Power Information Network Reports: Hurricane Katrina, Rising Gas Prices Putting a Squeeze on New-Vehicle Sales

WESTLAKE VILLAGE, Calif.--Sept. 7, 2005--New-vehicle retail sales have plummeted in the areas hit hardest by Hurricane Katrina, according to the Power Information Network (PIN).

PIN analyzed new-vehicle retail sales the weekend prior to the hurricane (Aug. 20-22) compared to the following weekend (Aug. 27-29). New-vehicle retail sales dropped 82 percent in cities affected by Katrina, including, New Orleans and Baton Rouge, La., Biloxi, Miss., Mobile, Ala., and Pensacola, Fla. In the surrounding areas, including Atlanta, Houston and Miami, sales dropped 19 percent over the same time period. In the remaining regions of the United States, new-vehicle retail sales were up slightly.

"While the impact of Hurricane Katrina has been significant in much of the South, we do expect vehicle sales in those areas affected by the hurricane to recover, especially as people begin to replace vehicles destroyed by the storm," said Tom Libby, senior director of industry analysis at the Power Information Network.

In addition to the hurricane, the dramatic rise in gas prices triggered in part by the destructiveness of Katrina, as well as depleted vehicle inventories at dealerships, have contributed to a major decline in sales of larger SUVs and pickups nationwide. On Wednesday, Aug. 31, full-size SUVs accounted for just 9.9 percent of retail SUV sales -- down from 16.4 percent, 13.0 percent and 13.3 percent during the weeks ending August 7, August 14 and August 21, respectively. For the first seven months of 2005, full-size SUVs accounted for 14.5 percent of all SUV deliveries.

Overall the SUV segment share of the retail industry declined from 30.1 percent on Aug. 1 to 25.7 percent at the end of the month. This represents a return to the SUV share levels which existed prior to the Big Three's employee discount pricing programs. Those shoppers who stayed in the SUV segment chose entry SUVs, which experienced a 3.0 percent growth in August, and luxury SUVs, which were up 8.5 percent.

Sales of full-size pickups have also suffered. These vehicles accounted for just 12.3 percent of retail new-vehicle sales on Wednesday, Aug. 31, 2005 -- contrasting with 16.0 percent, 14.4 percent and 13.7 percent during the weeks ending August 7, August 14 and August 21, respectively. For the first seven months of 2005, full-size pickups accounted for 15.3 percent of all new-vehicle sales.

"Dwindling 2005 inventory levels and rising gas prices have caused a significant drop in full-size SUV and pickup sales," said Bob Schnorbus, chief economist at J.D. Power and Associates. "It's clearly not gas prices alone that are causing these segments to experience a sales drop. For gas prices to have a significant impact on vehicle sales, we believe two things need to happen. First, gas prices must rise above $3 a gallon and approach $4 a gallon, and second, prices must be expected to stay at those high levels for an extended period, perhaps a year or longer.

"Until these two conditions are met, we believe the only significant changes we will see in the new-vehicle marketplace are changes within segments. For example, consumers may switch -- and there is evidence that this is now happening -- from larger to smaller SUVs. However, the total SUV pie will remain largely intact."

About Power Information Network (PIN)

PIN's automotive solutions are based on the collection and analysis of daily new- and used-vehicle retail transaction information from 9,000 automotive dealership franchises in North America. PIN's industry-leading automotive solutions incorporate consumer demand and sales information to improve business for automotive dealers, manufacturers, lenders, and other companies in the industry. Additional information is available at www.powerinfonet.com.

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.

About The McGraw-Hill Companies

Founded in 1888, The McGraw-Hill Companies is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor's, McGraw-Hill Education and BusinessWeek. The Corporation has more than 300 offices in 40 countries. Sales in 2004 were $5.3 billion. Additional information is available at http://www.mcgraw-hill.com.