The continuing rise in oil prices poses a growing challenge for automakers already dealing with the effects of housing market weakness and a crisis in the sub-prime mortgage market, CNN Money reports.
Crude oil futures recently hit a new record high of $93.80 a barrel, and higher crude oil prices often precede a rise in gasoline prices. High fuel prices have over the past year increasingly led consumers to shift away from the pickup trucks and SUVs that have been the main source of profits for automakers.
The high crude oil prices will further pressure discretionary spending and lower consumer confidence, putting a deeper dent in auto sales. High energy prices can drive prices up for many consumer goods, forcing people to further cut back on bigger purchases and ultimately slowing economic growth.
According to CNN Money, perhaps the surest sign of the sour economic backdrop for auto makers is that Toyota Motor Corp. (TM), which has been a juggernaut in the U.S., reported year- over-year sales declines in July, August and September.