AutoNation CEO: $5 Gas Is The Freak-Out Number

When will consumers be forced into using hybrids and other fuel-efficient vehicles? AutoNation, Inc. (NYSE: AN) CEO Mike Jackson thinks he has the answer.

“If the price of gas is basically $3 to $3.50, I don't see [fuel efficiency] going anywhere,” said Jackson, who spoke to Benzinga while attending this year's North American International Auto Show. “The freak-out number to really push fuel efficiency is $4.50, $5 a gallon.”

Full Interview: Go Big Or Go Home with AutoNation CEO Mike Jackson

But not even $5 is set in stone. “Every time we have one of these spikes [in oil], the freak-out number becomes higher because people adjust in their mindset as to what they can live with,” he said.

During the interview, Jackson also took a moment to discuss the recovery of the auto industry, and the number of vehicles he expects automakers to sell in North America. “It was a solid recovery year for the industry revolving around the availability of credit,” Jackson said. “We really had no credit in '08 and '09. We had the traffic, we had the demand, but we couldn't get the financing.”

Fortunately, Jackson said that has begun to change, adding, “For prime and near-prime [customers], it's pretty much normalized. It's still constricted around sub-prime and leasing, but I expect that to normalize in 2011 and will be one of the reasons the industry sales lift another 10% or 11% to around 12.8 million [automobiles].”

Financing is especially important for an industry whose average transaction price has risen to more than $30,000. “You can't sell something with the average transaction price of $32,000, to the American people, without credit,” Jackson insists. “It's simply not possible. And, during the bleakest period after Lehman Brothers rolling into '09, we could take a prime customer and shop him to 10 banks and couldn't get him financed.”

Jackson said he had never seen that before in the consumer market. And while things are beginning to turn around, the leasing market is still mixed.

“You have brands like Mercedes-Benz and BMW where [financing is] there and never pulled back,” Jackson said. “And then you go all the way to the domestics and they just don't have the product, the financial products. If you look at a lease customer, they're not loyal to a car brand – they're loyal to a financing concept.”

Consequently, Jackson said that if a customer walks into a General Motors (NYSE: GM) store and he doesn't have a lease for him, he won't be able to convert him to a buyer. “They're going into the marketplace until they find a brand that will give them a lease,” Jackson said. “Certain manufacturers still have to figure out how to address that.”

To hear more from AutoNation's chief exec, don't miss Benzinga's full interview with Mike Jackson.