Subcompact sales boom

Subcompact sales boom http://tinyurl.com/25p8lg
Over the past year, as U.S. gas prices rose to record highs, sales of fuel-efficient small cars did not benefit as much as industry experts
had anticipated, increasing 0.4 percent to 2.24 million in the first 11 months of the year.
But a breakdown of the small car market reveals that subcompacts, the smallest models on the market, such as the Chevrolet Aveo and Kia Spectra, surged partly at the expense of compact cars.
Through November, subcompacts were the fastest-growing segment in the U.S. car market, with sales up 21.8 percent to 322,699 vehicles. By contrast, sales of slightly larger compacts slipped 3.3 percent to 1.64 million, according to Autodata Corp.
That shift is not good news for Detroit's automakers. . Ford Motor Co. and Chrysler LLC are not yet present in this Asian-dominated segment.
In addition, automakers earn more money on compacts than on lower-priced subcompacts. The transaction price, or what customers end up paying, averages $13,098 on the Aveo, compared with $15,721 on the Chevrolet Cobalt compact, according to data from auto research firm Edmunds.com.
"There is some cannibalization" of compact sales by subcompacts, said Jesse Toprak, a market analyst at Edmunds.com. "But there are also buyers from other categories. You have a lot of new product here grabbing attention."
Nissan Motor Co.'s new Versa is the biggest seller in the subcompact class, followed by the Toyota Yaris, Honda Fit and Kia Spectra.
Demand appears to be strongest for the Fit, Toprak said. Fit cars spend 22 days on dealer lots until they are sold, or a third of the 69 days-to-turn for the Versa. Nissan offers incentives averaging $900 per vehicle for the Versa, compared with $60 in average discounts on the Fit, according to Edmunds.com.
Honda could sell more Fit cars if it could make more, said Honda spokesman David Iida. "We're constrained by the production in Japan," he said, adding that the Fit was the best-selling car in Japan last month.
Honda is not seeing cannibalization occurring between the Fit and new Civic compact. "It's an added market for us," Iida said.
The Fit attracts people in their 50s with modest incomes or who are buying a second or third car, as well as young buyers in their 20s who are new to the brand, Iida said.
Many automakers struggle to earn money with subcompacts -- Ford and Chrysler say they can't produce them profitably in the United States, and Chevrolet's Aveo is made by its South Korean GM Daewoo subsidiary.
But automakers want a presence in the segment to attract first-time buyers to their brands. Most analysts expect the segment to grow as automakers try to sell more small cars to achieve stricter mileage standards likely to come into force.
Higher gas sales are also spurring many customers to consider smaller vehicles or engines. Last month, gas prices averaged $3.07 per gallon of regular, according to AAA. That's the highest for any November and 85 cents more than the average price a year ago.
Chrysler is in talks to obtain a small car from Chery Automobile Co., and Ford has shown a study of a subcompact it plans to produce -- the Verve concept unveiled in September.
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Civis Romanus Sum

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