By on September 12, 2017

2017 Volkswagen up - Image: VolkswagenThe global auto industry is not a place in which small car production is as straightforward as it was a decade or two ago.

Brought closer to home, Americans are buying roughly 30-percent fewer subcompact cars now than they were just three years ago. With next to no fuel economy advantages; limited payment upside; and less refinement, power, and space, why would a car buyer choose a subcompact over a compact sibling? Most buyers don’t. In the United States, compact car sales are five times stronger than subcompact sales. August’s top three compacts (Civic, Corolla, Cruze) outsold their subcompact brethren (Fit, Yaris, Sonic) by more than seven-to-one.

Many automakers don’t even bother selling their smallest cars in North America. Mazda’s latest 2 never saw U.S. import. FCA has left the compact market, having long since left the subcompact sector to rivals. Subaru doesn’t dive below the Impreza platform. And Volkswagen stops at the Golf, leaving the subcompact Polo for more small-car-friendly countries.

But how keen on small cars are those other countries? In some instances, not keen enough. Volkswagen boss Herbert Diess tells Autocar, “Selling small cars is not easy.” And he’s clearly not just talking about F-150-loving America. “It’s a very European problem,” says Diess. As a result, the Volkswagen Up city car, a Lupo successor, may pull out of Europe in favor of emerging markets only.

2017 Volkswagen up rear - Image: VolkswagenThat means the same could happen for the Up’s Skoda sibling, the Skoda Citigo. “Of course, every car needs a sustainable business model and we want to improve on all our KPIs [key performance indicators] but we must also remember the Citigo is the entry point to our brand,” says Skoda’s CEO Bernhard Maier. “In emerging markets especially it plays a very strong role.” Based on demand in countries where small cars are bringing mobility to the masses, Maier doesn’t see production of the Up/Citigo ending.

But in Europe, specifically, there are real difficulties making A-segment cars sufficiently affordable to meet demand. Attempting to bring a small car like the Up into a low-emissions category requires high costs, but if those high costs are passed on to the consumer, virtually the whole appeal of the city car is lost. As B-segment cars such as Volkwagen’s own Polo become cleaner emitters, they compete too closely with A-segment cars in Europe’s regulatory environment.

Volkswagen can’t sell dirty Ups in Europe, but buyers won’t pay for an Up that costs nearly as much — or as much — as a Volkswagen Polo.2017 Volkswagen up family - Image: VolkswagenPresently, in the United Kingdom for instance, the Up is priced around 24-percent below the Polo. But that gap is tight. The Polo, for example, is a third less costly than the larger Golf. And the 24-percent reduction in cost from the Polo to Up represents the equivalent of just USD $3,700. Across Europe, the Up’s limited scope has produced ever decreasing sales. Up volume fell 4 percent in 2014, 16 percent in 2015, and 8 percent in 2016 61,246 before sliding 3 percent through 2017’s first seven months. The Polo is more than three times more popular than the Up in Europe; the Golf is nearly five times more popular.

If the Up could deliver a superior economic advantage, something Herbert Diess says is increasingly challenging, Volkswagen wouldn’t be considering the removal of the Up from its European lineup. Americans understand this already — otherwise, the 36-mpg $17,065 Fit would be outselling the 36-mpg $19,615 Civic seven-to-one rather than the other way around.

[Images: Volkswagen Group]

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

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28 Comments on “Evidence Exhibit #127 In the Case of Market v. Small Cars: Volkswagen Considering Pulling the Up City Car From Europe...”

  • avatar

    I always liked the Up Exclamation Point. It does not fall into the overly complicated styling trap of other tiny cars.

    For sure Americans wouldn’t buy it though, good they never bothered trying.

    • 0 avatar

      I do too. VW hatchbacks, New Beetle aside, are always (and most always have been) handsome and desirable to me.

      But, hey, I’d drive a freakin’ Honda N/ (Kei car for those who aren’t familair) here in Super Heavy Duty US of A if I could. Its not like I’m only infatuated with tiny hatches, I still want my big RWD Oldsmobile after all, but I do like ’em.

      No, I wouldn’t take a Kei car on the interstate, but I tend to prefer to avoid the boring concrete slab interstates anyway.

  • avatar

    Whats the real difference between an Up! and a Polo?

    • 0 avatar

      The Polo is quite a bit larger, 16 inches in length.

      UP: 139.4″
      Polo: 155.6″

      • 0 avatar

        Thanks. I know there’s a joke in there about coming with length, but to most buyers does roughly 15 inches matter? I’ve been to not car friendly Old Europe and I’m not sure buyers are saying, oh my its so much bigger I want the Up!. Outside of Japan’s Kei cars I cannot think of very small ICE car segment. I saw a few Smarts in Geneva but it wasn’t even 10% of the total amount of vehicles fielded.

  • avatar
    Arthur Dailey

    But Clarkson loved his Up!

    Drove a Polo right across France one night in a brutal rain/fog. Never felt overly fatigued or unsafe. Did however get pulled over by the ‘Flic’ because I did not have my rear fog light on. Let go with a warning.

  • avatar

    …Many automakers don’t even bother selling their smallest cars in North America. Mazda’s latest 2 never saw U.S. import…

    Well, not 100% true. I can buy a Mazda 2 today if I’m OK with it having a Scion, errr, Toyota badge.

    …FCA has left the compact market, having long since left the subcompact sector to rivals…

    When did FCA try to stop selling the Fiat 500 and its various iterations? Isn’t “Fiat” the first “F” in “FCA.”

    • 0 avatar
      Timothy Cain

      The 500 is far more of an A-segment car than a director rival for Fits and Fiestas and Versas.

      • 0 avatar

        Correct me if I’m wrong, but isn’t the Up! that is featured in the article also an A segment car?

        You didn’t specify that FCA didn’t offer anything in the B segment, just that it had given up on subcompact cars. Is the 500 not a sub-compact (smaller than compact, as in a C segment entry) car?

      • 0 avatar

        The 500L is right on the border of the A-B line, at least to those of us old enough to have driven an early ’70s Corolla.

        The best-selling compacts (Civic, Corolla) were subcompacts until 20-25 years ago, as was the original VW bug. They were a lot closer to city cars than their own current iterations.

        Incidentally, when looking for city mpg for the Corolla, I noticed the EPA calls it a mid-size car. The EPA must have hired some former rental car employees.

    • 0 avatar

      I also wondered why, given the 500, FCA was included. Being an “a” segment vs. “b” is trivial, its still a subcompact car IMO. No, it isn’t positioned directly against the Fiesta or Fit, but it is a smaller-than-Civic/Focus/Cruze/etc car that is sold (or attempting to be sold) here by FCA.

      • 0 avatar

        If I focus only on the United States, I see the 500 as a “tweener” playing as a small B-segment car. The 500L is certainly B-segment and FCA positions the 500 and its iterations as a B-segment car. Do we call the new Compass an A segment vehicle? I think not.

        I see the Spark as a tweener, playing as an A-segment car only because the Sonic exists and is a solid B-segment vehicle.

        I see the defunct Scion iQ and dying smartfortwo as true A segment vehicles that were available in the United States.

        I agree with JohnTaurus that in the United States specifically, the argument of A segment versus B segment is a bit pedantic. The only true A segment vehicle for sale (smartfortwo) is all but dead.

  • avatar

    Many (most ?) Euro cities are getting rid of cars in the urban core. Or drastically restricting the use of cars, if not an outright ban. The one advantage to driving a tiny car was the ease of parking said car downtown. But now that you won’t be able to drive downtown, might as well get something comfortable for suburban/rural driving.

  • avatar

    Cool looking little car.

  • avatar

    This is an interesting turn of events. I can understand the point made by Herbert Diess. It reminds me of the situation sixty years ago in the USA. Nash, Kaiser, Hudson and Willys introduced compact cars to the market, but they couldn’t price them much cheaper than a standard-size Chevy, Ford or Plymouth. And they weren’t all that much cheaper to operate. So, people bought the standard-size cars instead. I’m speaking of the Nash Rambler, Kaiser Henry J, Hudson Jet and Willys Aero. All three were pulled from the market by 1955 after just a few years. The Nash Rambler was reintroduced as the Rambler American in 1959 after the Recession of ’58 and sold well for several more years. But the others never returned to the American market.

    • 0 avatar

      The Rambler sold well after ’55, when full sized American cars were being fitted with V8s. The others never came back because they stopped making cars, or in the case of Hudson, merged with Nash to form AMC.

      BTW, Ramblers were more economical than full sized cars with V8s. I owned a ’63 Rambler with a 196 cid straight six, and Borg Warner automatic with overdrive. It was good for 22 mpg. My ’63 Chrysler Newport got 12 mpg, my ’63 Buick LeSabre got 11 mpg, and my ’65 Impala got 12 mpg on the freeway.

      There was a reason Ford, GM and Chrysler marketed 6 cylinder compacts in the early ’60s: people wanted better than 11-12 mpg, and the Falcon, Corvair, Olds-F85, Valiant could return 16-19 mpg, enough improvement to make downsizing from the “longer, lower, wider” of the late 1950s worthwhile. Full Sized Cars in the late ’50s to mid-’60s became very large, compared to the late ’40s and early ’50s.

  • avatar

    They sell the up in Mexico, but while it is the smallest car in their lineup it is not the cheapest, the Gol, Polo and Vento are bigger than the up and their starting prices are a bit lower.

  • avatar

    Did anyone notice that the entire rear door window on the four door version is a large pop-out vent? It reminds me of the GM cars of the early 80’s with the fixed rear door windows and the quarter window that opens.

  • avatar

    What we have here is a failure to communicate. Don’t we all know the world is going to boil and melt the glaciers and create giant hurricanes the floods all the low lying areas of the globe? Al Gore has been telling us this for 20 years, but do we listen? Sure Americans are stupid selfish people that continue to buy earth killing pickups, SUVS and muscle cars, but Bernie, Hillary, Barack, and Elizabeth keeps telling us the Europeans are so darn smart and we should copy exactly what they do. Yet now we learn that even the Europeans are not heeding the call to save the planet and are instead buying larger cars and even SUV/CUVs. Next thing you know the Germans will be burning dirty coal instead of splitting atoms for power…oh, you mean they are already doing that? I guess I better turn up the A/C, because I’m starting to really feel overheated.

  • avatar
    V-Strom rider

    Sub-compact cars have several problems. They prioritise low emissions, low fuel use and low price over room and comfort. That’s fine if there are major differences in emissions/fuel use/price versus the next size Up (weak pun intended) and/or those attribute differences are highly valued by buyers. When the differences are small and/or not highly valued then the negatives outweigh the positives.

    In an incredibly congested city the shorter length might attract some buyers, but in many cases compact cars are small enough. In a developing market without a good supply of lightly-used compact cars the lower price might attract buyers. With very high fuel prices another group of buyers might find the lower fuel use attractive enough to go sub-compact. Absent these conditions there’s no reason to compromise space and comfort quite so significantly.

    One of the reasons sub-compacts aren’t much cheaper than compacts is that there are a lot of fixed costs in designing and developing any car, no matter what size. There are also components that don’t have much lower costs in a smaller car – things like door hinges and handles, steering wheels, airbags etc. These factors reduce the cost/price difference to less than one might expect.

    • 0 avatar
      Arthur Dailey

      V-Strom accurately addressed the key issues. The savings to the consumer are minimal.

      Unless the government intervenes by taxing vehicles based on their weight, displacement, horsepower or emissions.

      A segment cars do have an advantage in some congested, ancient towns/cities with very narrow roads and little parking. However as others have mentioned many of these towns/cities are now prohibiting private vehicles.

  • avatar

    Used cars are probably the worst enemy of these tiny penalty boxes. Those looking for a cheap commuting appliance often end up buying a pre-owned vehicle, typically a class larger than they were going to buy in the first place.

  • avatar

    C-segment is peak car right now. Something like a Civic combines the fuel economy of a Fit with the tech and most of the usable space of an Accord. It takes extenuating circumstances (challenging parking) or unique demands (“I like bigger cars”) to really warrant moving off that peak (without defaulting to a crossover)

    • 0 avatar

      It’s not just the footprint, tech, and usable space, though. An Accord is quieter, better finished, and just generally more pleasant than a Civic. On a long commute, those attributes make a big difference.

      For the same reasons, I don’t consider compact crossovers “equivalent” to the midsize sedan across the showroom, even if car buyers are increasingly willing to take a step down in refinement in exchange for crossover packaging. Sure, CR-V and Accord prices closely align, but the CR-V is still the Civic of crossovers.

  • avatar

    Technical error in this article. The Up! (sic) replaces the Fox which replaced the Lupo.

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