But in 2008, an all-time high in fuel prices started the trend toward smaller cars, but only for a time.
In that same time frame, another popular American car model saw a different trend. The Chevrolet Malibu saw a slight depression during the recession but quickly rebounded to incredibly strong numbers while fuel prices remained high.
The same pattern is repeated in models across the board: the Toyota Camry, Honda Civic, and Chevy Cruze all have the same trend in passenger cars. Conversely, the Chevrolet Silverado, Ram Trucks, and Jeep Grand Cherokee sales follow the same pattern at the F-150.
What Does It Say?
The automotive industry is fickle, and heavily based on fuel prices. A look at the current fuel prices and sales figures confirms it. The SUV and crossover markets are experiencing unheard-of growth and truck sales are as strong as they’ve ever been. At the pumps, if the average price of gasoline in America remains under the $3 mark, you can expect larger vehicles to fly off the lot.
However, there seems to be evidence contrary to the belief that car sales are steeply declining. Instead, many car models are holding steady in sales – not growing exponentially like trucks and SUVs currently but maintaining a sales pattern that is less volatile.
As the saying goes, “Make hay while the sun shines.” In the automotive market’s current condition, manufacturers and dealers are focusing efforts on selling models that customers want: trucks, large SUVs, and crossovers. No doubt, some of the increase in sales is due to improved fuel efficiency in these segments, and perhaps future fluctuations in fuel prices won’t result in wild variations in sales numbers.
Yet, there’s still a good market for car sales – a full third of new vehicle buyers still choose a passenger car. Should fuel prices climb significantly, for example to $3.50 or $4 per gallon, it’s highly likely large vehicle sales will stagnate and car sales will grow.