The Price Of Gasoline And The Mix Of Vehicle Sales -- May 20, 2019

The link to this article was sent to me by a reader last week.

It's a difficult article to follow, for two reasons:

• too many ads which interrupt the flow of the article;
• the writer seems to be focused on three things, making it unclear what the writer was primarily interested in

But after re-reading it closely, the writer had three points:

• the mix of privately sold vehicles in the US is overwhelmingly leaning towards trucks (70%) vs sedans (30%)
• the sales lots across the country are filled with trucks and cars
• the price of gasoline has little correlation with the mix of truck/sedan sales

Actually, the writer had really only one point: to sell subscriptions to his pay site but that's a different story.

It should be noted that the definition of trucks is broad:

• anything that is not a sedan
• pickup trucks, SUVs, and minvans (yes, even minvans)

The writer's conclusion:

• little correlation between the price of gasoline and the mix of vehicle sales in the US

The article, by the way, is an advertisement disguised as a news article for the writer's research firm.

His conclusion:

The dramatic shift in sales to the truck segment is the strongest contributor to the bull case but also the biggest threat if the mix of sales shifts back towards cars as it has in the past. So, if not gasoline prices, then what causes the cyclical shifts in sales mix between cars and trucks? If you'd like a comprehensive answer to that last question, please contact us for pricing information.

Pricing information for a subscription to his pay-site.

If you are wondering what the writer is talking about when he says "bull case": he's talking about investing in automobile manufacturers. As long as trucks remain the big seller, automobile manufacturers will do very well; the margins are greater on trucks than on sedans. So, even if overall vehicle sales are down, automobile manufacturers can continue to do well if they sell high-margin "trucks."

By the way, we've talked about this more than once on the blog. The price of gasoline is but one data point in this equation. Two other data points are much, much more important.

First, the total amount spend on gasoline over a year is not all that great in raw numbers regardless of the price of oil when one actually runs the numbers which I've done several times.

Second, the price paid per gallon is a lot less important than how much one actually drives. When prices are high, consumers can easily combine driving trips to save on gasoline. Likewise, they can drive less fast. It's amazing how much gas can be saved driving cross-country at 55 mph compared to 85 mph. Driving not at all on days when one does not go into work would be a huge savings. Etc. Etc.

By the way, here in north Texas, the least expensive grade of gasoline is incredibly affordable, back down to $2.49 or thereabouts. One can actually find gasoline for $2.09/gallon in Ft Worth, Texas, according to gasbuddy.