mmarshall

I like the way this video was done....this young lady knows her stuff. She not only describes the true reason why sub-20K vehicles are being dropped in the U.S. (low profitability while using many of the same parts/materials as more expensive vehicles), but also why the automakers' claims that it is from a lack of demand is false. She uses industry-numbers and sales-data to back up her conclusions.

Much of what she says (although not all) is also things I myself have said for years.

FrankReynoldsCPA

If the demand for these cars was strong enough, they could sustain a price high enough to cover the cost of production.

The demand does not support increasing the price to cover the costs. Therefore it made sense to drop them.

That's how economics works, Mike.

geko29

Ok, so what? We've known for eons that the profit margins on the lowest-end cars are miniscule--often 3% or even less. That can be supported when the industry as a whole is doing great, and has some side benefits like increasing CAFE. But when tough times (like a pandemic-induced shortage) come along and the overall market contracts, most of the profit loss comes from the drop in demand for the high-margin vehicles. Businesses are not charities, and they're going to chase after the sales that actually turn a profit, not the ones that they barely break even on, if even that.

The math gets even worse when a vehicle gets to the natural end of its lifecycle, like nearly every example she raised. Now not only do you have to cover ongoing production costs from that 3% margin, you have to cover hundreds of millions of development dollars too. That's an extremely tough sell (literally), when those development dollars could go to a far more profitable model.

The sales data is good, but the video has a massive problem with anchoring bias. She keeps talking about the "sub-$20k market" like that's a static thing. It is not by any stretch of the imagination--especially the last few years. Just from inflation alone, a car that was $20,000 five years ago should be expected to be $24,527 today. So maybe we should be talking about the "sub-$25k market" instead. And she brought up several examples of compelling vehicles in that price range that are selling very well. There's no chance that the Maverick or Corolla are being cancelled anytime soon. Which kind of undercuts her thesis.

Striker223

Nowadays people who can afford and new car at all usually make dramatically more money than those who would otherwise only be able to maybe afford a cheap new car. The makers knows this so they concentrate on higher price tiers because they know what their buyers can actually afford and they know there is no point messing around with the true economy segment

JDR76

It's hard to imagine a sub-$20k car anymore.

Back in 2001 I bought my first brand new car. It was a 2001 Saturn SL2, and I bought it for $15,700. Not fancy by any means. Manual windows, plastic wheel covers, etc. I just checked that on an inflation calculator and it comes out just shy of $28k in today's dollars. Crazy.

mmarshall

As the video demonstrates, they were dropped not necessarily because they were actually losing money on them, but because they make MORE money on larger and/or more expensive vehicles. And they couldn't necessarily raise the price that much on these entry-level vehicles, because if they did, they would lose those customers not necessarily to other new vehicles, but to the used car market, where customers would get more vehicle (if older and not brand-new) for the same money.

That's how today's car market works, Frank.

mmarshall

Outside of the Mirage (which itself is biting the dust soon), that's true. The Ford Maverick crossover-truck started out right around 20K, but has also gone up.

Interesting. I had a 1999 SL2 brand-new, and, as I remember it, it came with standard alloy wheels.

JDR76

These are the covers mine had:




It looked a lot like this one, except I had a rear spoiler and a sunroof.

mmarshall

That's a valid point, and I'll generally agree with it, except that the difference between now and then, based on MSRPs alone, may not (?) be quite that much. Non-grocery/food inflation has generally cooled off somewhat in the last couple of years...it was at its peak in 2022. Also, one can consider what the true out-the-door new-vehicle prices are when taxes, destination, and the hated dealer mark-ups are. At the height of the pandemic, dealers in my area were charging at least 5K markup on just about anything....entry-level or not.

mmarshall

Yes, they updated the SL-series a year or so after I got my 1999, and redesigned the dash...just before the awful Ion series debuted in the early 2000s. They apparantly dropped the standard alloy wheels on your version.

I was a big fan of the S-series sedans...not so much of the coupe, for a couple of reasons. I hope you enjoyed yours while you had it.

JDR76

I did enjoy the car, but it was not without issues. The head gasket started leaking at 37k miles, just 1k after my warranty expired. Saturn did a "good will" fix and charged me half, while they covered the other half. I had fuel pump issues by 80k or so, but I took care of that. Sunroof was dead by 90k miles, but so be it. Despite that, the car was nice to drive and served me (mostly) well for over 100k miles, but it definitely soured me on the GM experience so I went to Toyota after that. I moved on to my 4Runner, which over 70k miles, my only issue was that I replaced one license plate light bulb.

mmarshall

Couldn't beat those plastic body panels on the S-series....and the ingenious screw-off transmission filter.

Yes, the 4-Runner, especially back then, was just about as close to tank-like reliability as you can get for the price. I know people with close to 300K on theirs. Look how long Jill kept her old one. The local Toyota here sells them used (with a dealer-warranty) with 175K miles on them.

mmarshall

Anyhow, back to thread-topic, one of my neighbors, not long ago, scooped up a new Mirage for his daughter while they were still available. There aren't many Mitsubishi dealers left in the U.S. any more (we have one not far away in Manassas, VA, that is a very rare recent addition, as most of them are closing ups)...they still have new Mirages for around 20-21K.

And it's stretching to even call it a dealership....it sits right in the middle of an industrial-park, and looks more like a warehouse inside and out LOL.

703

yeh. I wouldn’t buy a mirage for anyone. They fold like a pancake in a crash. I remember the first few generations had a 1 or 2 star rating.

geko29

The difference is negligible, about 1%. Take the Corolla for example. The 2019 Corolla LE started at $19,135 including destination, and the 2024 LE starts at $23,145. That’s a base price increase of 21%, compared to 22% for CPI.