Audi Boss Paints Gloomy Picture for Small Automobiles

While Europe often appears as a safe haven for punchy subcompacts, the reality is that the continent’s biggest sellers happen to be reasonably sized automobiles equipped with a tepid engine option. The Volkswagen Golf, Toyota Corolla, and Škoda Octavia (especially if you happen to travel through any former satellite states of the Soviet Union) are absolutely everywhere. Europe also has a strong taste for many of the compact crossovers that are popular here in North America, giving subcompacts an increasingly small share of the overall market. And it’s projected to get smaller (globally) under the existing European regulations.

Pint-sized economy vehicles aren’t exactly profit leaders for automakers and their margins are only going to become slimmer. The EU is now reaching a point where building them won’t make sense, as tailpipe regulations will eventually force some amount of electrification. This will jack up their price to a point where the kind of people that might have been considering them will probably shop used. But don’t take our word for it; Audi CEO Markus Duesmann recently said this is probably what will kill the A1.

“We do discuss what we do with the small segments. In the A1 segment, we have some other brands [in the Volkswagen Group] who are active there and very successful, with very high production, so we do question the A1 at the moment,” he told Autocar in a recent interview.

“We will certainly offer Q2s [small SUVs] and the like,” he continued. “That might be the new entry level for us; we might not do anything smaller.”

From Autocar:

The future of small cars has come under sharp focus in recent years. Profit margins have become extremely slim as manufacturers battle to meet stricter legislative and safety requirements, reduce emissions and offer a greater array of technology yet still sell at a palatable price to a market now more interested in SUVs.

The cost of electrifying small cars is proving an even tougher problem, although Volkswagen brand CEO Ralf Brandstätter has said that he’s committed to producing an electric ‘people’s car’ with a starting price below £18,000 (roughly $25,000 USD) as part of the ID range.

Before my EV advocates start posting about tax credits and fuel savings in the comments, it should be said that most people aren’t willing to take the time to calculate the lifetime ownership cost of a vehicle. Furthermore, we’re less than certain one can reliably assume the savings offered would actually offset the price bump associated with electrification. That’s especially true for this segment, where the cost of adding a battery might just push customers into something larger. Small EVs also don’t hold their resale values particularly well and will eventually have to have their batteries swapped out, which might not be financially prudent on exceptionally small vehicles. Audi was even working on an all-electric version of the A1 that was reportedly scrapped in 2020.

It’s likewise tiresome to see the continued advancement of regulations that are supposedly designed to protect the environment and uplift the poor that effectively do neither. By making subcompact and microcars untenable without electrification, consumers will effectively be forced to buy more expensive and less efficient automobiles than could have otherwise been built. But hey, at least the manufacturers managed to protect their bottom line by ending production on the segment comprised of what we used to call “economy cars.”

Audi is already considering which ICE models to eliminate to make way for electrics. VW Group is going all-in with alternative powertrains and its brands are supposed to become awash with new models catering to this. But the CEO made it sound as though some final decisions still need to be made, especially on the European market.

“We have to cut back,” said Duesmann said. “As we look at Q4 E-tron [SUV], we have a model where we have similar combustion-engine-powered models, and certainly we don’t want to have the same portfolio electrically … We make purpose-built electric cars because we can offer more functionality [that way], so we will certainly cut back our combustion portfolio in the next 10 years. We have to and we will.”

[Image: Audi]