If there was one thing conspicuously absent in the launches and unveilings at this year’s North American International Auto Show, it was trucks.
For many automakers, the big news this year was small cars. Ford Motor Co., General Motors Co. and Chrysler Group LLC offered up new compacts and subcompacts, as did many of the foreign automakers, according to The Detroit News.
A number of factors are driving this push toward smaller vehicles: changing demographics, a weak economy, fear of oil price volatility and new government regulations. But with so many placing big bets on small cars, some analysts wonder whether automakers are chasing the market or getting ahead of it.
“The compact car segment will continue to grow,” said Erich Merkle of Autoconomy.com in Grand Rapids. “But the rate of growth won’t be enough to accommodate all the new competitors and products.”
Ford CEO Alan Mulally said Ford’s entries into the domestic small car market are aimed at balancing a lineup that for too long was dominated by big pickups and sport utility vehicles.
“Some people perceive that we are making a big bet on small vehicles. I’d say we are reducing the risk to Ford Motor Co. by having a complete product line,” he said. “We’re the ones that chose to focus on big SUVs and trucks because we didn’t have a competitive cost structure … I want to give the consumer a fabulous choice in every vehicle size.”
That said, Ford’s market research shows that U.S. consumers are increasingly interested in smaller, more fuel-efficient vehicles. Mulally said most Americans know that fuel prices will rise again and want to insulate themselves from that risk as much as possible.
But demographics also are changing. The two biggest customer groups today are Baby Boomers, many of whom are downsizing, and young people who do not yet need the hauling capacity of a larger vehicle. Mulally said both of these groups are willing to consider smaller models — provided they can get the same comfort, features and safety they have come to expect from larger vehicles.
Other automakers agree that fuel economy has become an important purchase consideration.
Tom Stephens, GM’s vice chairman of global product operations, said the world’s oil production cannot keep pace with increasing demand, particularly as the United States and other nations emerge from the recent recession. That will prompt an inevitable rise in gasoline prices, fueling increased demand for more efficient models.
“In the future, consumers will have a need for smaller vehicles,” Stephens said, adding that GM’s new compacts and subcompacts are aimed at meeting this growing need.
Sergio Marchionne, CEO of Chrysler and its new Italian parent company, Fiat SpA, agreed that there is an opportunity to sell more small cars in the United States.
But he said Americans will always want bigger cars than their European counterparts.
“You shouldn’t equate gas prices with size of car. One has to do with the efficiency of the systems that drive these vehicles and that’s one thing that needs to be addressed as a separate issue in terms of the efficiency of the powertrains,” Marchionne said. “I know that in Europe 50% of the market is C-segment and below, but that’s Europe. We’re not going to turn Americans into Europeans. It just won’t work. Distances travelled are totally different. Let’s not confuse them.”
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said it is important not to read too much into the prevalence of smaller cars at this year’s show.
“There obviously is a lot of attention on fuel economy right now, because that is what everybody is talking about,” he said referring to the tougher fuel efficiency standards enacted by the federal government.
“Next year, I don’t think it will be about small cars. It may be about midsized cars or even large cars. Because the intent of the law is not to force people into small cars, but to have all cars become more fuel efficient.”