Matthew Conti – Accounting and Finance Reporter

Over the last couple of months the as prices have been on the rise and are estimated to hit $ 4 per gallon in the next month. How will this gas price increase affect the automotive industry and various car sales? How will big trucks survive the rise? The auto industry will adapt to the new consumer demand by making smaller cars, which in turn makes trucks obsolete.  If this is true, is this the end of the truck as we know it? The answers to all of these questions are in fact quite surprising; with consumers being so stubborn change is hard to come by.

The effect of gas prices on sales will vary depending on which cars are being sold, but as it stands now trucks are out selling cars even with the recent increase in gas prices. With the Ford F150 being the best-selling vehicle for 30 years in a row, it’s easy to see that consumers are not open to change. This stubbornness will give way if the prices become too high. The prime example is Europe with gas at $10 per gallon the small car market is much larger, and many more cars are being sold, than trucks.

More Foreign cars will be bought than domestic; the reason behind this is the foreign cars are much more efficient than most of the domestic cars. High end cars are relatively safe from a decrease in purchasing. This is true because the people who buy high end cars are more financially able than people who buy lower end cars. Even then people buying lower end cars will still buy the same amount of cars the only thing that changes is which cars they buy. The domestic car industry however is getting better at making more efficient cars, but that does not compare to the foreign car industry’s experience in these fuel saving cars. However backwards it may seem buying foreign cars is not bad, because more often than not the cars are built in the United States and the domestic are actually built in third world countries and then shipped to America. This is beginning to change yet, auto groups are bringing back jobs to America so that we can befit on both sides.

With the increase in gas prices auto makers will end up having to spending less, because consumers will spend less on cars. When both sides start to spend less people lose jobs and things start to get out of control, until either the government takes control or the market reaches some equilibrium. Gas price increase however could encourage the development of fuels that will not impact the environment as much. Consumers will not spend nearly as much with an increase in gas prices, and consumer confidence falls about 1.5 percent every 10 percent increase in gas.

Over the next years of price increases and inflation, the auto industry will come out alright in the end. After all is said and done people will learn to adapt and auto makers will adapt. Europe is the prime example will gas over there at 9 dollars a gallon and people are living perfectly fine. Americans will change with the prices and the next thing people will worry about is 5 dollars a gallon prices.