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Small Car Sales Rise with Gas Prices

Rising Gas Prices Continue to Boost Small Car Sales

Soaring gasoline prices have some large and midsize truck owners swapping for smaller vehicles, according to recent real-time transaction data from the Power Information Network (PIN), a division of J.D. Power and Associates, customer satisfaction

With gasoline prices surging more than 20 cents in recent weeks to a record nationwide average, owner loyalty in the large pickup and midsize and large utility vehicle segments dropped, according to this year's PIN data. Measured by the percent of owners in a segment who trade for another vehicle in the same segment, owner loyalty seems to be quickly declining.

"We’re seeing a broad, long-term — but gradual — movement to smaller vehicles," said Tom Libby, senior director of industry analysis at PIN. "For example, during periods of high gas prices over the past two years, we’ve seen movement from larger to smaller SUVs."

While gas prices are having a negative effect on large vehicle segments, owner loyalty has increased for small cars. Sales of small vehicles, including cars and light trucks have risen from 26.3 percent in the first quarter of 2004 to 31.8 percent in the first quarter of 2007. 

One emerging family staple, the midsize crossover, is one of few still selling strong. And PIN findings show that owner loyalty for large and midsize cars, small crossovers and small SUVs has remained relatively unchanged in recent months.

Increased demand for smaller vehicles, coupled with higher gas prices, has also given four-cylinder engines a boost in powertrain market share. Four-cylinder engines as a percent of total retail sales has increased over eight percent in the past three years.

Also on the rise are new vehicles powered by hybrid-electric engines. [Check out RTM's Green Buyer's Guide here.] Hybrid vehicle sales have shown a strong correlation to gas prices. For more than two years, hybrid sales have increased as gas prices have risen and have decreased as gas prices have fallen.

"The recent strength of the small vehicle segments—pricing, styling and an increasing number of new models — is receiving an additional boost from high gas prices," said Bob Schnorbus, chief economist at J.D. Power and Associates. "We’re expecting the small vehicle segments to continue to grow, regardless of gas prices, but higher gas prices certainly will help these segments relative to others."

(Source: PIN)