With petrol prices around $US3 per gallon (though there was a small drop this week), the market for tiny cars in the United States is rapidly growing and changing as their styling, interiors and features continue to improve, according to industry watchers.
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“I don’t think there’s a segment that’s come to life quite so quickly and robustly,” Jim Sanfilippo, senior industry analyst for Bloomfield Hills-based Automotive Marketing Consultants, told The Associated Press.
Analysts reportedly say eight tiny cars – B-segment models – are on the market from seven manufacturers, but that number is likely to grow as demand increases.
Sales are up 43% in the first seven months of the year compared to the same period last year. So far this year, automakers have sold 151,848 of the cars, and analysts told the news agency sales easily will surpass the 175,387 sold in all of 2005.
Big picture: automakers sold more than 9.8m cars and light trucks during the first seven months of the year.
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By GlobalDataAP said the increase has drawn interest from all auto companies with executives at Ford [which could haul in the popular Fiesta from Europe; it sold its German-built predecessor in the US in the 1970s] and Chrysler hinting last week new subcompacts in the works. Toyota [Yaris], Honda [Fit] and Nissan [Versa] all entered the market this year with great success – demand for the Honda and Toyota models is so high that dealers sell the cars at or above suggested retail price before they arrive at the showrooms.
The news agency noted that General Motors’ Chevrolet brand has been in the market since 2003 with the Aveo, a tiny car built in South Korea by the company’s GM Daewoo affiliate. The Aveo is the largest-selling subcompact in the US, and the company is banking on increased sales when it unveils a redesigned four-door version on Thursday (17 August).
But AP said the Yaris [previously only sold as the ugly Echo four-door sedan in the US, but now offering a three-door hatchback alternative] has been the greatest success so far, with 32,822 sold to 31 July. Even though it was just introduced in March, the funky car is closing in on the Aveo for the top spot in the class, the report said.
Honda also has been having trouble meeting demand for the four-seat Fit, AP said.
Petrol prices indeed are driving the increased interest, but the cars are selling because they’re much better than the old econoboxes, Dan Gorrell, a partner in Strategic Vision, a San Diego-based market research firm and consultant to automakers, told The Associated Press.
“The B-cars of today are far better, more functional, more styled than those of the past,” Gorrell said. A few years ago, the Toyota Echo flopped largely because it looked and felt cheap, Gorrell said. The rounded Yaris is much nicer inside and out, he noted.
“The options and equipment rival luxury cars of 10 years ago,” Jesse Toprak, chief economist for Edmunds.com, an automotive consumer web site told the news agency. “They’re not your mother’s subcompact any longer.”
Chevrolet has realized this with its 2007 Aveo, which is made of better materials than its predecessor, GM spokesman Jim Burke told AP. When the car is unveiled today, it will have options such as remote keyless entry, heated outside mirrors and steering wheel audio controls.
“There’s a surprising level of content in the vehicle,” he told the news agency. “Things that you aren’t used to seeing in the economy segment.”
Sanfilippo reportedly noted that nearly all the subcompact cars get 35-40 miles per gallon of petrol, all are pleasant inside and out and prices range from under $10,000 to around $16,000.
Mark Fields, Ford’s president of the Americas, told the news agency breakthroughs in design and materials have made the interior space equivalent to larger cars. He predicted that sales in the B-Car segment would grow to 600,000 by the end of the decade and said Ford was looking seriously at entering the market. Its research showed that fuel economy has risen to among the top three factors that drive vehicle purchases, along with quality and safety.
Technology, including side air bags and stronger materials, have made the tiny cars safer, Sanfilippo added.
The Associated Press noted that Chrysler COO Eric Ridenour said last week that the automaker is discussing a B-car with potential manufacturing partners. “We definitely see a pretty good-sized market, but not huge,” he said, adding that it’s a difficult segment in which to make money.
AP noted that, when DaimlerChrysler announced that it would sell its tiny two-seat Smart car in the US in 2008, company officials said it would be marketed in urban areas where traffic congestion and parking shortages make smaller cars more practical.
But so far this year, the surge in tiny cars isn’t limited to big cities. The Yaris, for instance, is selling well in the rural Midwest, where people are adjusting to higher fuel prices, the news agency said.
