Last updated Thursday, February 1, 2007

I generally like to wait a bit after the 1st of the year to make an assessment of market conditions. Sometimes it takes a while for the market to settle in to a discernable pattern. With a couple of exceptions it looks like we are in a pattern similar to much of what we experienced for most of 2006. For most segments there is a more than adequate supply to meet the still mediocre demand, and that translates into what I think of as a thin market. Once you get beyond a relatively thin layer of those vehicles in the segment that are unusual in terms of desirability, or miles, or equipment, or color, or some combination of those factors, the market stagnates rapidly and price becomes the determining factor. The thought process changes from “I need that car” or “I really want that car” to “I’ll buy it if it gets cheap enough”. Not a good thing for sellers.

Small cars seem to have experienced a negative shift in demand and have become harder to sell. Perhaps most of the people who were motivated to buy in that segment in response to high gasoline prices have already done so and the rest of the consumer base is generally not interested. Such models as Aveos and Cobalts, Neons, Focuses, Accents and Elantras, Rios and Spectras, Sentras, Saturns, Imprezzas and the like are harder to sell. Even those perennially popular producers of products promoting petroleum parsimony (sorry, I couldn’t resist it), Honda and Toyota, have seen their offerings suffer. Corollas, Civics, and even Scions have become somewhat passé. Their success at selling new vehicles has ultimately created a supply that has perhaps begun to surpass demand.

The biggest hits in the supposedly gasoline stingy segment have been taken by the hybrids, particularly the Prius, Civic, and Accord. A combination of consumer skepticism and supply catching up with demand as new vehicles has created something like a freefall among these models in the used market. Our consultants report many instances of no bidders in this segment. I’m told even the relatively recently introduced Lexus RX400H, which really has the market all to itself, has lost its luster. Diesels (VW and Mercedes) seem to have backed up some as well, though not nearly to the extent of the hybrids.

The luxury segment continues to struggle in the face of a supply that simply overwhelms demand. This is a segment that is particularly thin. There is always a demand for used luxury vehicles and therefore the exceptional vehicles (or vehicles that meet export criteria) do well, but once you get beyond those exceptional vehicles there can be significant shift in the salability of the remaining offerings. The German manufacturers, M-B, Audi, and BMW, because of their supply issues are most affected, but Lexus and the others are not immune.

So what’s doing well? Of course sport coupes and convertibles are holding their own and in some cases strengthening. Corvettes, some Mustangs and Porsche are on the rise. We expect others to follow shortly. Late model pick-ups are also doing quite well in general. And the larger SUVs as well as they continue to rebound some from their fuel price doldrums.

Perhaps the market will heat up some along with the outside temperatures. We are hopeful. It would make our jobs a bit easier as well.

Dan Galves