> I've never bought the argument that cheap oil has a significant effect on car sales, especially in saturated developed markets.
If you look at the sales figures it is quite obvious that you're not in the majority here. It's a little tricky to model because cars are all getting better mileage every year, but when gas is expensive gas guzzlers definitely experience a dip in sales (and vice versa).
> Based on the simulation results, we estimate that a 10 percent increase in gasoline prices will generate a 0.22 percent increase in fleet fuel economy in the short run (one year)
> We also find that sustained $4.00 per gallon gasoline prices will generate a 14 percent long-run increase in fleet fuel economy relative to 2005 levels, although this prediction should be interpreted cautiously in
light of the relatively large out-of-sample price change considered and the Lucas critique (Robert E. Lucas, Jr. 1976)
The strength of the effect of oil prices on fleet efficiency is 0.0022 over a year. I would consider that extremely incremental. Meanwhile, we observe a 22% decrease in total car sales over the 2007-2009 period due to changes in disposable income and household wealth. [1]
So I would still argue that gas prices change the fleet efficiency mix around the margin, but that purchasing decisions are driven primarily by changes in income, government policy, and social norms.
The best proof of this behavior is the Prius. It's a simple appliance car that is cheap and reliable. By all accounts, it's a great car to own if cheap and dependable are your top considerations. However, the sales and depreciation of the Prius are highly correlated with gas prices to a much larger degree than similar economy cars, like the Camry.
Car sales are at record highs and Toyota just released a next generation (which always coincides with increased sales and higher transaction prices). Yet, sales are down 12% YoY.
Meanwhile, Jeep sales are at record levels and their best selling models are also their least fuel efficient.
If you look at the sales figures it is quite obvious that you're not in the majority here. It's a little tricky to model because cars are all getting better mileage every year, but when gas is expensive gas guzzlers definitely experience a dip in sales (and vice versa).
http://li.dyson.cornell.edu/pdf/AEJ_2009.pdf