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As Automakers Move Focus To Smaller Cars, Entry Segment Lags

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2011 Ford Fiesta

2011 Ford Fiesta

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With the landslide of all-new small cars being introduced this year and over the next several model years—including the 2011 Ford Fiesta, 2011 Mazda2, and 2012 Fiat 500—you might assume that small-car sales are going strong, and that the forecast for subcompacts in the U.S. is bullish.

According to some sources the subcompact market is still expected to grow over the next several years. But as R.L. Polk & Co. PolkInsight Advisor Tom Libby pointed out in a post, overall market share for small cars is hardly on the upswing.

According to Polk, sales of entry-level vehicles—particularly subcompacts, which it classifies as vehicles smaller than the Honda Civic, Toyota Corolla, Ford Focus, and their ilk—grew dramatically from 2005 to 2008 but have actually lost share since then. Altogether, entry-level vehicles make up less than three percent of today's market; and while the whole industry is up this year versus last, by ten percent, entry-level vehicles are down four percent.

Many of the better-selling vehicles in the segment, including the Honda Fit, Toyota Yaris, and Scion xB, are down by double-digit percentages versus last year.

Many newer models like the Kia Soul, Nissan Cube, and Scion xB aren't considered cars in the market abalysis. According to Libby, the whole small-vehicle part of the market is segmenting into smaller pieces, with crossover-type vehicles, along with compact sedans like the 2011 Chevrolet Cruze, 2911 Chevrolet Volt, and new 2012 Ford Focus, set to gain a larger share.

There's also another issue: Those who would otherwise shop for a lower-priced vehicle have been staying out of the new-car market so as to avoid the commitment of a lease or loan, while those who can afford a higher-priced vehicle have been pulling that trigger; if not carefully seen in light of the current economic situation, that's led to some odd and potentially misleading trends—such as that the average new-car price is up, and buyers are migrating back to larger vehicles.

Once the market recovers to a greater degree, we might better be able to assess that shift to small cars. While the small-car market will likely bounce back, there's one thing for sure: the days of the basic, stripped-down small car being a sales success are probably over, and it's clear that shopping priorities have changed to include more practical considerations such as safety features, tech content, and connectivity.

[R.L. Polk & Co.]

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