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Cheap Gas Drives Big Auto Sales


Have automakers cracked the code to producing big sales? Apparently, this formula is working for the industry: Cheap gas equals more sales.

In fact, Karl Brauer, Senior Director of Insights with Kelley Blue Book adds, “There’s good credit available. The economy seems to keep strengthening, at least enough to have some confidence in people… And of course, fuel prices are dropping, so people aren’t only looking at new vehicles, but they’re looking at new large vehicles.”

Needless to say, this is great news for the auto industry because bigger vehicles means larger profits.

German luxury carmaker BMW saw a 17% pop in its third-quarter operation profits. With cheaper gas, consumers are more ambitious, opting for powerful engines now that fuel isn’t hitting their pockets so hard.

Bigger Is Better?

The numbers are supporting the classic mantra of U.S. consumers.

In America, Ford (F) F-series pickup trucks still remain the bestselling models. And though General Motors (GM) missed the mark with overall sales, its pickup truck sales are up by 16%.

Fiat Chrysler (FCAU) is another good example. Thanks to strong pickup and Jeep SUV demand, its overall sales were up 22%.

Right now, the automakers are giving thanks to the U.S. shale boom because low gas prices – below $3 a gallon – have really boosted the industry in a major way. Among the six-largest automakers, overall monthly U.S. sales rose by 6% from over a year ago (which matches analysts’ expectations).

And it certainly sets up a nice year-end trend, as well. As long as fuel prices remain low, large vehicle purchases will remain high, leaving both consumers and manufacturers very happy.

And “the chase” continues,

Commodities Research Team