The Auto Industry Could Be A Surprise Beneficiary Of Higher Gas Prices

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Photo: Flickr / whatatrivisty

Conventional thinking might lead one to believe that higher gas prices would lead to slower new car sales.  But UBS’s Colin Langan acknowledges that this may not be the case.Since new cars and trucks are roughly 17-20% more gas efficient than the average vehicle, in order to save on gas prices consumers may opt to purchase a new car.

Langan notes that it is important to distinguish between pulling forward demand and incremental demand, explaining that the increase in new car sales would not be incremental.

While they do not feel this will lead to a long term increase in demand levels, they do agree that buyers may accelerate their purchases as gas prices rise.

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