Highly touted electric cars will be rolling off the assembly lines later this year. And while consumers  are intrigued by this new automotive category and have incentive to buy, thanks to a sizeable tax credit, they also have questions. The findings of a recent Consumer Electronics Association survey show that auto makers are likely to engage in educational ad campaigns to boost sales.

Here’s what consumers like about electric cars:

• Vehicles don’t use gasoline 78%
• Less pollution 67%
• No need for oil-changes or tune-ups 60%

However, consumers are also hesitant to purchase an electric vehicle. Price is an issue. Even with the tax credit, a GM Volt will cost about $33,500 and the Nissan Leaf will cost $25,280.  Some models, for now, may only run 40 miles on a battery charge before the engine switches to the gas engine that allows an additional 300 mile range. And the batteries will need to be charged at home or at work. Here are the specific consumer concerns on this topic:

• Running out of battery power on the road 71%
• Unable to recharge 66%
• Limited mileage range 59%
• Not interested in installing a home-charging station 51%

Bracken Hendricks, a senior fellow at the Center for American Progress, says “[e]lectric vehicles are going to be the dominant automotive technology of the future. All the trends are moving that direction.”  Because of the performance uncertainty and higher prices, manufacturers will be promoting leases as the best way to purchase an electric car. In addition, auto manufacturers are expected to launch educational campaigns in the next few months to generate sales and interest in this category.

[Sources: Clayton, Mark. Chevy Volt vs. Nissan Leaf. Csmonitor.com. 27 Jul. 2010. Web. 27 Aug. 2010; Americans Want to Give Electric Vehicles a Test Drive. CEA.com. 23 Aug. 2010. Web. 27 Aug. 2010]

Auto parts retailers are benefiting from consumers now making good on their intentions to keep their aging vehicles on the road longer, after deferring repairs for the last two years. According to automotive aftermarket research by The NPD Group, a leading market research company, auto parts retailers experienced a seven percent growth in dollar sales for year-to-date April 2010 versus a year ago.

NPD’s Aftermarket Industry Monitor, which tracks item-level sales at more than 18,000 U.S. auto parts store,  finds that the sales growth is driven by applications parts, which increased 10 percent in dollar volume for the January through April 2010 time period versus a year-ago. The dollar gains, according to the “Aftermarket Industry Monitor,” came from real unit volume growth reflecting an actual increase in consumer transactions for replacement parts. Much of the volume growth came through the commercial channel, as repair shop bays filled up with aging vehicles.

“I believe what we’re seeing is that consumers have begun to recognize that repair costs are more economical than replacement costs,” says David Portalatin, industry analyst for NPD’s automotive aftermarket business. “Consumers have been telling us for two years   they were aware their autos needed service but they were putting it off. They are now realizing they can no longer put off the services and are making the needed repairs.”

The top five hard parts categories, based on unit volume percent change for year ending April 2010, are suspension, application electrical, climate control, brakes, and driveline.

“The increase in application parts sales is a case where consumers’ intentions, what they say, did portend exactly to what they would do in the future.” says Portalatin. “By paying attention to what consumers said in 2009, marketers could anticipate what consumers would do in 2010.”

[Source:  "Aftermarket Industry Monitor."  The NPD Group. 9 Aug. 2010.  Web.  17 Aug. 2010.]

As Americans emerge from the recession, they are buying much different vehicles than they did before the crash – smaller and more fuel-efficient – signifying a major shift.  Compared with consumers in the first half of 2007, Americans now are buying more cars, fewer trucks and smaller vehicles in general; smaller and less expensive cars within segments; and ordinary rides that replace bigger or more luxurious vehicles.  Still, as they go down in size, buyers aren’t necessarily sacrificing equipment.

“We’ve got people trading Lexuses for Camrys,” said Ernie Sims, executive vice president of Al Hendrickson Toyota in Coconut Creek, Fla. “Buyers are much more cautious, more rational.”

Cars are outselling light trucks again, taking 53.4% of the market in the first half. That compares with 49.2% in the first half of 2007. But a close look at the numbers reveals an even more dramatic shift.

When car-based crossovers and minivans are lumped in with cars rather than with trucks, the swing away from body-on-frame pickups, SUVs and full-sized vans is striking. The big trucks plunged from 31.1% of the U.S. market in the first half of 2007 to 22.8% in the first half of 2010.  Car-based vehicles grew to 77.2%t, from 68.9% in the same period.

SUVs have fallen more than any other segment during the three year-span: to 7.9%, from 12.8%. The car-based crossovers that look like SUVs but handle better and get better mileage have grown by 5.2 share points — 19.6% in 2010, from 14.4% in 2007.

“When gas prices spiked [in 2008] and manufacturers dropped big incentives on high-end trucks, consumers felt burned and SUVs got hit real hard,” said George Magliano, a forecaster for IHS Automotive. “Manufacturers shifted from SUVs to crossovers.”

Within segments, buyers are moving to less premium nameplates.

For example, upscale cars held their 6.4% share overall over the three-year stretch. But demand has shifted some from larger vehicles, such as the BMW 7 and 5 series and Mercedes S and E class, toward the likes of the Mercedes C class.

Similarly, sporty cars stayed at 3.0% of the overall market. But lower-tier sporty models such as the Ford Mustang and Chevrolet Camaro have gained a half point, while the group of pricier sports car nameplates, including the Chevrolet Corvette and BMW Z4, went from 0.6% to 0.2%.

The growth in car sales is all at the lower end. The small-car category that includes the Toyota Corolla and Ford Focus commanded 13.8% of the U.S. market in the first half of 2010, up from 12% in the first half of 2007. Mid-sized cars, led by the Honda Accord, Toyota Camry and Ford Fusion, held 30.3% of the market, compared with 27.9% in 2007.

Even within the mid-sized car segment, consumers are shifting down. The pricier end of the category, which includes the Chrysler 300 and Nissan Maxima, has lost share since 2007, while the gains were concentrated among less expensive models such as the Hyundai Sonata and Nissan Altima.

But consumers are not necessarily choosing cheaper vehicles. Transaction prices are rising. Equipment levels and technology content are higher in even the smallest models, manufacturers say.

“When consumers downsize, they don’t leave behind the options, content and features they had,” said George Pipas, chief sales analyst for Ford Motor Co.

“Now our Fiesta, Focus and Fusion have options like Sync that weren’t available on smaller vehicles three years ago.”  Ford customers are buying greater proportions of upper-end trim levels and technology features, boosting per-vehicle revenue, he said.

IHS Automotive’s Magliano thinks most of the changes are permanent.
“We’re moving into an era of less ostentatious buying habits,” Magliano said.  “Some of these segments are never coming back, either because consumers have irrevocably moved away or the manufacturer has pulled the product.”

[Source:  Snyder, Jesse.  "It's official: Buyers downsized."  Automotive News. 12 Jul. 2010.  Web.  21 Jul. 2010.]

Consumers who are venturing into the car buying market for the first time generally do not have enough cash to purchase a vehicle. This situation means they must research financing alternatives before signing a contract. These buyers also need to consider the total cost of ownership before they make a decision. But a recent survey from Capital One Auto Finance shows first-time car buyers lack the information they need to make a financially responsible decision.

According to the Seventh Annual Rules of the Road Survey from Capital One Auto Finance, when first-time car buyers begin the purchase process, they typically follow these steps:

• Compare prices/makes/models 70%
• Develop a budget for payments and consider how it fits into the rest of the budget 53%
• Stick to the budget they set 88%

But first-time buyers frequently underestimate the true costs of car ownership because they neglect to consider:

• Cost of maintenance/repairs 47%
• Parking and registration costs 45%
• Actual interest rate on loan 48%

To help consumers make the best possible decision when buying a car for the first time, Capital One recommends that consumers separate the buying process from the financing process. In addition, consumers should check their credit score ahead of time, learn how vehicle pricing works and compare financing options.

Financial services companies that offer auto loans may begin marketing programs to help buyers understand the financing process. These kinds of services position the lenders as responsible and helpful and may increase their auto loan business from first-time buyers.

[Source: Many First-time Car Buyers Researching on Front-end, Yet Unprepared for Costs. Capital One. 24 Jun. 2010. Web. 13 Jul. 2010]