Subcompact sales boom
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
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.