From Automotive News:
Dealers brace for $4 gas
Press: “This year is going to be a pretty severe year”
and Ryan Beene
February 29, 2008 - 3:55 pm ET
DETROIT -- Experts predict that gasoline prices could reach $4 a gallon in some regions by spring, giving the U.S. auto industry more reason for pessimism amid a slowing economy.
The national average price of regular unleaded gasoline rose 16 cents from Jan. 25, to $3.16 a gallon today, according to AAA's Daily Fuel Gauge Report. Premium gasoline rose 18 cents, settling at $3.48 a gallon.
Prices in Alaska already have reached $4.95 a gallon, according to www.GasPriceWatch.com
" With the price of oil over $100 a barrel, we should expect self-serve gasoline to reach $3.50 per gallon by spring," Geoff Sundstrom, spokesman for travel and auto group AAA, of Heathrow, Fla., told Automotive News. "
Some regions could reach $4, especially for the West Coast."
The prospect of $4-a-gallon gasoline has dampened an already weak U.S. sales outlook for 2008 -- and growing pessimism by top auto executives such as Chrysler LLC co-President Jim Press.
" This year is going to be a pretty severe year," Press told reporters today in New York.
While high gasoline prices will affect consumers and retail vehicle sales, auto dealers have differing opinions about the effects on the market.
A measured response
" The impact of gas prices is a consideration" for new-car buyers, Paul Taylor, chief economist for the National Automobile Dealers Association, told Automotive News. " It is a measured response on the part of the consumer, not a dramatic response."
AutoNation Inc. spokesman Marc Cannon says if gasoline reaches $4 a gallon, " consumers are clearly going to look at alternatives because of fuel efficiency."
Cannon says it is tough to speculate about if and how consumer preferences will shift with high fuel prices. But he says $4 a gallon will not stop people from buying cars.
" You are not going to see at $4 gasoline, all of a sudden, everybody says, ‘Oh, we're never going to buy this again,' " he said. " You'll see consumers shopping and looking at alternatives and looking at a variety of things, but it's going to depend on what fits their needs."
Tony Pordon, senior vice president of Penske Automotive Group, said when fuel prices have spiked in the past, consumers strayed from light trucks. And, he said, " the used-market values of those cars declined precipitously."
Taylor said used-car values, particularly pickups, can decrease $1,600-$2,000 as fuel prices rise.
Balance from a shift?
Pordon says if $4-a-gallon gasoline pushes consumers away from light trucks, sales of smaller, more efficient vehicles could see a boost. This type of a shift is something Penske dealers can handle.
" As dealers, that's one of the great things that we have," he said. " We can change the mix that we have on our lots. I know you would see (dealers) adapt in terms of the product they carry on their dealership lots to appeal to what the people want to drive."
But high fuel prices alone won't stop trucks from selling.
" You've got to be looking at trucks from the economy angle, from the housing angle," AutoNation's Cannon said. " Sure, gas will have some effect on truck buyers, but really what's having the effect on truck buyers is the entire housing market -- the facts of the housing downturn and less construction."
Tom Machen is an independent Chrysler, Dodge, Jeep and Ford dealer in Forrest City, Ark., a small town near the center of the state. He says any time there is a large jump in personal expenses -- whether it is $4 gasoline, higher electricity or heating bills or higher mortgage payments -- it hits small dealers hard.
" It's the uncertainty" of the prospect of $4-a-gallon gasoline and other economic forces that make times tough for Machen and his customers. He says if gasoline prices spike, pessimism can grow among potential customers in his town of about 15,000, slowing showroom traffic.
Machen said for his customers to feel comfortable with $4 gasoline, " it needs to settle there and stay there for about six months."