#Compact

Mercedes, BMW and Volkswagen/Audi are all moving inexorably towards a major downmarket expansion, as they develop a new generation of compact and subcompact cars based on front-wheel-drive architectures. Though Volkswagen has played in this space for some time, the move is a major cultural shift for BMW and Mercedes, which are typically associated with rear-drive luxury cars, particularly in the US market. But the truth is that the German luxury brands have always sold products in the German and other European markets that don’t match their premium overseas brand images (see, among other examples, the ubiquity of Mercedes taxis in Germany). But the strange thing about this next push towards smaller cheaper cars is that it’s not not aimed at Germany at all.

The best-selling nameplates in America may still be pickup trucks, but for the first time in nearly a decade, cars and car-based crossovers are outselling the body-on-frame competition. The shift occurred in the second half of 2007, as gas prices built to their Summer 2008 peak, and despite more reasonable energy prices, consumers do not appear to be going back to large trucks and SUVs en masse. And, as Automotive News [sub] reports, the downsizing of America’s buying tastes is doing more than just putting a fork in the SUV fad.

Everybody knows a “Mr. Euro”. Hell, you may even be “Mr. Euro” to your friends. Mr. Euro is the guy who, for some reason, wants the cars he cannot have in the United States. He’s the guy who says he would drive a 520i “in a heartbeat” given the chance, the dude who thinks we’re missing out because the Renault Twingo stays on the froggy side of the pond, the fellow who desperately wants a Vauxhall Zafira for child-lugging purposes. I still fondly remember the conversation I had with a similar fellow, whom I shall call “Mr. JDM”, around 2004 or so:

“I would buy a Japanese Skyline sedan in a heartbeat, if only they would bring them here, and I’m not worried about the money.”

“Good news. They did. It’s called the Infiniti G35. Allow me to drive you to the dealership so you may make your cost-no-object dream a twenty-nine-thousand-dollar reality.” Alas, the grass is never so green when it’s cut into sod and shipped to our lawns, and perhaps that’s why so many Mr. Euros find themselves conspicuously absent from the lists of Saturn Astra or VW Rabbit owners. It’s also possible that the loudest voices on the Internet buy the fewest cars, which would also explain why the current Ford Focus has been such a roaring success despite the heretical nature of its US-only design and execution.

After several years of hype, Chevrolet is releasing images pictures of its US-market Cruze compact in advance of the New York International Auto Show. The Cruze has been on sale around the world for nearly a year now, though the US launch delay has actually been a blessing in disguise, thanks to early transmission problems and a recall for fuel supply pipes. Now that Chevy’s next small thing has had its teething pains, the Daewoo-developed compact is being shown in a dizzying array of trims and packages for the US market. Chevy hopes that the Eco trim level will bring some much-needed enviro-cred to the brand, by offering a 40 MPG (freeway) version powered by a turbocharged 1.4 liter engine. To match that long-established mileage goal, Chevy had to make a number of modifications to the Cruze, including

We’ve spilled a few pixels on these pages over Hyundai’s dedication to direct injection (DI) technology, even going as far as to crown Hyundai the “new Honda” of motor technology. But DI technology isn’t without its downsides, and Hyundai tells Automotive News [sub] that the technology isn’t likely to appear on future engines with less than two liters of displacement.

Business Week reports that Toyota are planning to capture 10% of the Indian market. “India will play a pivotal role in Toyota’s global expansion plans,” Vice Chairman Kazuo Okamoto said today at the Delhi Auto Show. “The time has come for us to strategically accelerate our growth here.” Toyota is using the Delhi Auto show to showcase the cars which will lead the assault for 10% of the Indian market, the most important of which is Toyota Etios (which will also be produced in Brazil). Autocar.co.uk reports that Etios is 90% production ready and that it will go on sale in India at the end of 2010 (with first-year sales projected at 70k units). Because of the price (around $10000) it’ll go head to head with the Maruti Swift, the very boys who hold a huge chunk of the Indian car market. To help combat Maruti, a larger and better quality interior is key to the Etios. Autocar also reports that in order to keep costs under control, Toyota went on a cost cutting exercise. Measures taken include, limited sound proofing, a hard, but durable, interior and one windscreen wiper. But before you cry “Toyota are turning into GM”, don’t be fooled. Toyota tried the same thing with the Aygo in Europe and the end result was a good car which sells very well.

CSM Worldwide seems to think so, telling Automotive News [sub] that new compacts from Ford and Chevrolet are being pushed into the market to comply with increasing fuel-efficiency and CO2 emission standards. If gas prices stay steady, CSM’s VP for Forecasting, Michael Robinet says “extreme pressure to channel smaller vehicles in the market due to CAFE and emissions standards will raise incentives and lower profitability.” “It is very possible that U.S. automakers will not achieve their objectives of selling small cars at a profit,” adds CSM CEO Craig Cather. The crux of the argument is that CAFE ramp-ups to 35.5 MPG by 2016 create incentives for automakers to produce small cars without corresponding consumer demand. Luckily there’s a planned gas tax hike for that.