Will Falling Gas Prices Revive SUV Sales?

Gas prices averaged $2.44 nationwide on Sept. 22, 47 cents less than a month ago (per AAA) and continue to fall as oil prices hover at $60/barrel; yet surveys show consumers continue to rank fuel economy as their top consideration.

1 minute read

September 25, 2006, 10:00 AM PDT

By Irvin Dawid


"Simple economics would suggest that as gas prices fall, car shoppers would place less emphasis on mileage. But few, if any, people in the automotive industry are betting that this latest drop will undo some of the damage to Detroit.

"They'd have to keep falling and the decline would have to last for at least three or four months before it would have much of an impact on anything," said Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich.

"It would take a real fall to the $1.50 level to start changing expectations," he explained. "And there's a better chance of $4 than $1.50 in the long run."

"In 2002, the year S.U.V. sales peaked, only 22.7 percent of likely buyers said fuel economy was important in considering which car to buy, according to CNW Marketing Research, a firm in Bandon, Ore., that studies buying habits.

By 2005, 61.3 percent of buyers rated fuel economy as important. And in the first quarter of this year, after Hurricane Katrina but before gas prices spiked again, that figured climbed to 64 percent, CNW research showed."

"In August, a survey by Consumer Reports magazine found that fuel economy had become the top consideration for car shoppers, ahead of reliability, price and safety."

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