As Gas Prices Rise, So Do Sales Of Fuel-Efficient Vehicles

Effect has been "dramatic," according to Ford spokesperson

The recent surge in gas prices across the country has brought similar surge in the number of car shoppers seeking fuel-efficient vehicles.

The effect has been "dramatic," says Erich Merkle, chief of sales analysis at Ford.

The number of customers buying fuel-efficient vehicles started increasing in mid-January, and accelerated as gas prices continued their climb through February, Merkle said.

General Motors reported Thursday sales of small and compact cars increased 43 percent over February 2011. Sales of the electric Chevy Volt surged upward from 603 in January to 1,023 in February, a 70 percent increase.

Ford said sales of its compact Focus increased 115 percent year over year. And Chrysler, which saw overall sales leap by 40 percent, saw a 315 percent year-over-year increase in sales of its Chrysler 200 sedan.

"Our product portfolio now contains some of the most fuel-efficient vehicles in our company's history," said Reid Bigland, president and CEO of Chrysler's Dodge Brand.

Small-car sales typically account for 19 percent of total sales volume, according to Merkle. Small cars have claimed as much as 24 percent of the overall market share this month, according to Ford estimates. In California, where gas prices average more than $4 per gallon, small-car market share is expected to reach 32 to 33 percent in February.

Gas prices rose 9-percent in February and averaged $3.73 per gallon Wednesday. It was only late December when they averaged $3.22 per gallon, according to

"In our opinion, there's no doubt this rotation is being stimulated by this increase in higher fuel prices," Ford's Merkle said.

Sales of mid-size sedans are also performing well, growing market share from approximately 14 percent in December to as high as 17 percent today.

Last spring, gas prices rose to a high of $3.96 per gallon in March and April of 2011, and automakers saw a similar correlation between the price increase and sales of smaller and fuel-efficient products.

Auto sales are making a strong comeback as consumers come off the sidelines amidst reports of surging consumer confidence and reduced unemployment. Overall, automakers believe, based on Thursday's latest round of sales data, that the U.S. auto industry is on pace to sell 14 to 14.5 million units in 2012. If today's Seasonally Adjusted Annual Rate (SAAR) reaches 14.4 or above, it would mark the industry's highest pace in four years, according to

Domestic automakers were caught flat-footed in 2008 when a surge in gas prices sent concerned drivers away from the large-vehicle offerings that dominated domestic lineups at the time. Since then, the Big Three have diversified their portfolios and added more fuel-efficient vehicles across all sizes. Now they can capitalize on pent-up demand for those cars.

"Today, we're in a much different position," Merkle said. "... We're in the best position for whatever the external market brings."

But higher gas prices could eventually cross a threshold in which they hamper the overall economy, and thus, new-car sales.

That was a concern expressed Wednesday on Capitol Hill. Federal Reserve Chairman Ben Bernanke testified told a congressional panel that the high gas prices, driven in part by growing tensions between Israel and Iran, could slow the ongoing domestic economic recovery.

"That is likely to push up inflation temporarily while reducing consumers' purchasing power," Bernanke testified.

Foreign policy impacting the unrest in the Middle East is somewhat alterable by President Obama, who is seeking re-election and would like to not be facing $5-per-gallon gas prices nationally in the Fall. But the other big factors driving up gas process are increased demand from China and the loss of some refineries in the Eastern U.S., which will depress supply. And those factors are harder for a President to influence.


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