Consultancy: Gas Price Hikes Eroding Consumer Loyalty For Trucks, SUVs

As gasoline prices hit record levels, consumers trading in large and mid-sized trucks and SUVs are getting smaller vehicles instead, according to J.D. Power & Associates.

Per the consultancy's Power Information Network (PIN), gasoline price surges of 20 cents, to a national record average price of $3.10, have eroded owner loyalty of big vehicles. The consultancy measures loyalty as a percentage of owners in a given segment who stick with that segment when they trade in for another vehicle.

Per PIN data culled between February and April this year, sales of small vehicles as a percentage of total new-vehicle sales have risen from 26.3% in 2004 to 31.8% so far this year. Gasoline price increases are also reducing the number of used small cars, compact basic cars and small luxury crossovers sitting on lots.

While loyalty toward large vehicles has slipped, loyalty toward small cars and crossovers has gained. And gasoline prices have had minimal impact on mid-sized crossover vehicles, reflecting both the proliferation of vehicles in that segment and also the fact that crossovers garner higher mileage. Gas prices have also had no effect on large and mid-sized cars, and on small crossovers and SUVs in recent months.

Not surprisingly, sales of hybrid vehicles closely track monthly variations in gasoline prices, per the consultancy's PIN research data from January 2005 through April this year.

For example, hybrid sales hit 40,000 in August 2005, when gasoline spiked to just below $2 per gallon--up by 75 cents a gallon eight months earlier when only 25,000 hybrids were sold, per the consultancy. In August last year, when gasoline prices hit a national average of $2 per gallon, sales spiked again to similar levels, then dropped in the fall, when gas prices tempered, before heading up again this year.

Tom Libby, senior director, industry analysis for J.D. Power, says the key point is that at least until the sky falls, or gasoline prices hit $4 per gallon and stay there, the loyalty patterns will follow, roughly, gasoline prices.

"We are seeing patterns repeating themselves after last year. The segment loyalties are following the same trends," he says. "The propensity to re-buy or trade for the same vehicle goes down in [large and mid-sized SUV and truck segments] as gas prices rise like this. But it could reverse itself; we have seen that happen.

"But if the market reaches that $4 level in general and stays there for an extended period, we think there will be dramatic shifts in the market. If those two conditions develop, there will be major shifts."

Recommend (1) Print RSS