J.D. Power and Associates Reports: Incentives Overpower High Gasoline Prices in Driving New-Vehicle Sales

Business Wire, July 29, 2005

WESTLAKE VILLAGE, Calif. -- Incentives are overpowering the drag of high gasoline prices in keeping new-vehicle sales strong, J.D. Power and Associates Chief Economist Bob Schnorbus said at a presentation to the Wall Street financial community this morning at the New York Athletic Club.

Speaking at an economic and automotive market update conference hosted by J.D. Power-LMC Automotive Forecasting Services, a division of J.D. Power and Associates, Schnorbus said gasoline prices are impacting new-vehicle sales in the U.S. market, but so are incentives.

"Gasoline prices are not killing the market, just putting a bit of a drag on it," Schnorbus said. "The sales surge we saw in June and July was caused by incentives overpowering high gasoline prices."

Schnorbus noted that the increase in incentives in June and July created a sales jump similar to what the industry experienced in 2004 when automakers boosted incentives.

"The incentives are different and it's slightly earlier than last year, but it has created a similar boost in sales," Schnorbus said. "Once the 2005 models are gone, sales will return to a more temperate pace."

Schnorbus noted that J.D. Power-LMC is holding its annual sales forecast at 16.9 million units.

One vehicle segment that had been struggling in a flourishing market is full-size SUVs, but Schnorbus noted that it has received a large boost from the employee programs. Still, full-size SUV sales are down 12 percent on a year-to-date basis and the segment's market share has slipped to 3.57 percent from 4.14 percent in 2004. In addition, premium luxury SUV sales are down 7.92 percent compared to a year ago, while the other SUV segments -- entry, midsize and entry luxury -- are all experiencing year-over-year sales growth.

"The SUV market is not going to disappear as a result of high gasoline prices," Schnorbus said. "In fact, it will grow over the five-year forecast horizon."

J.D. Power-LMC expects the SUV market share to increase from 27.7 percent in 2005 to 28.8 percent in 2010.

About J.D. Power and Associates

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, consulting, training and customer satisfaction. The firm's quality and satisfaction measurements are based on responses from millions of consumers annually. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.

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