Last updated Tuesday, March 13, 2012

Market On the Upswing
I'm sure it won't come as much of a surprise that the market has been pretty strong thus far this year. It started off a little it slow but rapidly picked up momentum a few weeks into the year and has continued to build up steam through February. A general undersupply of product coupled with an increasingly optimistic public who have loosened up their purse strings a bit in recent days has resulted in a heightened level of aggressiveness in the lanes. Where not too long ago that level of activity was largely relegated to the more exceptional vehicles available, the increasingly favorable supply/demand climate has seen the more ordinary vehicles spiraling upward in the slipstream of their high flying brethren.

We expect that that will continue to be the trend as we move through March. The one exception that warrants continued caution is the European and Asian luxury market, both cars and trucks. I know we've been saying that for some time and probably sound a bit like a broken record (given the demise of records we should probably develop an updated cliche - maybe a nagging spouse?), but that market remains stagnant with an adequate supply and tepid demand. With that exception, and perhaps the more ordinary pick-up trucks as well, most segments are strong.

Gas Prices on Everyone's Mind
There is, of course, one caveat that could throw a wrench into the whole deal and ruin our chance to take something of a breather for the next couple of months, and that would be - to no one's surprise - the price of gasoline. In the wake of some pretty substantial increases in fuel prices within the last couple of weeks the public is poised for a panic and that means there is a large group of dealers watching closely as well. It hasn't happened yet and perhaps it won't (election years can be particularly unpredictable), but the talk is beginning to start and the public is on alert. If that were to happen we expect consumers would do what they always do in those circumstances: overreact and make a bad situation worse. To be closely followed, understandably, by dealers protecting themselves. So we might revisit a market where a Prius is worth more than a comparable Caddy, a Rav4 more than a Tahoe.

Let's hope not. I'm an optimist and prefer to think that that will not happen and I can see that in this election year there is a great deal of pressure that will be applied to mitigate against that. If successful, and gas remains reasonably priced, we think March will continue to see a very strong market in most segments. Price range vehicles will be very strong, as will Asian imports, Suvs and crossovers, especially midsize examples, entry level vehicles, and so forth. We think even late model vehicles will do well as new vehicle sales remain strong and production levels continue to be restrained.

What is that old saying? March comes in like a Lion and goes out like a Lamb? We shall see.

Dan Galves



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