High gasoline prices function as a regressive tax. They take money directly out of people’s pockets and have a negative effect on all of their discretionary spending as well as their new car purchase intent.
Ramsey, NJ (PRWEB) April 23, 2012
A New Jersey based market research firm, TechnoMetrica, has been interviewing U.S. consumers every month since 2007 in an effort to determine their interest in purchasing or leasing a new vehicle within the next six months. Their report, the Auto Demand Index, revealed a gradual but positive trend, beginning last August and peaking this January at an index of 105 or as strong as the demand was during the industry’s best sales year, 2007. In March, the ADI abruptly dropped by more than half to 49. The April survey revealed an ADI of 67, confirming new car purchase intention has dropped significantly from its January high. This continued drop in new car purchase intent will likely express itself as lower new car sales during the second quarter, stated Raghavan Mayur, president of TechnoMetrica.
“While we express our research as an index, let me explain what this means in terms of new car acquisition”, Mayur explained. “In February of this year, 16% of all people surveyed stated that they were somewhat likely or very likely to purchase or lease a new car during the next 6 months. In March, this number dropped to just 8% and while it did increase to 11% in April, it is still down significantly from February. More disturbing is the positive momentum in purchase intention, which began last August, has been broken”.
The Auto Demand Index is a forward-looking indicator of consumers’ intent and it has a very high correlation to actual new vehicle sales. Further, the index, when combined with retail gasoline pricing data, has nearly perfect correlation to auto sales. 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. The ADI’s dramatic downturn in March might translate to reduced new vehicle sales as early as May. While the ADI does not explore why intention has changed, other research projects the company conducts can help explain the reason for the change. According to Mayur, the number one factor in the dramatic slowing of new car consideration has been the rapidly increasing price of gasoline.
Mayur states his research clearly shows that the price of gasoline has a huge impact on people’s budgets and behaviors. High gasoline prices function as a regressive tax. They take money directly out of people’s pockets and have a negative effect on all of their discretionary spending as well as their new car purchase intent.
Not all of the findings in TechnoMetrica’s April’s ADI were negative. The survey includes a section on the brands consumers are considering. Here, Ford is the winner with Chevrolet and Toyota in a dead heat for second and third. Honda comes in fourth, with Nissan filling out the top five.
Mayur pointed out that the drop in ADI should probably not be of concern to the public at large. After all, it is merely a reflection of their intentions. Those who should be concerned are the auto manufacturers, their suppliers, and their dealers. The auto industry has long lead times and high inventory costs.
“Rising gasoline prices appear to be the primary driver behind the drop in ADI. It is not the only cause to be sure, but it has a very large and real impact on a family budget. Consumers today are saying they would rather address this problem by driving less and postponing new car purchase, rather than by buying smaller or alternate fuel vehicles”, concluded Mayur.
TechnoMetrica began the monthly Auto Demand Index research in 2007. 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. To review the entire TIPP Auto Demand Index for April visit: http://www.tipponline.com