The Tipping Point on Gas Prices Keeps Moving
Is the run up on gas prices affecting the behavior of car shoppers? Not all that much, according to comments last month from Bob Schnorbus, chief economist at J. D. Power & Associates. He told U.S. News and World Report that consumers have not yet fled larger vehicles. “If $4 gas is only short-term, people will do what they’ve been doing the last five years: complain but keep on buying.”
Maybe the realities of high gas prices have already shifted from short- to long-term. A survey from AAA, released this week, suggests that gas mileage has become the number one consideration for American consumers in choosing a new vehicle—even more important than which automaker produces the car or truck.
“The survey results clearly demonstrate that gas prices have reached levels sufficient for consumers to dramatically alter their driving behaviors and car-buying habits,” said Kathy Harrison, vice president and chief public affairs officer for AAA Michigan. Gas prices are up 70 cents from a year ago.
Yesterday, J.D. Power’s Schnorbus told Detroit News that rising gas prices last year did not show a dramatic impact on vehicle selection. But this year looks different. There was a 35 percent increase in sales of subcompact cars in February 2007 compared to last year. Schnobus said, “I think that surprised all of us. Is $4 the new threshold?”
There’s further evidence from a March study of consumer attitudes by Kelly Blue Book, which showed that 58 percent of car consumers said gas prices have strongly influenced their purchase decision—an 11 percent increase since February.
The most recent AAA survey confirms the phenomenon of a moving tipping point. “I think a lot of analysts were saying we’d hit the tipping point at $4 a gallon,” said Jim Rink, an AAA spokesman. “I think this suggests we already have.”