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Auto-Industry Recovery: Not Quite Yet, Analysts Say

May 4, 2010
Analysts at the market-research firm AutoPacific report that though there are many indications that the recession is ending—or over—there might not be any strong indicators in the automotive sector that things will get much better anytime soon.

The firm has found that new-vehicle purchase intention has weakened, not strengthened, in recent months; so, barring stimuli like sales-stoking special deals and incentives—of which there have been plenty—demand this spring might actually be lower than it was for part of last year. Last September, the firm found that 23 percent of those polled indicated that they "were definitely or probably likely to acquire a new vehicle in the next 24 months." But in data from this March, only 20 percent indicated that.

AutoPacific also noted the continuation of an unexpected trend that we reported back in February. The firm had found—again through its Fuel Price Impact Survey—that interest in small cars and hybrids was, surprisingly, waning as pump prices continued to rise (albeit gradually).

Consumers' intention to replace whatever they were driving with a sport-utility vehicle (including a car-based crossover) has gone from 16 percent a year ago to 27 percent in March, and small-car consideration has fallen from 22 percent to 12 percent from March 2009 to March 2010—in a period when the price of gas rose 44 percent.

Third-Generation Toyota Prius

Third-Generation Toyota Prius

The most dramatic was hybrid intention: down from 22 percent in March of 2009 to 11 percent in January 2009 and on to just nine percent this March. Actual sales trends contradict this; Toyota just reported a 41-percent increase in hybrid sales in April versus a year ago—although in all fairness last April the redesigned 2010 Toyota Prius hadn't yet reached dealerships.

Of course, as before, gas-price volatility probably has a lot to do with the change in attitude. Over the past year or more, the market hasn't experienced the dramatic volatility that it did from 2005 until early 2009. Since then, prices have risen, gradually, from a national-average $1.71 to a current average of nearly $2.90 (as of May 3).

Are these trends occurring simply because we haven't had $4 gas in some time so shoppers are becoming complacent, or because the market is changing in other ways—replacing larger family vehicles but having fewer of them, for instance—that we won't recover from for a long time, if ever? To this, we'll just have to hold on and hope for more positive signs.


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