Car sales: Car sales could be a little more resistant to higher oil prices than usual. When drivers have to pay more for gas, it often makes them less willing to splash out on a new vehicle. This time, however, prospective buyers should find it easier to shrug off concerns about the rising cost of fuel.
It would be foolish to read too much into the impressive figures the auto industry chalked up in February, though. Germany’s Audi and BMW both recorded 20 per cent gains compared to a year ago, much of it on the back of sales in China. In the US, overall sales jumped 27 per cent to an annualised 13.4 million units, the best showing since the federal government’s cash-for-clunkers programme in August 2009.
Some of that was powered by manufacturer incentives. For example, an industry-leading average of $3,700-a-vehicle helped turbo-boost General Motors’ US sales by 46 per cent. And, most transactions occurred before Middle East tensions put rising oil prices back in the headlines. But other factors, especially in the United States, could keep the sales momentum rolling. First, the economy has been in recovery mode and credit is easier to come by than in the past few years, as lenders relax what had become pretty conservative financing terms.
Meanwhile, scrappage levels have outpaced car sales since 2008, while two million new drivers take to the roads every 12 months. That has caused the average vehicle age to approach 11 years, at which point Morgan Stanley reckons the cost of keeping the car running jumps by as much as 20 per cent. That’s an incentive to trade in for a new vehicle, even more so if the old banger’s fuel consumption is worsening just as pump prices are rising. More, with used car prices hitting new highs each month, according to the Manheim Index, drivers should be securing a decent wad of cash for their next down payment.
Of course, costlier fuel is likely to hit sales of gas-guzzlers like SUVs. But only a spike sharp enough to threaten the American economic recovery should be able to puncture pent-up demand for smaller vehicles.