Pain at the Pump Driving Sales of Smaller Vehicles

As a result of rising gas prices, the demand for compact cars nearly double that for AEVs.



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DETROIT -- As the price of gas remains high, consumers are increasingly looking for more cost-effective and fuel-efficient vehicles, with compact cars rapidly gaining in demand. Researchers from GfK Custom Research North America's Automotive sector found that, while demand for compact cars is high, that same demand doesn't carry over into smaller sub-compact cars or Alternative Energy Vehicles (AEVs), including hybrid and electric vehicles.

In May 2011, compact cars accounted for 18.1 percent of six-month light vehicle demand compared to 3.6 percent for subcompact cars. AEV demand currently represents only 9.4 percent of light vehicle demand.

GfK's Automotive Intentions and Purchases Study found a strong relationship between surges in gas prices over the past four years, and increases in demand for sub-compact and compact vehicles. But why aren't consumers rushing to alternative engine vehicles in these times? GfK's researchers find that AEV demand is hindered by three major obstacles – lower familiarity, higher purchase prices, and lack of convenience.

"For the average consumer looking to purchase a new vehicle, especially during these times of rising gas prices, they see more value in smaller vehicles with traditional gas engines – some of which approach 40 mpg - rather than hybrids or even electric vehicles," said Doug Scott, senior vice president, consulting, GfK Automotive.

"However, while consumers are looking at smaller vehicles due to high gas prices, they aren't willing to go all the way down to a subcompact car. Consumers are discovering that newer compact cars offer the comfort features before only reserved to larger cars, combined with the fuel economy that was only available in much smaller cars.

GfK also identified the factors that automakers must overcome to move buyers towards purchasing AEVs. Demand for compact cars remains higher than AEVs since consumers prefer compact cars over AEVs because of cost, convenience, and familiarity.

"There are certain emotional benefits that AEV drivers feel that automakers need to communicate to a wider audience of potential customers," said Scott. "The feeling of pride associated with owning a vehicle that is environmentally friendly has resonated with consumers inclined towards 'green' behaviors, and automakers must develop their marketing strategies to communicate both the tangible benefits, while also addressing the obstacles consumers face with purchasing AEVs."

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