Is $2 Gasoline Good News For Autos? Morgan Stanley Says Not Necessarily

Investors could be wrong when they correlate low fuel prices to a positive catalyst for the auto industry, at least according to Adam Jonas of Morgan Stanley.

"It's not that easy," Jonas wrote in a note on Tuesday. "Many offsetting forces could result in a net negative impact on autos. Careful what you wish for."

According to Jonas, the correlation between low fuel prices and demand for autos is "highly nuanced" and involves "an innumerable degree of situational and mathematical complexities."

Related Link: Why Drivers Should Give Thanks For Low Gas Prices

According to the analyst, the biggest impact of lower fuel prices is to "take the bid off" of the small and compact car segments in favor of larger sedans, crossovers and some SUVs.

Jonas believes that financing terms have a greater impact on mix and average transaction price for new car sales, and not fuel.

The analyst explains with a hypothetical example of a potential car buyer who has a "significant" change of heart on which class of car to buy due to recent swings in fuel prices. This hypothetical customer "may not represent the most resilient category of consumer" and that consumers are now "trained" not to lock in a long-term lease or purchase commitment simply due to a six-month decline in fuel prices.

Jonas also notes that low $2 gas prices may be more of a curse than a blessing in certain situations. For example, low prices at the pump may reduce the urgency of a consumer to trade in an old gas guzzler for a new, efficient vehicle.