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The latest study by Kelley Blue Book once again confirms the fickleness of US car buyers when it comes to gasoline prices. In the second half of May, KBB surveyed 753 prospective car buyers and found that 87 percent expect gas prices to rise sharply. In April, just 66 percent believed gas prices would rise. What changed in the last month? Gas prices rose sharply.
The national average price for gasoline is $2.64—a jump of 20 percent in the last month. In California, the statewide average for regular is $2.96—four cents below what KBB sees as the tipping point. KBB also found that about two-thirds of respondents said that gas prices had an influence on what car to buy.
“While we may not see the $5-per-gallon gas experienced in some areas last year, current economic conditions compounded by the pain at the pump may make $3-per-gallon gas a new threshold for car buyers—the point at which they change their mind about what vehicle to buy and how they spend their money,” said Jack Nerad, Kelley Blue Book’s executive market analyst.
According to KBB, the No. 1 compromise was moving to a smaller engine—a four-cylinder, say, instead of a V6 or V8. That was followed closely by vehicle size—moving down to a mid-sized sedan from a larger model, for instance.
A sustained rise in gas prices will encourage consumers to adopt smaller cars and hybrids—but so far, that’s been a tough sell. Honda was aiming to sell 90,000 units of the new 2010 Honda Insight in the US this year, but is now acknowledging that it may not reach its goal. John Mendel, the company’s US executive vice president, now believes that Insight sales will be closer to 50,000 or 60,000 units. The Honda Insight, offered at an MSRP of $20,000, is being marketed as the first affordable hybrid.
Big in Japan
On the other hand, the Honda Insight was the No. 1 selling car in Japan in April, and was overtaken by another hybrid, the 2010 Toyota Prius, in May. The Japanese government offers generous incentives for hybrid-buyers—and gas prices are almost 80 percent higher in Japan than in the US. Current retail prices for gasoline in Japan are $4.69 a gallon, according to the Tokyo-based Oil Information Center.