By on July 26, 2021

Audi is discontinuing the A1, citing Europe’s regulatory landscape as the main cause. Eager to limit the amount of CO2 coming out of tailpipes, the European Union has placed strict limits on petroleum-powered passenger vehicles. For Audi, the price of manufacturing a subcompact automobile-dependent upon internal combustion is getting too high. Installing a smaller motor would negatively impact drivability while slotting in a hybrid powertrain means more R&D costs and jacking up the MSRP to a point where consumers might lose interest.

There’s just not much incentive to build small, efficient vehicles when the profit margins have been made razor thin and people aren’t buying them in great numbers. And this is a lesson that’s being learned by all automakers, not just those associated to Volkswagen Group. 

“We won’t have a successor to the A1,” Audi CEO Markus Duesmann told Automotive News Europe in a recent interview. “We know that offering combustion engines in the smaller segments in the future will be pretty difficult because the costs will go up. Therefore, we will leave the segment.”

Though it’s probably not the only reason. Despite routinely being on the cusp of breaking 100,000 deliveries inside Europe, A1 sales have declined steadily over the last several years. The same is true of sibling subcompacts from Volkswagen Group’s other brands. For example, the VW Polo and SEAT Ibiza have also had good and bad years. But both are coming off a high point as larger sections of the market have been trending toward crossovers and having similar difficulties balancing EU regulations with profitability. Of course, this phenomenon isn’t limited to properties owned by VW.

From AN:

This year the industry must reduce its fleet CO2 average to 95 grams per kilometer [in Europe], down from 106.7 g/km last year, according to JATO Dynamics.

The problem is that automakers struggle to get CO2 levels in their minicars and small cars to below the 95 g/km average without including some form of electrification, which adds cost in segments when margins are thin.

As a result, Opel dropped its Karl and Adam minicars. In addition, Stellantis sister brands Peugeot and Citroen plan to stop making the 108 and C1 minicars, respectively, according to a report.

Daimler, meanwhile, has begun the process of shifting production and development of its Smart brand to China, where the small cars will be built exclusively starting in 2022 as part of a joint venture with Zhejiang Geely Holding.

Mercedes has stated that it’s not going to keep dulling down subcompacts to chase the necessary volumes to make them profitable either. It’ll still produce compact vehicles but anything smaller is likely off the table unless it’s powered by electricity and can be manufactured relatively cheaply. Meanwhile, American automakers have already dipped out of the extra-small segment in their home market. While we cannot blame EU regulations for that, it may have influenced their long-term strategies along with the aforementioned influx of crossover sales.

From our vantage, it looks as though the entire industry is out of whack at this juncture. Balancing safety with efficiency/environmental requirements is already challenging enough. But they’re at odds with consumer trends (which are skewing toward larger automobiles the world over) and economic realities where the buying power of the general public has started to decline. Companies that can’t rely on high volumes are probably wise to stick with models they can charge more for. But we’re also edging out mainstream nameplates that have millions of customers that still need something capable that offers good value for money.

I suppose the preferred government solution is to supplant them all with EVs. But we seem quite a ways off from their reaching functional or financial parity with internal combustion vehicles, especially in smaller packages. It’s a problem in need of a more practical solution than the ones we currently have at our disposal and it’s difficult to see the point of regulating economical vehicles out of existence to adhere to a regulatory environment that was supposed to ensure their proliferation. Worse yet is that the average CO2 emissions (something used as a regulatory benchmark) from passenger vehicles operating in Europe actually started climbing again in 2016 after nearly two decades of consistent declines, according to data from the European Environment Agency. The group also blamed the popularity of sport utility and crossover vehicles, adding that EV adoption had not quite matched the desired targets.

[Image: Audi]

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22 Comments on “Audi Abandoning Subcompact Cars Over Regulatory Pressure...”


  • avatar
    schmitt trigger

    These small vehicles are a necessity on many European towns with a medieval road layout, at least while driving their downtown areas.

    So essentially the Brussels bureaucracy is telling their subjects to either ride a bike, use public transport, or hold on to your existing miniature clunker.

  • avatar
    Master Baiter

    Only a government regulator would think that a Porsche Taycan is better for Mother Earth than an affordable subcompact powered by a small ICE.

    • 0 avatar
      stuki

      +a lot.

      You know you’re dealing with dystopian era overgrown government, when thwe “solution” to some sort of imagined “problem”, is to enact laws idiotic enough to get rid of the least environmentally troublesome vehicles there is. In favor of silly jokes for clueless dupes, to boot.

    • 0 avatar
      mcs

      No, the Taycan is much cleaner. Even EVs that plug into dirty grids emit less than fossil cars. Actual data supports that fact. Not internet mythology.

      https://www.theverge.com/2021/7/21/22585682/electric-vehicles-greenhouse-gas-emissions-lifecycle-assessment

      • 0 avatar
        ajla

        I don’t know that it would change the final outcome, but if one was comparing an Ioniq Blue to a Taycan 4S I think things like the Porsche’s leather wrapped everything and higher appetite for fancy tires should be accounted for somewhere as well.

        Also, even with the link you gave the study cited compared BEVs to the “average” ICE vehicle in a market rather than to the most efficient ICE vehicle available in a market.

    • 0 avatar
      FreedMike

      Calm yourselves, comrades…if folks in Europe want to buy cars as big as the A1, they will find no shortage of them. VW makes any number of them, matter of fact.

      The problem isn’t that no one wants to buy or sell small cars in Europe – it’s that no one wants to buy ones at an Audi price point, which means Audi doesn’t want to sell them anymore. I’m sure this was all explained in “Atlas Shrugged.”

    • 0 avatar

      “Porsche Taycan is better for Mother Earth than an affordable subcompact powered by a small ICE”

      Yes, because “affordable subcompacts” are manufactured in much larger quantities than Taycan.

  • avatar
    FreedMike

    “…A1 sales have declined steadily over the last several years.”

    Enough with all the faux-outraged “BIIIIGGGG GUBBBBMMINT INTRUUUUUUSION” noises – bottom line is that Audi isn’t selling small cars, so it’s exiting that market. My guess is that people who want small cars want small ***cheap*** cars, and Audi isn’t in that business. It ain’t rocket science. Of course, the company won’t blame itself for building small cars people don’t want – it’ll all be about “BIIIIGGGG GUBBBBMMINT INTRUUUUUUSION”.

    Meanwhile, Audi’s parent company sells about half a zillion cars in the A1’s size class. So much for “”BIIIIGGGG GUBBBBMMINT INTRUUUUUUSION”.

  • avatar
    DenverMike

    Thankfully we have CAFE to kill small car choices for us. The targets are just too unrealistic, not happening.

    • 0 avatar
      Lou_BC

      There is much truth to that statement.

      CAFE “footprint” rules are one of the reasons why we have so many large pickups on the road. 1/2 tons became “heavy halfs” to escape 70’s era emissions. That’s why fullsized SUV’s were so common. We don’t see regular cab small trucks because they’d have to meet tougher rules (and no one other than cheapskates buy them). Ford decided to be a “truck” company and I bet tougher small car rules are part of the picture in a low margin environment.

      • 0 avatar
        Scoutdude

        Yup footprint rules are one of the reasons Ford got out of the sedan game and why the Hybrid is the base power-train in the Maverick.

      • 0 avatar
        Steve203

        I read that “footprint” CAFE reg when it first came out around 2006. The reg openly stated that the formula was intentionally skewed to discourage the production of smaller cars, with the excuse they are “less safe”. That “less safe” notion is belied by the IIHS saying that engineers have made even the smallest cars perform just as well in the IIHS crash tests as larger cars.

        The footprint model, with it’s built in bias against smaller vehicles, has been pursued by all subsequent administrations.

        VW commented on the formulas used to implement the footprint model:

        “Volkswagen does not endorse the proposal under discussion. It places an unfairly high burden on passenger cars, while allowing special compliance flexibility for heavier light trucks. Passenger cars would be required to achieve 5% annual improvements, and light trucks 3.5% annual improvements. The largest trucks carry almost no burden for the 2017–2020 timeframe, and are granted numerous ways to mathematically meet targets in the outlying years without significant real-world gains. The proposal encourages manufacturers and customers to shift toward larger, less efficient vehicles, defeating the goal of reduced greenhouse gas emissions.”

        VW was absolutely right in their evaluation and expected outcome. Of course, VW in the US has pretty much gone all SUV, all the time, rather than complaining about the bias of the model, and is reaping the rewards of pandering to a gaslighted public.

    • 0 avatar
      millerluke

      Why Ford, GM and Ram built 2500 & 3500 trucks by the barge-full – they’re exempt from fuel economy regulations. If you only build big, thirsty vehicles, it’s easier to meet emission standards. Very logical…

      • 0 avatar
        stuki

        “If you only build big, thirsty vehicles, it’s easier to meet emission standards.”

        And if you then live in a totalitarian dystopia where overgrown government de facto outlaws less cumbersome competition under guise of whatever drivel the indoctrinati have been told to uncritically fall for, your complete ad utter inability to compete against less incompetent competitors, no longer prevents you from preying on those who otherwise would not be your customers.

  • avatar
    Brett Woods

    Unfortunately, engines like four cylinder turbo 2L are big air hogs. Whatever the tachometer shows you in RPM, that is also the fume plume of exhaust in LPM.

  • avatar
    Manic

    Razor thin margins? Audi sells basically same cars that are available at Skoda, Seat, VW dealers, but for much higher price. If anyone can get margins on small cars it’s Audi.

  • avatar
    APaGttH

    If the US was any indication, there just wasn’t much benefit from A-segment cars. The costs were only incrementally cheaper than B and C segment vehicles, the MPG was typically equal or only slightly better. All the compromises resulted in something great for narrow urban canons and easy to park – but that’s about it.

    I get the Fiat 500, smart4two, Chevy Spark, Scion iQ, etc. had their fans.

    The biggest problem facing the Spark was the vastly better Sonic sitting right next to it. The Scion iQ was hampered by the Corolla or even the maligned Yaris sitting on the showroom floor. The smart4two was laughable.

    • 0 avatar
      Yankee

      @APaGtth: You are spot on. I rented a new Spark last week while out of state for work just for the heck of it. I was surprised at how nicely it drove and handled, and the features such as Apple Car Play made navigation a breeze on it’s display that was nicely integrated into it’s dash (rather than looking like a flat screen TV tacked on to like so many other cars). I was even surprised at how nice it rode on such a small wheelbase. Then came the real surprise: only 26.5 average mpg on a week of relaxed driving on suburban streets under 50 mph. Just sad.

  • avatar
    Steve203

    Is Audi trying to gaslight everyone? Their arguments sound just like the big three’s.

    -“big gummit” regs will make small cars more expensive, so they will discontinue the small cars, leaving customers no choice but more expensive models.

    -“big gummit” CO2 regs of 95grams/km are too burdensome for small cars to meet, but not a problem for larger, heavier, inherently less fuel efficient, but more expensive, cars.

    Their argument is nonsense. They just want to jack up ATP, just like the big three, and they are blaming “big gummit” for their profiteering, just like the big three.

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