By John Horner
May 9, 2008 -
The Wall Street Journal [WSJ] reveals the not-so-surprising fact that U.S. car buyers are trading down to smaller vehicles in the name of fuel economy– but they still want iPoditude, hands-free schmoozing and thermal butt management. Small car market share is climbing, from about 14 percent (2004) to over 19 percent (year to date). At the same time, the average small car price is heading upwards by some $2k - $3k. Ford Marketing Maven Jim Farley says around 30 percent of Foci are now top spec. Hang on. Does this mean that there's, you know, money in small cars? Yes! So "auto makers accustomed to building eight-cylinder cars loaded with options while sparsely equipping four-cylinder vehicles [not naming any names yet] have to adjust their production. GM President Fritz Henderson [there you go] said Wednesday that the company is trying to find more plant capacity to build more cars." Too bad GM can't convert all those truck factories to small car production. Who saw that one coming? To illustrate the premium compact trend, the WSJ brings us the ethnically-correct case study of Hugo Chau. Mr. Chau traded his 2005 Mercedes for a Sync-ed-up Ford Focus and said: "I really wanted a car that has the features and is nice to drive… The Mercedes was more like a toy, and this is something I can drive every day." What Merc was that, then? An SLR?
48 Responses to “ Small Cars Make Money? Who’d a Thunk It? ”
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May 10th, 2008 at 11:23 am
jthorner - your TSX is an excellent example of a great small car which has received only lukewarm reception from “enthusiasts”. It doesn’t have a turbo V6 option so cannot scream onto the cover of Car and Driver, yet it is screwed together well, handles competently, has an upscale interior and also represents fuel-efficient transportation.
Now if Honda will only make one in RWD, they’d have the real modern-day 2002…
May 10th, 2008 at 12:59 pm
“What is even more astonishing is that the morons in our government - you know the ones with the hands on the power levers - did not see that they were engineering America’s economic downfall.” The alleged “morons” include both Democratic and Republican presidents and Congresses. The need to better prepare for oil price shocks was apparent at least as early as 1973. And Iran, directly and through its proxies, has been at war with the US since 1979. So why is it so difficult to sacrifice in the present for gain in the future? Well, it’s human nature. And in democracies, leaders cannot pull their followers along faster than public opinion allows. Churchill was alone and ostracized in the 30’s for warning about Hitler.
“GM, Ford and Chrysler can not figure out how to build small cars at a profit?” Nor could you on a $20,000 wholesale price, if you assigned (for example) $13,000 of indirect costs (for administration, pensions, insurance, equipment depreciation, etc.) to each vehicle and had, say, $8,000 of direct costs in labor and parts.
May 10th, 2008 at 3:35 pm
Yes, but making a small car for $21K that sells for $20K is better than making a small car for $18K that you can’t sell for more than $14K after incentives. That’s what you guys still refuse to get - in the latter case, you lose less money - maybe less enough combined with the higher-profit vehicles to actually make a go of it in the long-run.
Building shitty Cobalts, on the other hand, only prevents the next generation of potential higher-profit vehicle-buyers from ever considering your nameplate - and you STILL lose money. People don’t try that awful car and then say “well, I guess I’d better move up to a Malibu”; they go over and buy a Civic or a Corolla.
May 10th, 2008 at 3:38 pm
And in democracies, leaders cannot pull their followers along faster than public opinion allows.
While very true, the opinion of a poorly educated public, especially as regards history, is easily manipulated given a compliant corporate-driven media (and I include the NPR farce). Witness the drumbeat for attacking Iran so soon after the wildly successful Iraq foray.
May 10th, 2008 at 3:43 pm
On the TSX-”They really don’t do anything wrong. It is a nice small car with all the features and then some, of larger more expensive cars and I get 29mpg.”
Wow- Now I really feel like a genius since I purchased a 2006 Chevy Impala LT instead of a TSX- for a biiger vehicle and $6,000 less! Oh yes, I get the same mileage with 2 more cylinders and 6 more horsepower! Hooray for me!
May 10th, 2008 at 4:14 pm
So when are we gonna see the blinged out Focus with the fake Rolls-Royce grill and gold quad tail pipes for “performance”? Yo yo yo!
May 10th, 2008 at 4:27 pm
I really like my 2006 Scion xA. Toyota quality, small but hatchback versatility (with the rear seats down, you’d be amazed how much stuff you can fit in such a small vehicle), fairly loaded but not ridiculously so. (I mean, it has a great stereo, power windows and door locks and mirrors, side airbags, and ABS, but it doesn’t have a nav system.)
And, buying a small car isn’t all fuel economy. Ease of parking and good handling are major factors as well. In some ways, it’s safer than a bigger vehicle, in the fact that you take up less of the lane and can get out of the way easier, so situations that would be accidents in a bigger vehicle are merely near-misses in mine.
May 10th, 2008 at 5:50 pm
Skooter: For many buyers it’s really not about size when it comes to cars. I much prefer driving a GTI/Mazda3 sized automobile than a Passat-sized one, even though I drive 30kms one way to work daily on the highway.
It’s about the little touches (side blinkers - a great safety feature ignored in NA; hidden mufflers; wheels that fill the arches properly; front and rear IRS; a manual transmission; supportive seats; steering feel, excellent brakes; toys - auto lights, wipers, Xenons, sunroof, Bluetooth, auto climate ctrl, the carpet in the trunk and how carefully it’s made to cover all gaps; steering wheel audio controls, etc).
May 10th, 2008 at 6:18 pm
Dinu: Well put!!!
especially the small touches.
my base vw jetta was purchased for 18k 3 years ago with:
electronic stability control
4 wheel disc brakes with abs
6 airbags
3 12 volt outlets
cruise control
10 speaker stereo
auto down on ALL 4 windows!!
power / heated outside mirrors
side blinkers
tilt/telescopic steering wheel
rear-HVAC vents (floor and upper)
Full Size spare
Overhead sunglasses holder
center armrest: extend-able and tilt-able
small AC vent in center console and glovebox
footwell lighting
alarm system
remote door locks and trunk
etc…
May 10th, 2008 at 6:39 pm
Skooter: I used to agree with that position and bought a Lincoln LS that I still have because it has no resale value, just like the Impala. The LS had a V8, rear wheel drive, great handling and was good looking. The BMW had a inline six, less horsepower, less interior space and cost more money, I should have bought the BMW, just like you should have bought the TSX when you go to get another car and find out that the Impala has no resale value.
The Impala may be rated at 28 on the highway, but the TSX actually gets it.