LexFather

By DON HAMMONDS
Pittsburgh Post-Gazette

Published: Saturday, October 3, 2009 at 4:01 a.m.
Last Modified: Saturday, October 3, 2009 at 1:33 a.m.

Trouble is brewing on the horizon for the U.S. automotive industry as it prepares for tougher fuel economy standards calling for the industry's fleet of new vehicles to average 35.5 miles per gallon by 2016.

The Obama administration announced the new standards Sept. 15 against the backdrop of plummeting sales for small fuel-efficient cars that already are on the market.

According to new sales figures, the "lower small car" or subcompact segment suffered a 15 percent drop in the sales year to date through last month, while the "upper small car" or compact car segment is off 28.5 percent. The small specialty car segment is off 15 percent.

By make, for example, Toyota Yaris sales are off 41 percent year to date, Honda Fit sales are off 8.2 percent, and Chevy Aveo sales are off 30.6 percent.

Used car buyers also are showing less interest in smaller cars. Kelley Blue Book officials say residual values for small cars have plummeted while they have gone up considerably for large cars and sport utility vehicles.

Adesa, a large wholesale auto auction company that conducts sales all over the country, reported that while pickup truck prices plummeted 17 percent in value from August 2007 to August 2008, they have risen 23 percent since then. Meanwhile, the auction house said, compact car prices went up by 17 percent from August 2007 to August 2008, but have fallen 15 percent since then.

In a study by AutoPacific, a California-based industry research firm, small car buyers were unhappy with their vehicles.

"This is buyer's remorse," said George Peterson, president of AutoPacific, "What they said in the study is they want a bigger car. They bought a fuel efficient car, but now they're saying, 'It does what I need, but it doesn't have what I want. It doesn't have the features, the power, the room, and next time I'll opt for a bigger car.' "

In the AutoPacific study, based on more than 32,000 new car and light truck buyers in the United States, 30 percent said they wanted more power than they have in their current small car, 25 percent wanted more cargo room, 18 percent want more room in general, and 25 percent want more technology. In addition, 22 percent wanted a softer ride, and 18 percent wanted more safety.

When they are asked what size car they will purchase next, 49 percent of the owners of the smallest cars said they would buy a compact sedan, 35 percent said they would buy a midsize sedan, and 18 percent said they would buy a compact crossover or SUV.

"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 Peterson. "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."

Still, to get consumers to buy the new generation of small cars - which could cost about $2,000 or so more than what they are paying now - could mean car companies could be forced to offer rebates and incentives.

"Or they will have to offer more options and better styling to draw consumers. That's about it. Those are their options," said Tom Libby, an independent auto industry analyst.

Nextourer

So the question is, are Americans ready to embrace premium small cars? Cars that are fuel efficient, decently spacious and yet offer all the amenities of their previous large car.

PhilipMSPT

iTrader: (5)

Functionality still rules.

Subcompact cars may not be functional enough for a growing family. Yes, you save on fuel efficiency and space efficiency. But if you can't bring home a family of four with all their luggage or groceries or those Ikea boxes back home, the car is useless...

mmarshall

Reminds me of one of those old ads for the Renault Le Car, which was sold here in the late 70's-early 80s.

mmarshall

Right now, I agree, that's probably the case, but that's because gas still pretty cheap by historical standards.....$2.39 in my neighborhood for 87 octane. If it gets to be twice that again (like it was in the summer of 2008), people may be less picky about what they drive, and gravitate back to smaller products.

Of course, not everyone panics and gets a smaller vehicle just because gas goes up. Those who kept their vehicles through the $4.00-a-gallon spree last year saw the price drop below $2.00 by year's end.

SLegacy99

I think that people would buy small cars if they were efficient. On paper anyway, the Yaris, Aveo, Fit don't offer much of an advantage in fuel economy compared to their bigger brothers. Why sacrafice the space then?

mmarshall

It's not just a fuel-economy issue. Some people like the nimbleness of small cars, and the ability to zip in and out of small parking spaces.

Och

iTrader: (3)

I find it ridiculous when people buy a small car for sake of fuel efficiency - it is not like the small car doesn't consume fuel at all. In real world driving the difference in gas consumption between a nice size modern powerful sedan vs a small econobox is going to amount to $10-15 per week. Just isn't worth it.

SLegacy99

I disagree.

I average 200 miles in a week to go back and forth to work and school.

Average fuel economy of my Legacy GT. 26 MPG, 7.69 gal consumed @ $2.50 a gallon = $19 a week, $1000 a year. I would say my Legacy is relatively fuel efficient.

I drove my sister's Corolla during really high gas prices. Average fuel economy 36 MPG, 5.55 gal consumed @ $2.50 = $13.88 a week, $722 a year.

A difference of $212 a year. And of course, I do drive other places than work.

-J-P-L-

No, it's not just about fuel efficiency. Far from it.

Many people, like myself, love small cars for their nimbleness that can't be had with a large car. They just feel great. Never mind the superior maneuverability in tight areas such as parking lots, city streets, ect.

Then there is the fact that there are those of us that actually enjoy minimalist vehicles for a number of reasons. One being that barely anything breaks making them very cheap to own and hassle free.

Cheap to own, aside from gas savings, is a HUGE part of it. Initial cost is about half the cost of today's average purchase price. Maintenance costs are far less. Repair costs are less. Many people choose a new small car because they have to for economic reasons (rather than going with the bigger car that is used). Many people have plenty of money for larger cars but choose small cars for the reasons stated earlier or because they feel that spending a lot more money for a vehicle is needless.

I drive 600 miles a week and it certainly makes a difference although less so with gas relatively cheap today. Everything changes when we're facing $4 gas which WILL happen again. It's only a question of when. This study reflects opinions based on $2.50 gas. Americans still love large vehicles because we've always been spoiled with cheap gas while other countries pay $6, $8, $10 a gallon. But naturally people like the utility, why wouldn't they? More is more. People prefer $2M over $1M right?

But anyway, I love my car.

Och

iTrader: (3)

So thats a difference of $6 per week. People spend more on bubble gum.

I8ABMR

oh how quickly they all forget the $5 / gallon prices and how they were all tripping out. I had staff that would say they didnt have enough money to get to work. Now we are in a huge slump and they act like it never happened and that it will never happen again. Next time its going to stay high and get higher. We all need to get with the program

-J-P-L-

Before I traded my SC400 last summer ($4/gal) for the Yaris, it was a $70 gas bill a week driving about 350 miles a week at the time. It became about $35 a week instead. That's an $1,800 savings a year. Tell me that ain't worth it. Now, at 600 miles a week, that savings would nearly double that if it was still $4/gal.

Nextourer

The ironic thing is that some SUVs have small cargo areas than some wagons and hatchbacks.

bruce van

Gas WILL go up. There is no doubt about it. OPEC nations are already discussing pricing oil in something other than the US dollar. Seeing how the dollar is continuing to take a beating, that means oil will go up in price. $100/barrell of oil is not so far off.

Either way, having a fuel efficient car is alway a WIN-WIN.