Have Americans Finally Embraced The Small Car?

Sales of automobiles are down across the board -- except for the segment of small, fuel-efficient vehicles.

"The smallest, cheapest, cars are the biggest, brightest spot in the dreary auto market, reflecting continuing buyer flight to fuel economy and lower prices.

Sales of all types of small cars in March were at year-ago levels, Autodata says - a big success in an industry that sold 12% fewer vehicles overall than in March 2007. The small-car segment was the only one not showing a loss.

Within that group, the so-called lower small cars, the smallest and lowest-priced, boomed. Sales were up nearly 27% from last year. "And last year was a strong year," notes Tom Libby at Power Information Network, a unit of consultant J.D. Power and Associates.

Standouts: Toyota Yaris (up 70%), Honda Fit (up 61%), Kia Spectra (up 41%). Their starting prices are $12,000 to $14,000. Their mileage ratings are low to mid-30s on the highway. "Yaris - I've never seen a model in that segment with sales that high, ever," Libby says."

Full Story: Smaller, less-thirsty, cheaper cars enjoy big sales boom



Markets rule!

Even though subcompact car sales are increasing, they still represent a small fraction of overall sales. But if this trend continues, then Americans will consume less gasoline in the future.

So what is causing Americans to buy more small cars?

Government mandates? Hardly, as the new CAFE standards have not taken effect.

Fear of global warming? a desire to cut carbon emissions? Perhaps, though the global warming threat was hyped for more than a decade, while growth of SUV sales continued.

High gasoline prices? That's the change that got consumers' attention.

What should be our lesson from this observation of increased small car sales? Markets work. When a good - gasoline - is priced high enough, consumers will make adjustments to buy less of it. Markets work much better than preaching or government intervention.

Catch 22

Perhaps there is something to be said for using markets as a tool for measuring one's wants. However, what if many of those wants are artificially stimulated?

For example, if I had continued to live in an auto-centric city, I have no doubt that I would still be driving my car today. Frankly, I didn’t have an option. After having relocated to a bike-friendly city, however, my travel behavior changed simply because I had the option. It is convenient to bike for utilitarian purposes, and I feel safe. I also save money and prevent GHG emissions. I think more people would bike if they had the option. Because many cities are not designed for bicycles though, people don’t bike and there is no demand for bike-friendly cities. Catch 22?

I want the freedom to move to any U.S. city and feel as though I won’t be mauled by an automobile (even a smart car). Yes, I can attempt to ride my bicycle in any automobile dominated city, but I will likely be killed. Market failure? I would love to hear your opinion.

What about my monster truck?

I agree with you. It's a shame American cities are designed for certain vehicles of a certain size. More Americans would buy monster trucks like my "Truckasaurus" but the infrastructure simply isn't being built. It's very safe and lot of jobs are created building it. I bought so many carbon credits offsets from Al Gore's company I now have the carbon footprint the size of a Tunisian shepherd. Smaller cars are dangerous because I can't see them until I'm on the roof of the cars.

Until all streets can accomodate my ride, my brother's horse and buggy, my little sister's pogo stick and my crazy uncle's gondola (he wants more canals) we aren't really allowing every possible mode of transport a fair shot at market share.

Markets and hasty generalization.

Markets work much better than preaching or government intervention.

Speaking of logical fallacies, this argumentation is an example of 'hasty generalization', where one example is assumed to be valid for all examples. Of course the majority of folk who don't walk around with their nose glued to The Fountainhead know this already.

Markets do not reflect or capture all of societal and individual decision-making processes. They work best in combination with other things and when they provide signals for decision-making.



Embracing the small car

The embrace of the small car is evident in places like Australia, where large cars are almost unavailable now. Even Ford have dropped their "Fairlane" model. Small, fuel efficient cars are more sort after than ever, reflecting the increasing cost of fuel and a growing comprehension that environmental issues are real. We are still buying SUV's for no real practical purpose, but even in that category, the mid-size range is prevailing over the very large Landcruiser style. 'Trucks' or large utility vehicles, are usually bought where some practical or commercial use is intended. We don't normally buy an F500 style to go do the shopping. At fist look it appears surprising that auto makers have kept evolving ever larger vehicles. But it must take many years for production to reflect a new commercial or philosphical direction from the decision makers. In the meantime, automakers have kept churning out vehicles seemingly out of step with the realities of economics and the environment. Perhaps change is on the way, the writing has been on the wall for some years now.

Lag time

"In the meantime, automakers have kept churning out vehicles seemingly out of step with the realities of economics and the environment. Perhaps change is on the way, the writing has been on the wall for some years now."

I read somewhere it takes from 5-7 years to design, test, and mass produce a new car so there's a lag time in the market. The writing has been on the wall since the Arab oil embargo in 1973 but oil price changes have lulled consumers into buying bigger vehicles when oil prices dropped. That's in line with economics from the consumer's point of view. I still remember the shock at coming back to the U.S. from Germany in 1999 seeing all the SUVs on the road. That was when VP Gore was in office and before he decided environmental issues weren't important enough run on in the 2000 election. Eight years later the world is doomed by global warming, amazing.

Markets DO work

My guess is that people are buying the miniature cars for commuting purposes. I read recently that, while sales of small cars are up, very few people are trading in their bigger vehicles. Rather, they are adding to their fleet. Hence, the sale of “basic” models.

As far as the previous comment about auto manufacturers not making small cars, the comment regarding “lag time” is accurate. Furthermore, the manufacturers couldn’t give away the small cars earlier. Mandates never work. For all the whining about SUV’s, you can thank the CAFÉ standards for those. Higher efficiency means smaller vehicles, and people don’t want smaller vehicles. The SUV was a way to make a large vehicle that wasn’t subject to the CAFÉ standards. People bought them. A decade or so ago, California instituted a requirement that 10% (or some such figure) of all cars sold in the state be “Zero Emission Vehicles.” Basically, this meant electric cars. Now, why the state felt they could mandate car sales is beyond me, but they tried. And failed. They have continually ratcheted down the number to where it is meaningless now.

Finally, we have recently been treated to the spectacle of the Democrats, who have been busily trying to transform themselves into a “green” party (more like a “watermelon” party, but that’s another discussion), hauling oil company execs into Congress to beat them up over high gasoline prices. High gas prices will do far more to curtail driving than all the mandates you can pass. Now, I know the average Democrat is largely unfamiliar with how markets work, but surely they can read a newspaper now and then.

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