Will Small Cars Hit It Big?

There has been a great deal of talk recently about the green economy, the creation of new jobs by the use of technologies that will also aid the environment. In some quarters, these efforts are seen as keys to economic recovery and future economic growth. With the federal government’s big stake in the ownership of General Motors and its heavier involvement in the auto industry as a whole, this premise will quickly be put to the test. The Environmental Protection Agency has proposed very stringent new fuel economy restrictions aimed at not just limiting fuel use but also curbing global climate change. Soon we will see if consumers will accept the consequences, which may include significantly smaller vehicles with significantly fewer features. If consumers balk at this, it will have major ramifications that will reverberate through the economy.

Asked if they will make sacrifices to aid the environment, consumers most often say they will. But it is the nitty gritty of their actions, not the things they give lip service to, that will really make a difference. So, many question whether American consumers will accept the smaller cars that may soon be forced upon them. 

A just-released study on the future of small cars in the United States shows American consumers are increasingly “interested” in smaller cars but have reservations about size and features. The study underscores the challenge automakers will face in trying to meet the new government-mandated improvements in fuel economy while still delivering what consumers want and will buy. And persuading consumers to buy such cars is the key, since the government has put the onus on the manufacturers not just to offer high-fuel-efficiency vehicles but also to sell them in significant numbers. In response, one expert predicts that tomorrow’s “small cars” won’t be all that small.

“Our research indicates that American car buyers are definitely willing to buy a more fuel-efficient car but that they don’t want it to be much smaller than what they are driving today,” said George Peterson, president of AutoPacific, the research firm that conducted the study. “Tomorrow’s successful small car won’t be tiny. It will be reasonably sized, have increased fuel economy, adequate performance and a full load of customer features.”

The firm’s study, Small Cars in the USA: Planning for the Coming Boom, is based on the results of its annual survey of over 32,000 new-car and light-truck buyers in the United States. The study looked at recent buyers of new small and midsize cars plus people who will consider a compact car the next time they buy. Findings suggest that current small-car buyers want features more in line with the features in larger, more expensive and more powerful vehicles.

“This survey shows that present owners of the smallest cars like the Toyota Yaris, Honda Fit and Chevrolet Aveo want more power and acceleration, more technology and more cargo room next time they buy,” said Peterson. “When they bought these cars, they accepted lower power and cargo room for better fuel economy and a high-value price, but in the future they want something more -- bigger, faster and with more bells and whistles.”

While the world’s manufacturers are hard at work preparing additional small, high-fuel-efficient models for the U.S. market, American consumers show no particular interest in downsizing their personal transportation.  This suggests that all manufacturers, including the struggling General Motors and Chrysler, might find it difficult to meet fuel economy and profitability targets as we move through the decade toward 2020.

“The question is whether American car buyers will avidly embrace smaller-size new products,” commented Peterson. “In our Motorist Choice Awards polling released last month, 106 of the top 107 were large cars, luxury cars, sport utility vehicles, crossover SUVs or minivans. Only one small car, the BMW 1-Series, scored in the top 100, landing in the 35th slot.”

by Luigi Fraschini