(Source: Alisa Priddle Detroit Free Press (MCT) — Falling gas prices could jump-start showroom traffic in coming weeks, but automakers’ June sales reports, to be released Tuesday, are expected to show a modest slowdown from the torrid pace of March and April.
“When gas prices come down, they have a deep psychological effect,” said Jessica Caldwell, economist with auto information site Edmunds.com. “People are in better moods.”
Pump prices in metro Detroit have fallen 19 cents a gallon in the last month, according to AAA’s Daily Fuel Gauge Report. In Grand Rapids, the decline has been 30 cents, with an even steeper 40-cent drop in Flint.
Analysts are divided on whether cheaper fuel will make owners more confident about replacing aging cars and trucks or simply make them less interested in upgrading into something more fuel-efficient.
People still want fuel efficiency for when prices go back up, but they are buying efficient versions of the vehicle they want, said Rebecca Lindland, analyst with IHS Automotive in Greenwich, Conn.
Modestly upbeat reports on new home sales should help sustain the growth of pickup sales.
Whether consumers head to the showroom or the mall, lower gas prices mean people have more money to spend.
Forecasts call for June auto sales to come in at a seasonally adjusted pace of 13.4 million to 14 million. That is stronger than 11.6 million in June 2011, when Toyota and Honda were pinched by shortages following the Japanese earthquake and tsunami. Both Japanese automakers have shown substantial sales increases in recent months.
Here are three predictions for what Tuesday’s numbers will show:
• J.D. Power and Associates/LMC Automotive: June sales pace of 14.5 million
• Edmunds.com: June sales pace of 13.9 million, with an uptick at year’s end • WardsAuto.com: June sales drop 7.5% from May but are up 17.5% from a year ago
Americans bought about 7.25 million new vehicles in the first half of 2012, up 14.8% from the halfway mark in 2011, said WardsAuto.com analyst John Sousanis.
“All indicators point toward an industry that continues to get healthy,” said John Humphrey, senior vice president at J.D. Power and Associates.
But there likely will be fits and starts.
Job growth remains lackluster. Manufacturing output, housing starts and the stock market continue to bob up and down, leaving consumers awash in a sea of uncertainty.
“Despite a rising level of uncertainty … consumers remain resilient in their willingness to purchase new vehicles,” said Jeff Schuster, senior forecaster at LMC Automotive. “We expect the sales pace to remain strong and stable throughout the second half of the year.”
One cautionary trend has been identified by Itay Michaeli, an analyst with Citi Investment Research: The number of vehicles per driver and household are declining.
Since 2008, for the first time in history, the U.S. has disposed of more than 1 million more vehicles than it has bought. The trend, Michaeli said, means it may be a while before Americans buy more than 15 million new vehicles a year. During the housing boom that ended in 2007, annual sales of 16 million or more were common.
The fear is that when the economy improves, consumers, especially younger ones, will have learned to live without a second or third vehicle.
IHS data shows there were 1.05 vehicles per driver in 2007 but by 2010, the ratio was 1-1 and continues to fall, Lindland said. It dropped to 0.99 vehicles per driver last year and is forecast to keep falling to 0.96 vehicles through 2020 — the first steady fall since 1960.
Contact Alisa Priddle: 313-222-5394 or email@example.com
©2012 the Detroit Free Press
Visit the Detroit Free Press at www.freep.com
Distributed by MCT Information Services