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Soaring gas prices drive sales of small cars

Industry data show motorists shifted hard to more fuel-efficient compacts and subcompacts in April.

Published May 27, 2011
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When potential customers wander into the giant Thornhill showroom at Roy Foss Motors these days, price is one of the first things they bring up. Not the price of the cars, mind you — the price of gas.

“Especially over the last month or two, people come in and are asking about fuel efficiency, and smaller cars. The fuel efficiency is usually the first thing,” said James Foss Ricci, manager of business development at the dealership.

Even people buying SUVs and vans are starting to downsize as gas prices in the Greater Toronto Area hover around $1.30 per litre, Ricci says.

“People are going from regular SUVs to crossovers, or from minivans down to SUVs,” said Ricci. It’s a trend he first noticed two years ago when the price of gasoline broke through the $1.00 per litre barrier.

“I think the shock isn’t there any more. It changed people’s behaviour two years ago, but we’re still noticing it now,” said Ricci.

For Barrie-area home health-care worker Stacey Kettle, the rising price of gas means she’s looking to buy something smaller than her current Hyundai Santa Fe. Even though it’s relatively fuel efficient as SUVs go, Kettle says it costs her $75 to fill up the tank, up from $40 to $50 last year.

“Most of that extra money for gas comes from the family’s ‘fun’ money. We’ve cut out a lot of entertainment type activities that cost money. We also did away with a landline phone and cable/satellite service,” said Kettle, who drives 100 to 200 kilometres a day to reach clients’ homes.

As demand for smaller cars has risen, so has their price on the wholesale market, says Ricci. It’s something particularly noticeable at wholesale auctions for used cars.

“(Small) cars are going for two or three thousand dollars more than they should at auctions,” said Ricci.

Ricci’s experience matches new industry data showing motorists shifted hard to more fuel-efficient compacts and subcompacts in April.

It marked the first time that shoppers turned more to smaller cars this year, said veteran industry watcher Dennis DesRosiers.

“If you don’t think gas prices affect what vehicles consumers are buying, think again,” said DesRosiers in a note to clients on Thursday. “With gas prices spiralling out of control in April, consumers came back to the small car and light truck market in hordes.”

Sales of subcompact cars shot up 17.1 per cent in April from the same month in 2010 while business for compact models jumped 11.3 per cent and volumes for compact sport utility vehicles climbed 16.6 per cent in the same periods, data from DesRosiers Automotive Consultants revealed.

Those models easily outpaced the overall market, which improved 6.9 per cent in April from the same month in 2010.

At the same time, gasoline prices have increased about 25 per cent or close to 30 cents a litre in the last year.

In the first quarter, sales of smaller vehicles had actually dropped or only marginally increased despite rising prices.

In explaining those numbers, DesRosiers, president of Richmond-Hill based DesRosiers Automotive, said in an earlier interview that Canadians are already a small vehicle country and there wasn’t much room for growth.

“We’re already at 50 per cent of the market while the U.S. is at 25 per cent,” he said. “We could grow five more points but not much more, while the U.S. has more room and it’s showing.

The statistics show that the Honda Civic compact remains the most popular car in the country, while the Ford F-series pickup holds top spot among trucks and the overall market by a wide margin. The Hyundai Elantra compact and the Dodge Caravan are in second place in sales in the respective car and truck categories.”

Sales of small vehicles have climbed significantly in the United States this year as gasoline prices approach $4 a gallon. Forecasters have indicated fuel costs will likely continue rising rather than drop much.

While sales of pickup trucks dropped in April, business for large commercial vans shot up 27 per cent.

DesRosiers attributed the big van increase to businesses who buy those vehicles because of necessity, regardless higher gasoline prices.

“If you are a tradesman in need of a van, then you buy one and it doesn’t matter what the price of fuel is day to day,” DesRosiers added.

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