“High gas prices function exactly like a regressive tax. Today, over 50% of Americans expect gasoline prices to cross $4.50 per gallon over the next 3 months and nearly a third expect it to exceed $5.00,” says Raghavan Mayur, president of TechnoMetrica
Ramsey, NJ (PRWEB) March 23, 2012
The U.S. auto industry is likely to become a casualty of high gasoline prices. Persisting high gasoline prices could drive down demand and add to the financial troubles of the already vulnerable auto industry. Further, a sharp slump in auto sales has immense potential to affect the economy and employment significantly.
The TechnoMetrica Auto Demand Index nosedived by 49 points, or 48%, in March posting its all time low 49 vs. 94 in February and 105 in January.
March's reading of the Auto Demand Outlook Index is 22 points below its 12-month average of 71.
Note: Index readings correlate with demand and purchase plans for new automobiles. Higher index scores indicate higher demand, while lower scores indicate lower demand. The baseline score for the Index is 100, pegged on the average demand during February to April of 2007.
TechnoMetrica Market Intelligence computes the Auto Demand Index based on responses to the question in its nationwide survey of Americans: How likely is it that you will buy or lease a new vehicle within the next 6 months? Would you say very likely, somewhat likely, not very likely or not at all likely?
The share of likely buyers dropped from 16% in February to 8% in March.
The number one factor in the dramatic slowing of new car consideration is the rapidly increasing price of gasoline, which has a big impact on people’s budgets and behaviors.
“High gas prices function exactly like a regressive tax. Today, over 50% of Americans expect gasoline prices will exceed $4.50 per gallon over the next three months and nearly a third expect it to exceed $5.00,” says Raghavan Mayur, president of TechnoMetrica Market Intelligence.
“Gasoline prices are the single biggest wildcard facing auto manufacturers. Our prior research has shown that the U.S. auto market could shrink 10% if gas prices hit $5 a gallon and 18% at $6 a gallon. This gives a significant new meaning to the idea of gas pains,” says Mayur.
Prior to this month’s big decline, car purchase intentions had been increasing nicely for more than 6 months with February intentions almost equaling those we saw in 2007. Suddenly, this month, Americans have lost the confidence they need to purchase or lease a new vehicle.
The dampening of consumers' appetites for new vehicles followed the broader drop in consumer confidence registered this month by the IBD/TIPP Economic Optimism Index, which fell to 47.5 from 49.4 in February (down 1.9 points or 3.8%).
Not all of the findings in TechnoMetrica’s March Auto Demand Index were negative. The survey includes a section on the brands consumers would be interested in considering. Here, Ford is the clear winner with nearly one in five new car intenders considering a Ford. Second, is Chevrolet, Toyota comes in third, Honda is fourth and rounding out the top five is GMC. Intention to buy American brands is consistently 10 percentage points ahead of the Asian brands.
According to Mayur, auto manufacturers and their dealers must proactively prepare for a slowdown. Auto factories take a long time to alter production rates and no manufacturer wants to have too many cars in inventory. The same holds true for car dealers, who must finance the unsold cars in their inventory.
Car manufacturers have done their part by significantly increasing the fuel economy of cars and light trucks. They have achieved this by reducing weight, improving aerodynamics, and increasing combustion efficiency. They have offered alternate fuel vehicles and an increasing number of electric vehicles. Yet the car buying public has shown a clear preference to drive gasoline-powered cars.
Each month TechnoMetrica uses Random Digit Dial telephone methodology to conduct live interviews with more than 900 respondents. The margin of error for the survey is +/- 3.3 percentage points.
About TechnoMetrica Market Intelligence:
TechnoMetrica, founded in 1992, is a nationally recognized full-service Market Research consultancy and a leader in the publication of economic and industry-specific consumer confidence and purchase plan indicators. TechnoMetrica helps businesses identify, develop and capitalize on growth opportunities. Spotting trends and synthesizing insights that are well defined, accurate, and forward thinking is TechnoMetrica’s key strength. TechnoMetrica has been providing innovative research solutions to many of the world’s most respected automotive brands for over a decade. In addition to the Auto Demand Index, TechnoMetrica also publishes the Alternative Fuels Tracker, a quarterly tracking study that monitors the development and growth of the alternative fuel vehicle market. In partnership with Investor’s Business Daily, TechnoMetrica conducts IBD/TIPP polls, including the nationally recognized IBD/TIPP Economic Optimism Index. IBD/TIPP was the most accurate pollster in both the 2008 and 2004 presidential elections, according to final FEC-certified results of those elections. TIPP is also the polling partner of The Christian Science Monitor and the Monitor/TIPP polls regularly appear in the paper.
Note to Editors:
Users of these statistics should attribute credit and source to TechnoMetrica as this research is proprietary.