US auto buyers head for fuel efficiency

US autos Apr12.pngEvery now and then, genuinely good news comes along in terms of consumer demand. Today is one of those days.

As the chart above shows, US auto sales in March (red square) were the highest monthly total since March 2007. They also followed relatively strong sales figures for February, which adds to the good news.

Of course, the interesting question is ‘what happens next’? The blog first highlighted the industry’s recovery potential in January, on the basis that the average age of the US auto fleet was at a record, close to 11 years, whilst scrappage rates were at an all-time low of just 4%.

Equally encouraging for chemical industry sales is that buyers are clearly adopting a New Normal way of thinking. They have not gone back to buying the gas-guzzling SUVs of the supercycle period. Instead:

• 40% of GM’s March sales gave fuel economy of over 30mpg (7.8km/l)
• This was the first time GM have sold 100k/month in this category
• Toyota’s more efficient models were 60% of sales for the first time
• Ford’s Focus models with 31mpg saw sales jump 65%, whilst sales of its Expedition models with only 16mpg fell 17%

In fact, those who can afford to buy new cars have clearly decided that today is a good time to buy. They can capture savings from increased fuel efficiency immediately, with average gasoline prices at $4/gal (€0.80/l). And auto purchase loans are easier to obtain, for the moment.

The warmest winter on record has also helped to lure buyers into the dealerships. For the moment, therefore, the blog will maintain its forecast at 13.5m (compared to 12.8m in 2011), whilst hoping that Q1’s 14.5m sales rate can be maintained through the rest of 2012.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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