By on August 23, 2017

2018 Honda Fit Sport 6MT in Orange Fury - Image: HondaThe Dodge Dart is dead. The Ford Fiesta is likely on its last legs in the United States. Ford Focus production is moving to China, off the North American continent where demand for Ford small cars is rapidly declining. General Motors is scaling back production at the Chevrolet Sonic’s Orion Township, Michigan, assembly plant.

That’s the Detroit small car picture, or at least part of it. From Japan’s perspective, however, small cars are entirely worth it, not just because of the sales success enjoyed by the Honda Civic (currently America’s best-selling car through 2017’s first seven months) and Toyota Corolla, but because of the demographic small cars target.

“Small cars get our buyers hooked from cradle to grave,” Toyota spokesperson Curt McAllister tells The Detroit News. “If you get them into the family early, then you can keep them on up the family tree.”

Full-size pickup trucks transacting at an average price of $46,441, according to Kelley Blue Book, are hugely profitable machines for the Detroit Three. But such vehicles might not serve as the ideal ticket for budget-conscious first-time auto buyers.2017 Nissan Versa Note - Image: Nissan Volume remains quite low in the subcompact car category, not just for Detroit’s Ford Fiesta and Chevrolet Sonic but for most Japanese automakers as well. Even the segment-leading Nissan Versa has seen its sales plunge by nearly a quarter this year as Nissan seeks to foster greater support for certified pre-owned vehicles.

Yet in Honda’s case, for instance, “Seventy percent of Fit buyers are first-time buyers,” says vice president at American Honda, Jeff Conrad. True, Fit volume is low, substantially lower than even the nosediving Versa. Honda reported a 5-percent drop to 31,126 Fit sales in America in the first seven months of 2017. But Conrad says, “We’re interested in an entry point for cars and trucks. The Fit is that product for cars and HR-V is that for trucks.” HR-V sales are up 29 percent this year to 56,407 units in 2017.

For the trio of large Japanese automakers — Toyota, Nissan, Honda — that continue to offer a full slate of small cars in America, it’s not an either/or comparison. Subcompact crossovers such as the Ford EcoSport do not invariably have to cancel out subcompact cars such as the Ford Fiesta. According to KBB, subcompact crossovers require, on average, $7,704 more to acquire than subcompact cars.2017 Toyota Yaris iA - Image: ToyotaIn other words, subcompact crossovers have every potential to continue as high-profit-margin vehicles for automakers of all stripes, but they don’t compete at the most affordable end of the spectrum. Their ATPs are almost precisely in line with midsize cars.

If the cradle-to-grave theory expressed by Toyota is a fact-based business theory, automakers that forsake the most affordable corner of the market are losing out on the opportunity to capture lifelong buyers who’ll eventually move up the ladder: Yaris iA, Corolla, C-HR, Camry/RAV4, Highlander, RX350, LC500.

Honda, meanwhile, doesn’t feel as though the abandonment experienced by the small car sector is worthy of concern for automakers that are operating successfully in said sector. “People have abandoned segments for a long time,” Honda’s Conrad says. “A few years ago a lot of manufacturer sold minivans. How many manufacturers really make a serious run at selling (them) anymore? Not many, but we’re still in it and we sold over 120,000 last year.”

[Images: Honda, Nissan, Toyota]

Timothy Cain is a contributing analyst at The Truth About Cars and and the founder and former editor of Follow on Twitter @timcaincars.

Get the latest TTAC e-Newsletter!

50 Comments on “Do It for the Children: Honda and Toyota Sticking With Small Cars for the Sake of Our Children, and Our Childrens’ Children...”

  • avatar

    Its been the same story for decades, a business philosophy vs. what results are obtained by next month/quarter/year.

    • 0 avatar

      I’m a solid supporter of the products the US automakers put out there (GM and Ford at least…not so much FCA). But this right here is at least partially why they have been in trouble over the years. Instead of focusing on their line up as a whole unit, and fielding competitive products top to bottom, they want to only compete in the high margin segments to increase profit and ignore other segments which in turn causes buyers to ignore their lineup when moving up. This approach is fine for a niche automaker but not good if your trying to be mainstream. At least in the future they won’t even bother building crappy subcompacts I guess!

      When consumer demand shifts from trucks and CUV’s (and it will eventually) they will be left wondering again what the hell happened.

    • 0 avatar

      The biggest difference between Japanese and American manufacturers has always been that of long-term thinking versus not looking past the next shareholders report.
      We all know people who personally have had positive experiences with Hondas or Toyotas (or they grew up in a family that did) and don’t even shop for anything else. Ford, GM, FCA will need to provide a very compelling reason to even get such shoppers to look in their direction. And needless to say that for the most part they currently do not.

      • 0 avatar

        “The biggest difference between Japanese and American manufacturers has always been that of long-term thinking versus not looking past the next shareholders report.
        We all know people who personally have had positive experiences with Hondas or Toyotas (or they grew up in a family that did) and don’t even shop for anything else.”

        That used to be the case with Honda. They spent 25 years earning my business and my preaching their qualities to my family, who then went on to buy Hondas. I have great stories about their commitment to their customers, and piles of dealer service invoices (because I have a great dealer service department).

        But then the economy crashed, and by August 2009–when the transmission on my Odyssey went out–American Honda Motor Manufacturing had completely gone out of the customer commitment business. They had pulled back all the way, completely, and were telling even their long-time customers to go pound sand.

        After years of falling on their sword and replacing those bad transmissions at the rate of 10 per week at my dealership, even for people who had never been in the shop before, suddenly American Honda Motor Manufacturing turned a deaf ear to its customers who got caught in Honda’s bad engineering choices. They were looking at next month’s financials, and not at all at the long term business of the consequences of their choices in this matter.

        At this point it became clear: Honda is no different than Chrysler. Not in their products, and not in their attitude toward their customers.

        Never again, Honda. Never again. I will tell these stories until I die. I will tell the great stories from the past, if only to put context to the horrible treatment Honda suddenly provided in 2009 when the chips were down.

        I am going to buy $75,000 worth of cars over the next 12 months. They will all be Toyotas. And I may send copies of those sales agreements to American Honda along with my story, just to tell then what idiots they are.

        Truly, Honda = Chrysler.

    • 0 avatar

      It helps support the family ladder theory if a mfr has a global market for small cars. The Japanese 3 can make and sell small cars in a lot more markets than the Detroit 3, so the Japanese mfrs can spread development costs across more units. They’re also selling into markets that value better quality in a small car and will pay more for it. Too many American small car buyers are entirely focused on purchase price/payment amount which has lead the Detroit 3 to cut too many corners on their entry level cars.

      • 0 avatar

        Until very recently, Ford and GM both had large market shares for their small cars in Europe, where small cars are often all that middle class people can afford to own and operate. What did Ford and GM do with their high-content B and C segment cars? They decontented them and held over obsolete models for the US market. Defending them is not really defensible.

    • 0 avatar

      And it came full circle with regard to a retired couple I know. They stayed with Toyota and recently purchased a Corolla. Their college age nephew gets driving privileges, so potentially, he could be a Toyota customer.

      I did recommend the Toyota IA (Mazda2) which I know the nephew would enjoy more, but the couple deemed it too “unfamiliar,” even with a Toyota badge on it.

    • 0 avatar

      Boom, bust, bailout, baby! When you get past all the mumbo jumbo, it’s what they teach in business schools. And it has proven to be correct.

    • 0 avatar

      nearly 30 years ago, I sat in political economy courses where I was told that Japan, with it’s patient capital and long term view had unlocked the secret to business. They were buying up everything. Students were studying japanese to be a part of the future. I believed it too.

      A couple of year later their bubble burst and they still havent fully recovered. Meanwhile, the US economy, with its “short term focus” has continued to grow and sprout world leading companies.

      Detroits loss of share to the Japanese over the last 40 years isnt because of quarterly earning reports.

      • 0 avatar

        The Japanese debt bubble just burst earlier than those of the West. The Land of the Rising Sun, and all….

        In the West, debt growth and the attendant pumping of asset prices, has continued apace, or perhaps even accelerated, giving a similar illusion of prosperity and presence of “world class companies” that headfaked many Japanese companies to lose focus on efficiency in the 80s.

      • 0 avatar
        Arthur Dailey

        Japan’s domestic economic malaise has much more to do with demographics than how their corporations operate.

        And since Japan has far more domestic automotive manufacturers than America, by a considerable number, that seems to demonstrate that their approach does indeed work.

        • 0 avatar

          Honda (and Toyota) have a philosophy when they are building their plants: (Relatively) light machinery that can be redeployed in a short time. Plus, (at least in the case of Honda), all, or most of their production lines are flexible, so they can switch to producing different models to adapt to the sales trends. Most North American companies do not have that luxury,needing weeks or even months to go from one model to another.

  • avatar

    Small cars will always have a purpose. Sure, most manufacturers dont make a bunch of money on each one or sell as many as they use to since Americans loves those CUVs so much. Bot at $7704 average more for a CUV thats just crazy.

    If I was to even consider a CUV it would either be a Rogue Sport or CX-3

    • 0 avatar

      Subcompact CUVs are widely reviled, and cost about as much as a discounted midsize car. The price of fashion is very high.

    • 0 avatar

      You have to keep in mind that is the ATP and not an accurate representation of what it would take to move from a sub-compact car to a sub-compact CUV. As noted many of the sub-compact car buyers are buying their first new car, others are looking for the cheapest new car they can find. Meanwhile the CUV buyer isn’t looking for the cheapest new vehicle, they are looking for something that either shows they have some money or is just a nicer vehicle in general. So many if not most of the sub-compact cars roll off the lot as base versions or with minimal options. That of course is due in part to the fact that dealers will actually stock base model sub-compact cars to be able to advertise that “new car for under $X”. At the other end the CUV buyer will spend that extra $X per month to get the sunroof, Navigation, chrome/larger wheels and the top trim level. Just like the sub-compact car this is due in part to what the dealer has on the lot, which is due to the current popularity of the CUV. So when they can only get X per month they make sure that each has the greatest profit potential possible, ie they don’t stock many, if any, of the base models.

      • 0 avatar

        I suppose, but I just received a mailer from Honda saying I can take my pick of an Accord LX CVT or an HR-V LX CVT for $189 a month with the same terms.

    • 0 avatar
      Guitar man

      What is the point of the Sonic ? It cannabalises sales from the Cruze and uses much more fuel than the (much better) Spark.

      And why make them in the US ? Just import them from Mexico or India.

      • 0 avatar

        The “much better” Spark? Did anyone else see this nonsense comment? I know we’re used to seeing people spout nonsense 24 hours a day now but my god what planet are you on?

  • avatar

    Perfectly describes the plight of the Detroit three – always Pursuing next quarters results, never paying attention to any long term implications.

    • 0 avatar

      They said the same thing when the market tanked. Everybody blamed Detroit for making too many SUVs. At that time, Toyota had more SUVs than any other brand.

      The stereotype of Detroit is generally invalid.

      • 0 avatar

        It didn’t matter if Toyota or Ford had more SUV nameplates. What mattered was the percentage of their earnings that were coming from vehicles that returned less than 25 mpg. Toyota wasn’t dependent on FJ-Cruisers, Land Cruisers, Sequoias or 4-Runners to keep the lights on. Was Daimler-Chrysler dependent on the Grand Cherokee? GM on the Tahoe and TrailBlazer? Ford on the Explorer and F150?

        • 0 avatar

          You’re not wrong. However, Toyota was trying to catch up in percentage of earnings coming form vehicles that returned less than 25mpg. Their failure to do so, helped them.

          The media likes to make it out that Toyota was somehow smarter. They were trying to be like GM, but got lucky.

          • 0 avatar

            They got lucky with the Prius? The RAV-4? The Camry? The Corolla? Luck isn’t as impetuous as you might think.

  • avatar
    George B

    Most young drivers start with a used car, often one that’s almost completely worn out. If an automaker wants to make a positive impression to young drivers, they need to minimize the annoyances of used car ownership. Toyota already does a pretty good job on designing cars that are relatively easy to keep on the road, but a little work on trying to keep interior plastics from becoming brittle would go a long way. My sister’s Corolla lasted more than 200k miles and the engine survived a neglected timing belt that broke on the highway, but half the interior door handles were broken. Had to roll down the window to get out of the car.

    • 0 avatar

      If it’s a rare problem (some handles never seem to break), you can probably find them new at the dealer for 40 bucks (or used at a salvage yard for even less) and install them in an afternoon.

      If it’s a common problem (some handles seem to break every time you look at them), you can probably find them new at a local salvage yard for the same 40 bucks or so.

      Seems like a pretty cheap and easy way to solve the problem, rather than just suffering thru it.

      When I worked at a salvage yard in the mid ’00s, we had shelves of brand new inner, outer, and tailgate handles for a dozen different cars and trucks; everything from Nissan Hardbodys to Camrys and Corollas to the ever growing list of cars that used the Avenger/Sebring handles.

    • 0 avatar
      Big Al From 'Murica

      Meh, show me a car that won’t go 200k. Hell I put 300 on a couple first gen Saturns…we are talking early 90s GM iron. Multiple Ford Rangers over 200k. Honestly I have found that things like the AC and power windows are more likely to work on old domestics than Japanese cars, but that is purely anecdotal of course. I owned a late 80’s (IIRC) Alfa Romeo 75 that was perfectly reliable at over 300,000 kms until I wrecked it. A freaking 80’s Alfa for crying out loud.

      • 0 avatar

        What kind of Japanese cars are in your sample? Nissans? Honda A/C compressors are good for about 200K miles in muggy, gruesome central Virginia weather. Domestics with 200K miles? You’re lucky if the blower fan still works, let alone the air conditioning. Toyota A/C compressors seem to last as long as the cars. In the past six months as manager of an independent shop, I’ve sent one Nissan to the scrap yard, one BMW, one Jaguar, a few VWs, a couple Hyundais and more Fords and GMs than I can begin to remember. The funny thing is that you’re truly an outlier if you own a Detroit car in this lefty college town, so it is odd what a high percentage of hopeless junk they comprise. I know someone who has a Challenger Hellcat, but it isn’t his daily driver. Technically he’s also got an Imperial from LBJ’s inauguration parade. but that’s about it for Charlottesvillians I know who own Domestic cars. Trucks are another story, but I only sent one GMC pickup to the shredder. We’ve had quite a few Subaru owners throw in the towel and sell us their cars for a pittance rather than fix them, but there is always money to be made fixing those and selling them to the next person who needs to learn about high cost of ownership.

  • avatar

    Ford’s just reverting back to what they always did pre-Mullaly…design a good small car (Contour in the past, Focus and Fiesta now), and then leave it to die on the vine with next-to-no marketing and ridiculously long product cycles while they chase the low hanging suv/cuv fruit.

    • 0 avatar

      I am not going to defend FoMoCo, but you do realize that nobody produces a car in its class like the Fiesta ST, or SE w/1.0 turbo? In fact you can also get the 1.0t as well as its own ST version of Foci. Neither of these cars are short on innovation. The China built Focus (in a higher quality euro trim) will be sold in the US and the Fiesta will be replaced by the Eco sport cuv.

      The latest Corrola must surely be the blandest most uninspiring car on the market. The Civic is simply ghastly. Reputation sells these mediocre cars.

      • 0 avatar

        I think it is safe to say the Civic is not viewed as “ghastly” by tens of thousands of buyers. It’s one of the best selling cars in the country. We bought an EXT with manual transmission two months ago. Beautiful blue color makes up for some of the less attractive lines. Still not a pretty car but so far it is easy to see why so many buy it. Lots of interior room (something Ford and GM don’t offer on small cars) great power and phenomenal fuel economy. I can get 45 plus mpg with little effort in suburban commuting.

      • 0 avatar

        You can’t seriously posit that the Fiesta is innovative because of an arbitrary displacement number. The 1.0L isn’t even an innovative engine in the 3rd world places they were designed to toil in.

  • avatar

    Detroit does tend to abandon whole market segments when the competition gets tough. I’m sure there are cases where it’s justified, but often it just seems like a lack of will to remain competitive.

  • avatar

    My first car was a 65 Beetle and I’ve had nothing but small cars since. I wish I could calculate how much I’ve saved on gas in the past 46 yrs.

  • avatar

    Couldn’t be because this is the segment they created and have dominated for nearly forty years?

    No. Never. Unpossible.

  • avatar

    But I am also a conservationist, so there! NOT to be confused with conservative.

  • avatar

    This worked for me and my brother. Our first two cars were small Hondas. They were affordable, got good mileage and didn’t need constant repairs. Granted they were purchased used (only thing we could afford) but based our combined experiences my 1st truly new car was in fact… yep a Honda. I was so Honda obsessed that I even bought an Isuzu Rodeo because they were sold as the Passport. However Honda had no pickup so once I got my boat we jumped ship. After a VW (oh the horror) we tried to upgrade to Acura but they offered nothing that captured my wife’s attention, so next came Volvo then Infiniti. A rear drive or turbo-charged 2 door Acura might have kept us in the family.

  • avatar

    Domestics aren’t dumping small cars. They’re just switching to hatchbacks, calling them SUVs. Isn’t that similar to what Honda and Toyota (and VW) are doing?????

  • avatar

    The Dutch are bigger people than Americans, they drive lots of small cars, they are affluent and relatively happy, and European car companies do at least as well as North American ones. What gives?

  • avatar

    As a 2014 Focus 5MT owner, Ford was on the verge of something good with the Focus and Fiesta. Many people who bought them were first time Ford customers, myself included and they were competitive aside from the cramped space and awful DCT transmissions. People want cars that feel European without the strange upkeep of a Volkswagen or FIAT and Ford needed another generation to win people over. GM did very well with the Cruze and I hope they stick it out.

    By upbringing and history, I’m a Toyota and Honda fan, and the Civic is great aside from its awful styling. Why Toyota can’t make a small car that’s actually entertaining to drive is beyond me though. I like the CH-R if they’d put the new Dynamic Force 2.5 from the Camry or better yet the 2.0 from the Lexus NX along with a 6 speed.

  • avatar

    I’d rather have a small car for the sole reason that they are more fun to drive. I’d consider a VW GTI but in today’s America the size of the VW Golf concerns me. On the road are a majority of big SUVs weighing two tons and usually more. It’s the safety angle that worries me by being hit by one of those huge SUVs. Do any of you folks have a similar concern that would keep you from buying a well built small car?

  • avatar

    I guess this means that in a few years my 2014 Fiesta ST might actually start to appreciate. Think I will hang onto it for a while.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • RHD: Agreed about the lack of colors. A lot of new vehicles look like they just clearcoated the primer.
  • stuki: In a world in decay, “dated” is a compliment.
  • stuki: Competing head on with Camry and Accord, like competing with Google in internet search, has to rate among the...
  • RHD: That and the nearly useless “truck bed” make this a non-starter. I saw one on the road a week ago,...
  • RHD: You are right about that! A facelift is all it needs to recover the sales volume. “Polarizing” is...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber