American Automobile Sales Slump as Rising Gas Prices Hit Home

Rising prices of gasoline and lowered consumer confidence were two key elements that ensured automobile sales in the U.S. for the month of April plunged, reaching the lowest annual rate in the past 10 years.

With both American automobile manufacturers as well as their strong Asian competitors hit by declining sales numbers, April’s auto sales in the U.S. slumped by as much as 14% for April this year.

A steep downslide in sales of trucks and SUVs ensured that American automakers General Motors Corp., Ford Motor Co., and Chrysler LLC, registered a sharp fall in sales. Chrysler seemed to be the worst hit, registering a 30% drop in sales, while GM and Ford registered 23% and 19% respectively.

Asian car manufacturers, who have been tough competitors for the U.S. automobile manufacturers in the U.S. market, fared only marginally better, registering a slump in sales at their end as well. The numbers, however, were considerably, better. Sales at Toyota Motor Corp. fell by about 5%, while Nissan registered a 2% slump.

What makes these numbers critical is that the numbers coming out of the auto sales figures are usually a benchmark indicative of consumer demand in the U.S. In these troubled days, these numbers are what investors bank on to determine the state of the U.S. economy and see if it has actually gone closer towards recession compared to the beginning of this year.

This is what Erich Merkle, director of forecasting at IRN Inc., a consulting firm, had to say about the matter, “Almost no one buys new vehicles because they have to, they want to. And in order to want to they have to feel good about their future. That’s just not the case today.”

On an annualized basis, adjusted seasonally, overall sales of automobiles dropped to 14.4 million units in April. Data collected by Autodata Corp. indicated this was the biggest downslide the industry has experienced since 1998 August.

The rising prices of gasoline also made its impact felt on the sales figures, with a number of buyers opting for cars that were cost effective in terms of fuel instead of trucks and SUVs. Car sales stood at 53% compared to 47% in the case of light trucks, as per Autodata numbers. This was a complete turnaround from last year, when the numbers were reversed for the two categories.

The three big names of the American auto industry, based out of Detroit, also saw a 5% reduction from last year in their market share, which stood at 48% in April. The current No. 2 in the American automobile market and the biggest auto manufacturer in the world, Toyota also showed a decline in truck sales, which ate into its profits from its small car offerings like Yaris and Prius, a hybrid car.