FUTURE NEW-VEHICLE SALES FORECASTED

U.S. consumers still love big vehicles, and even though gasoline prices are averaging $3.20 a gallon across the nation, they will probably continue to buy big vehicles, according to a recent article in The Detroit News. However, the article states that the overall U.S. market could drop slightly as some consumers wait until gas prices drop before making a new-vehicle purchase. The article quotes Jesse Toprak, senior analyst for the Edmunds.com auto website, as saying that "it really didn't seem like the gas prices had a direct impact in May," as he analyzed sales data for the first three weeks of the month. "It seemed like people almost got used to it," Toprak notes. Because of rebates and other incentives, light-truck sales will likely increase compared to May 2006 sales, based on analysis of the first three weeks of new-vehicle sales this month.

The article notes that people tend to buy more fuel-efficient vehicles when gasoline prices get higher, but 0% financing and cash rebates have kept SUV and pickup sales afloat. Consumers rationalize that the money saved will go to paying for the added fuel expense. Ford and GM sales are expected to experience double-digit drops this month, but these declines are expected to result from cuts in rental company sales. On the other hand, analysts expect Chrysler sales to jump 7% in May. Analysts also predict small declines for Honda, Nissan and Toyota.

Despite expected near-future declines for new-vehicle sales, Global Insight predicts 2008 new-vehicle sales will rebound. Light-vehicle sales will rebound next year after dipping to 16.2 million in 2007. They say that U.S. new-vehicle sales will not hit the 17-million level last seen in 2001 until 2010. By 2012, sales will climb to 17.7 million. According to Global Insight's forecast, the Detroit three will lose seven points of market share between now and 2012. Imports, on the other hand, will gain market share as they rise from 3.7-million units sold this year to 4.4 million in 2012, according to their forecast. Finally, Global Insight says they expect oil prices to stay above $60 a barrel over the next five years, which will affect the overall mix of vehicles sold each year.

Sources: Krisher, Tom. (May 25, 2007). "Americans Still Buying Bigger Models." The Detroit News/Automotivedigest.com. Retrieved May 31, 2007 from www.automotivedigest.com; James B. Treece. (May 23, 2007). "Forecaster: Sales Will Bounce back; Detroit 3 Might Not." Automotive News. Retrieved May 31, 2007 from www.autonews.com.