By on February 10, 2021

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]

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38 Comments on “Audi Boss Paints Gloomy Picture for Small Automobiles...”


  • avatar
    Kendahl

    Perhaps it’s my North American background, but I don’t consider a Golf or a Corolla to be a large car. Our daily driver is a Focus SE hatchback.

    • 0 avatar
      WallMeerkat

      In Europe they wouldn’t be seen as *large* but as mid-size (C segment), certainly the hatchbacks anyway

      I have the Octavia which is Golf based but extended with a large trunk (almost like a fastback Jetta), it straddles what is seen as mid-size and large (though the Superb is seen as a large car here)

      In Ireland the likes of the Corolla sedan has been popular as it is a mid-size but almost large (relative to European cars) given the extended trunk

  • avatar
    SCE to AUX

    Small cars were under threat long before EVs and the zero emission craze became popular.

    Other fixed costs have crept in also – safety and tech gear – which cost the same for a small car as they do for a large car.

    Rising CAFE requirements and greater economic prosperity make the larger car a better value. Why buy a 35 mpg small car when I can easily afford the 25 mpg SUV, and the operating costs are nearly the same? Then the car insurance gives me a break on the safer vehicle, and the dealer throws incentives to buy up?

    Of course, everyone must have AWD so they don’t die on the way to the grocery store. Small cars don’t offer that feature.

    Who killed the small car? Consumers did.

    • 0 avatar
      stuki

      “Other fixed costs have crept in also – safety and tech gear – which cost the same for a small car as they do for a large car.”

      Hardly begged for by actual consumers of small cars.

      Consumers didn’t kill low priced cars any more than they killed low priced San Francisco housing. Instead, what killed both was, as always, bans and mandates. Enacted by exactly those who are specifically neither consumers of low priced cars, nor low priced San Francisco housing.

      Consumers and producers left alone, always and everywhere make more things available, at all price points. Particularly low ones. When you see prices rise, you can pretty much guarantee there is someone else involved. Forcefully inserting themselves into productive producer/consumer value chains. Always with the goal of setting themselves up to leech, without themselves producing anything of value al all.

  • avatar
    ThomasSchiffer

    The sooner the EU collapses, the better.

    Yes to Europe, no to the disastrous and intrusive EU.

    • 0 avatar
      ToolGuy

      @ThomasSchiffer, I appreciate your posts.

      Your recent post about the cost of electricity in Germany was terrifying.

      • 0 avatar
        ThomasSchiffer

        Thank you.

        We have the highest electricity prices in the [developed] Western world and they are not getting cheaper. Furthermore, our all-knowing Führerin Angela Merkel’s idiotic decision to get out of nuclear and coal power at the same time means we have dramatic energy deficiencies. Recently a document was leaked from Peter Altmaier’s (the minister of the economy) office in which this energy crisis was acknowledged and the plans for a new law were laid out which would mean capping off power to your home (specifically EV-charging and heating) to prevent a nationwide blackout. You cannot make this stuff up, Merkel has ruined this once great country and the EU’s intrusive behavior is doing the rest.

        By the way, a liter of gasoline yesterday cost 1.52 in the Munich region, Diesel was 1.33.

        • 0 avatar
          wolfwagen

          @THomasSchiffer
          Thank you for posts and your insight.

          Anyone who thinks this cannot happen in the USA is either being deliberately dumb, has no critical thinking skills, or both. Will it happen tomorrow? No. But it will happen, if left unchecked.

          • 0 avatar
            ThomasSchiffer

            Agreed. I believe the current crop of many politicians in both the EU and in the USA are reacting based on ideology and wishful thinking rather than cold hard facts.

            Solar and wind power are alone cannot sustain an industrialized nation such as Germany or the United States.

        • 0 avatar
          chuckrs

          Thomas

          In WW2, many cars were powered by wood or coal liquified gas. They sported an attractive frame behind the trunk carrying one or two garbage can sized cylinders and attendant piping. A French Citroen was more elegant with a long attached cylinder resulting in an homage to the Oscar Meyer Wienermobile. Fuel could include German sourced lignite.

          Perhaps there is a business opportunity, although TUV and KBA may want a word or two.

          Although this is tongue in cheek, I fear our US leaders could come up with a different, but similarly bad, set of directives like those currently confronting you.

          • 0 avatar
            ThomasSchiffer

            Chucks,

            Indeed. My grandfather operated one during World War II. He owned an Adler automobile. The ‘Holzgaser’ as we called them in Germany had a range of roughly 100 km with a ‘basket of wood’. But you could not just ‘refuel’ by venturing into a forest with an ax, especially during the cold season. The wood had to be dry.

    • 0 avatar
      stuki

      Germany needs to leave the EU. And at a minimum get heir Mark back, even if they’ll likely still remain too gullible and economically illiterate to just use Gold.

      The massive wealth transfers enacted by the ECB over the past decade and a half via crass debasement: From productive German workers and industry, and to the same illiterate halfwits in FIRE sectors and glorified ambulance chasing and rent seeking rackets; is what has enabled wealth, hence power and influence, to be concentrated in the hands of the sort of negative value add back markers who have already long since destroyed the Anglo countries. Germany appeared rather immune to the rot, up until at least the late 90s. But now the game’s increasingly over, even there.

  • avatar
    here4aSammich

    I’m afraid the small car is about to make a comeback, at least in North America. It appears we are moving away from being self sufficient when it comes to oil. Oil (and gas) is going to get more expensive over the next few years since we will once gain be relying on other to supply it. EVs haven’t gotten cheap enough (let alone where the electricity is going to come from) to put entry level drivers in them. The US3 are going to regret moving away from small cars to big SUVs and trucks very soon.

    • 0 avatar
      tomLU86

      The drop in gas prices was a nice break, but unnatural. If, as some say, fracking has run it’s course, supply is about to drop.

      Another big if, if the economy rebounds somewhat (I’m convinced, like many, several commutes will not return as not all these people working from home will not be going back to the office), demand for motor fuel will rise.

      Fuel prices are going to go up

      Inflation will make them seem higher (it’s coming).

      Higher interest rates…they’ve started (the govt’s long term bond has doubled from virtually nothing in August, to very little..but DOUBLED)

      Recession–it’s coming. Fewer jobs and depressed wages.

      So, it will be interesting to see if this generation will behave as the previous generation in 1974-80, and discover that they can live with small cars.

      Against my depressing array of reality, today’s Americans are larger (30 lbs more on average?), older, and wimpier (how many served in a war, or even on active-duty?), so they might not be able to hack a ‘small car’—which is not as small as it was.

      And more people drive longer distances every day today than in the 1970s.

      It’s 1973 again…we stand at the dawn of a new malaise era for “motoring”. EVs, if they ever hit their stride, won’t do so in the next 8-10 years–which is about how long the first automotive malaise era lasted.

      • 0 avatar
        Luke42

        Anecdata time!

        My employer has been trying to figure out if we should all just work from home after all this is over. I voted to stay home, and it’s likely my employer will allow me to.

        Last summer, I bought a GMC Sierra as a pandemic-DIY-camping beast-truck. It’s a lousy commuter vehicle but, as long as I work from home, a full-sized pickup truck is a great choice.

        WFH means that I can have both a bigger car AND a lower gas bill, because I cut my mileage by 90%. 10% of 18MPG is much smaller than 100% of 40MPG.

        But, as I said, it’s anecdata. I have no.idea if anyone else is doing things the same way I am.

        • 0 avatar
          tomLU86

          Luke, your “anecdata” is probably multiplied by xxx,000 variations, hence the hot sales of pick-up trucks. GM is recommisioning a closed plant in Ontario because apparently they cannot meet demand.

          My anecdata is a variation of yours–I’m pretty sure I will not be commuting EVERY day when (if?) this pandemic ends, so to better deal with our execrable crumbling roads, as well as the winter, I sold my fine 7-year old Regal (which would have been at home in Germany, or even here, if the roads weren’t so bad) for a 4wd Colorado. Fewer mpg, but I still use less fuel than before, and I’m lucky to have a Miata for the nice summer days (when I can see and drive around the potholes). And if my current job goes, the truck becomes a useful capital asset.

        • 0 avatar
          tomLU86

          Do you really get 18mpg?

      • 0 avatar
        stuki

        “Fracking”, or hard oil and tertiary recovery i general, has barely gotten off the ground. Outside of the US, it has still been too expensive, and largely unnecessary. Apply US extraction efficiency across the world, and there is a lot of oil now recoverable, if only the price is right.

        Rapidly expanding demand from Asia, and eventually elsewhere, will pretty much ensure Americans will have to get used to bidding at more crowded auctions for even that oil, though. There are a billion Chinese out there, alread largely on par with Westerners wrt how much economic value they are able to extract from each additional barrel-of-oil-equivalent amount of energy. And Chinese efficiency is improving. While the West’s has been in decline since who knows when and gives no indication of turning around.

    • 0 avatar
      WallMeerkat

      If the US3 really wanted to they could source and federalise small cars quickly.

      GM still builds small cars for China, Ford still sells the Fiesta and Focus in Europe, there are plenty of small cars in the Fiat-Chrysler-Peugeot-Citroen (Stellaris?) stable

  • avatar
    Art Vandelay

    Pathetic. Bring back Bertel Schmidt.

  • avatar
    el scotto

    Not really sure what the Audi boss was trying to say. Here’s what 10’s or even hundreds of thousands have said: Small car? Japanese or Korean please! I’ll be back for a new one in 250,000 miles. Outside of the Golf small European cars don’t do well in the NA market. Never mind in North America (NA)luxury automakers have tried to foist rebadged small cars on the public. Not quite 3 card monte but people knew a scam when they saw one. Lexus was just as bad as Audi, CT or whatever it was or an A3 anyone? They didn’t make the cut as in were discontinued. At least the Lincoln LS looked good.

  • avatar
    deanst

    GM (wuling) is already making Chinas most popular EV for $4,000. The firm that wants to conquer the EV motor market (Nidec) expects the auto market to explode (as in triple in size) when EV technology peaks. I’m inclined to agree with this direction – with so many fewer parts and the resultant increases in reliability, small cars should eventually be readily available to whomever wants them.

  • avatar
    MrIcky

    “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”

    ….I feel like the obvious goal of the EPA and transportation department for at least 2 decades has been missed here. The implicit goal is to move toward Public Transportation and away from cars period. That has ALWAYS been the grass roots goal of CAFE standards. Go look up the EPA’s own site and “Smart Growth”. They have expressly said that attempting to keep up with growth demand through improving the current road system is going to have diminishing returns and is unsustainable. The end game is a reduction in cars on the road, period. They’ll never be able to say directly that they’re ‘anti-car’ for all sorts of reasons. And like most behavior mod programs, they are always classest to some degree.

    • 0 avatar
      tomLU86

      @MrIcky

      You said it well.

      Improving the current road system is often like chasing your tail…you build higher capacity roads (from 2-lane to 4-lane, or freeway) and over time the roads attract traffic and you are back to the congestion you had before.

      The disconnect is that while the EPA may want to get us out of our cars, other parts of the Federal govt want people to keep buying house in the suburbs, further and further out, and govt policies (tax breaks) encourage sprawl.

      It’s easy (for me) to be a Monday morning quarterback. Germany has expensive motor fuel–they have a successful auto industry. So does Japan. Even France. In 1980, the Federal Govt could have taxed gasoline to discourage (not stop, but slow down) suburban sprawl, and used the proceeds to maintain the roads in German condition, and perhaps make useful capital investments to benefit the lower middle class (assistance to tech schools/community colleges).

      Public transportation only works where people live in close quarters. It doesn’t work in suburbia. Even older American suburbs in the 1950s—even much of Queens NY–and Queens is part of NYC!–is difficult to impossible to have decent mass transit.

    • 0 avatar
      FreedMike

      I think we have to move towards public transportation. Why? It’s demographics. We have more people moving to more places where the highway systems weren’t designed to handle the cities as they are (think Houston, Atlanta, Dallas, Denver, Phoenix, Miami, L.A., etc) and as a result the traffic congestion is MURDER. Here in Denver, it’s so bad that it’s commonplace to be stuck in dead-stopped traffic on a Sunday afternoon going through downtown on I-25.

      L.A. tried to road-build its’ way out of that, and clearly that failed. But even if it were possible to road-build your way out of congestion, it’s astronomically expensive, and taxpayers don’t like ponying up for road projects.

      Here in Denver, it cost upwards of $1 billion to just widen and improve one 10-mile section of I-25 through the south side of the metro area, and that was 15 years ago. What the city really needs is more highways, but you’d have to buy literally thousands of houses to make way for those highways, and meanwhile, land prices here have skyrocketed in the last 15 years since the I-25 project was finished. Bottom line? You could probably put a permanent city on the moon for what it would cost to build a road network from scratch that’s sufficient to serve this city (which now has 3 million people, versus the 750,000 that it had when the Interstate road system was designed in the ’50s). And L.A. shows that no matter how many roads you build, it’ll never be enough. Rinse and repeat in every city that’s in Denver’s shoes.

      So, yeah, more public transport is the future. That, or you can count on the big bad gubmint to take steps to cut down on your driving, if for no other reason than it can’t afford to keep up with all the cars on the roads.

  • avatar
    someoldfool

    The picture(s) with black wheels are the “A-Spec.” This is a cosmetic only option package, sort of an Advance-Lite. What peeves me is the nice red leather interior is available only with the A-Spec package. I think the black trim looks cheap, and the black wheels always look dirty.

  • avatar
    FreedMike

    I don’t know how we got from this quote (“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”) to “small cars are going away and people without money aren’t going to be able to afford EVs and now dogs and cats are going to start getting married and it’s all the end of Western civilization as we know it”.

    What the guy is saying VW is that very successful at selling subcompact cars, but Audi isn’t, so its’ subcompact, the A1, may not have a future. Well, yeah…Audi’s an upscale brand, and upscale shoppers who formerly bought dinky subcompacts are now buying dinky CUVs. Plus, Audi’s going electric, which is a trend with ALL luxury brands.

    No, this does not mean that subcompacts in Europe are going away.

  • avatar
    Funky D

    Maybe I am missing something here, but wouldn’t a plug-in hybrid that would be capable of all-electric operation for everyday use be a more practical alternative that would go a great way to reducing emissions without burdening the ICE any further?

    For instance, the current RAV4 hybrid has 40 miles of electric range. That would allow me to run in EV mode the vast majority of the time without needing to run the engine except when venturing out of town. An ICE engine that only runs 1/3 of the time would cut emissions by 2/3, right?

    And it would still be more affordable than a BWV, also right?

    • 0 avatar
      stuki

      The added weight increases “emissions.” And road wear. And increases riskiness to others in a crash….. Gasoline emissions are by now so low, that I wouldn’t be surprised if the added weight, and attendant power required to move it, increases tire/pavement-interface emissions more than the increased opportunity for electric only driving reduces actual combustion emissions. I’m just guessing about that, but man, are newer gasoline engines, on modern gas, clean.

      Considering the complexity-to-the-point-of-indeterminantity of combined “total” emissions, it’s not entirely without value to look at that very fundamental measure of transportation efficiency payload/(total transported weight.) In dense urban surroundings, where speeds are low and a large share of total door to door time is taken up by parking, pedelecs are plain great. 3 ton Teslas which don’t fit anywhere, simply aren’t much different from similar sized pickup trucks. If you do need to haul 5, do so with as little weight, size and parking difficulty as possible. There _may_ be other concerns which come into play, but it’s always instructive to check ones high flying theories against hard basics, from time to time.

  • avatar
    tomLU86

    @ThomasSchiffer

    What you describe is disturbing (as this is the direction the US seems to be going). Supply of electricity is insufficient–rather than let the market decide (raise the price until demand balances out), the FRG is resorting to…rationing? I am kind of shocked. I can turn off some lights, but the refrigerator?

    May I ask, how many Euros a month, for how many KwH (kilowatt-hours) is a “typical” German electric bill?

    If it’s 100 euros, that’s really not as bad as you make it sound. Germany is an affluent nation, and unlike the US, most Germans do not have to drive cars as far or as often as Americans…and many don’t have to drive at all. Perfect candidates for EVs—oh, but it is challenging to charge an EV overnight if one does not have access to their own parking spot with charger, something much more difficult in densely populated areas (which outside of North America is the norm).

    • 0 avatar
      ThomasSchiffer

      Tom,

      It is indeed disturbing. Earlier this year Germany was on the verge of a massive blackout. We were saved by French nuclear and Polish coal power plants.

      We are a five person household, two parents and three children. Our electricity usage is very high, especially in recent months since my children cannot attend school and are stuck at home; electricity usage went up. The actual price for electricity in my region of Munich is 31,89 Cents per kWh – utterly outrageous. My electricity bill for January was 168,38 Euros.

      In a society which is supposed to switch over to EVs and become ever more digitalized, electricity should be cheap. But it is not. Public charging stations in Munich can demand as much as 80 cents per kWh!!! And earlier this year some of these stations went up to over a Euro per kWh.

      • 0 avatar
        28-Cars-Later

        I find it interesting my electric bill is usually $100 every winter, $150+ in summers, and less than $100 in the Spring and Fall dips, yet kWh is 7.07c + fees + misc. stealing.

      • 0 avatar
        ToolGuy

        @ThomasSchiffer, what was your actual kWh usage for January? (I am interested to do some comparisons, but if your bill is like mine it includes a lot of add-ons not directly related to kWh, and I’d like to be apples-to-apples.)

        [In my particular corner of the world, many people use electricity like it is water – if water were free and came with bonuses for using more.]

      • 0 avatar
        tomLU86

        Thank you Thomas, I was curious. That sounds expensive to me, yes.

        While I do not know if you use electricity to heat your home. If heating is separate (homes heated with natural gas have a separate bill), by US standards, 168 Euros, about $202, is very high. I looked at a recent bill, in Michigan it was $61 for 311 kwh, or say $0.20 per Kwh (is your figure 0,32 euros or 0.26 euros converted to 0,32 dollars–both are high, but 0,32 euros is double, while 0,26 euros is 60% more).

        Fossil fuels have been good to the West in general and America in particular, but they have many nasty side effects.

        We are told the nasty side effects are the reason we must get away from them.

        But, as you say, how can we have electric cars without electricity? The next question may be, “who really needs a car?” and “who will decide that?”

  • avatar
    Art Vandelay

    pieceofchit

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