Ford Analyst: High Gas Prices Boosting Small Car Sales

by Jeff Gilbert
WWJ AutoBeat Reporter

DETROIT (WWJ) - The rapid rise in gasoline prices is starting to have an impact on the vehicles that consumers are buying.

"Obviously, we're starting to see a shift toward smaller vehicles, specifically subcompact and compact cars and small utilities," says Ford sales analysis manager George Pipas.

Interview: WWJ AutoBeat Reporter Jeff Gilbert talks with Ford's George Pipas about car sales and gas prices.

February car sales numbers come out on Tuesday. But, Pipas says early trends show small vehicle sales up in both January and February. He also sees a familiar, but disturbing trend developing.

"We're now at the point, in January and February, where we were in the beginning of 2008 when gas prices went to $4 a gallon by summertime."

The national average for a gallon of gasoline topped out at $4.11 in the summer of 2008. Those prices then started falling, until they bottomed out at around $1.69 a gallon at the end of 2008.

Pipas said there's no way to tell right now where gasoline prices will top out. He does say trends do show that prices will continue to rise into the summer driving season. That, Pipas says, should keep small car sales strong.

Ford's data is corroborated by information from the research firm truecar.com. They say that the average fuel economy of a vehicle sold in February was 22.5 miles per gallon. That's one mpg higher than January's figure

"Average monthly fuel economy provides a closer look into how fuel-efficient the vehicles a manufacturer sells each month," said Jesse Toprak, Vice President of Industry Trends and Insights at TrueCar.com, in a statement. "It also provides a glimpse into how gas prices are shaping what cars are being sold monthly."

One big worry about rising gas prices is the impact they could have on the overall economy. In the past, sudden gas prices have had an impact on consumer spending.

"A strong, rapid rise in fuel prices would take away some of the benefits of the tax cuts that were enacted before the end of last year," said Ford's Pipas. "It's a good thing they were enacted, because higher gas prices are taking away some of the discretionary income that consumers have."

Pipas says consumers who are forced to spend more to fill up their tank, can't spend that money in other areas that are important to keeping the recovery going.

"For most things you buy, you get more. That's not true with gas. If you pay more, you get nothing more."

Analysts say while consumers could change their buying preferences, they don't see the auto industry recovery being derailed by the higher gasoline prices. One reason is an older fleet means there is still a lot of pent up demand.

Pipas says February car sales continue to show the recovery continuing at a consistent rate, with sales up about 20 per cent over 2010. Ford sales will be up, but not as much, probably in the "low teens" says Pipas.

Follow Jeff Gilbert on Twitter @jefferygilbert