Friday, July 17, 2015

Is There a Small Car Downturn?

Fiat 500c
Small car sales, such as the Fiat 500, are down sharply compared to 2014.

The U.S. economy is coming back. Gas prices are averaging $2.76 a gallon. We just signed a nuclear deal with Iran, and people are speculating gas prices could drop to $2.00 a gallon after Labor Day. I'm not going to be a Debbie Downer here—this is all good stuff. However, will it have an effect on small car sales in the U.S. and Canada? It may already be doing so.

We already know that with the recent lower fuel prices, people have been buying more large cars, trucks, and SUVs and foregoing the smaller more fuel-efficient vehicles. In fact, according to the June 2015 Subcompact Sales we recently reported, of the 26 small vehicles that have been on sale for more than a year on our chart, 17 of them are down in sales—that's 65% of the subcompact market.

The decline is real, as evidenced by last month's sales. But on top of that, it seems as if there hasn't been as much buzz about smaller vehicles. Sure, the new Scion iA and iM will be hitting dealer showrooms; Chevrolet's new Spark will come out in the next several months; Smart's new ForTwo should also hit our shores in the not-so-distant future. But Mazda has already said we won't get the 2016 Mazda2 hatchback, sighting both lower fuel prices and lack of profit on the vehicle. Will other automakers follow suit?

Despite this, subcompact CUVs continue to be popular. The Jeep Renegade, Honda HR-V, Fiat 500X, and upcoming Mazda CX-3 are likely to remain prosperous segments. Why? They're larger than a typical subcompact car and have an adventurous/off-road SUV theme that Americans just can't get enough of.

I'll be the last person to say the prosperous economy and lower gas prices are bad. But if you're waiting for a really cool new subcompact to come out, you might be waiting a while. Americans often have short memories with regards to fuel prices. The second gas goes down, big vehicle sales go up. But when those gas prices spike again, the used car lots become riddled with large, gas-guzzling behemoths. Will it happen again? I bet it will.

1 comment:

Barry Traylor said...

I agree with you about what will happen when gas spikes in price once again as it shall as surely as the sun rises in the East every morning. Then we will hear many of the people that bought large vehicles crying about how much it costs to keep their barges on the road. It helps that I enjoy small cars and like to use my money for other things than filling up my gas tank.