Small Cars, Small Profits
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| Will Americans embrace the microcar trend? |
AutoWeek | Updated: 04/23/07, 1:17 pm et |
Automakers appear to be preparing for the possibility that rising gasoline prices will send long lines of customers to U.S. dealerships to buy tiny fuel-sipping cars such as the Mini Cooper.
Several companies are moving into the segment. DaimlerChrysler's Smart ForTwo will arrive in the United States in 2008, and General Motors this month showed a trio of small Chevrolet concepts at the New York auto show.
But an industry consulting company predicts that U.S. buyers will shun cars that are smaller than subcompacts such as the Chevrolet Aveo, Honda Fit, Nissan Versa and Toyota Yaris. CSM Worldwide in Northville, Mich., calls such vehicles "microcars," defining them as vehicles less than 150 inches long.
CSM predicts buyers will sacrifice a few miles per gallon to buy slightly larger, slightly more expensive cars.
The bottom line: CSM forecasts that microcars will make barely a ripple in the U.S. market. Fewer than 100,000 microcars will be sold annually through 2013, according to CSM's seven-year forecast.
Bigger small cars
But CSM expects annual sales of subcompacts to rise from an estimated 300,000 in 2007 to more than 550,000 in 2013.
By buying a Fit, for example, rather than a Smart, "you are still going to get excellent fuel economy, plus a substantially bigger vehicle overall," says Dave Terebessy, a CSM analyst.
"When you look at that from a safety perspective and then from a value equation as a consumer," he says, "I think that is why you see the weakness in the forecast."
But the microcar segment still intrigues automakers.
DaimlerChrysler is investing heavily to bring the 2008 Smart ForTwo to the United States. Smart USA, owned by UnitedAuto Group, will distribute the car and is establishing a dealer network. The re-engineered ForTwo, a two-passenger car barely 8 feet long, goes on sale here early next year.
Smart USA will not predict U.S. sales but says the FourTwo will not be a flash in the pan.
On-line interest
Ken Kettenbeil, Smart's director of communications, says smartusa.com has had almost a million visitors since June. More than 50,000 people have signed up to receive Smart's newsletter.
"These are strong indicators that there is a pent-up demand for a brand like Smart," Kettenbeil says. The ForTwo's base price will be under $12,000.
General Motors is considering a small Chevrolet hatchback based on the New York concepts. But executives admit doubts about microcars' appeal in the United States.
"The question is whether or not this market would embrace a vehicle smaller than Aveo," said Ed Welburn, GM's design chief, in an interview at the New York show.
The three Chevrolet concepts were designed at GM's studio in South Korea. While microcars are acceptable to buyers in much of the world, GM stylists were conscious of U.S. tastes. They created an illusion of greater size, designing flared fenders to make the concepts appear wider than they are.
"We had to make sure the outside of the vehicle has a substantial look," and that the concepts "don't look frail," says Dave Lyon, GM's executive director of design, Asia Pacific.
GM car by 2010?
GM says it has not decided whether to sell such a small car in the United States. But CSM expects GM to market a microcar in the United States beginning in 2010.
How small are GM's concepts?
The shortest car sold in the United States today is the 2007 Mini Cooper, at 145.6 inches. The three GM concepts are 141 inches long. And the GM concepts are 11.7 inches shorter than the smallest Chevrolet sold here, the Aveo5 hatchback.
Jim Hall, vice president of the AutoPacific consulting firm in Southfield, Mich., says size and design aren't the only factors in predicting the success of a Chevrolet microcar. Dealers also must be willing to sell them and resist the urge to steer shoppers toward larger, more profitable cars.
"What money is in it for the dealer?" Hall asks, citing the small margins of the current Aveo. "The dealers don't like to do a lot of trade in them."
Several companies are moving into the segment. DaimlerChrysler's Smart ForTwo will arrive in the United States in 2008, and General Motors this month showed a trio of small Chevrolet concepts at the New York auto show.
But an industry consulting company predicts that U.S. buyers will shun cars that are smaller than subcompacts such as the Chevrolet Aveo, Honda Fit, Nissan Versa and Toyota Yaris. CSM Worldwide in Northville, Mich., calls such vehicles "microcars," defining them as vehicles less than 150 inches long.
CSM predicts buyers will sacrifice a few miles per gallon to buy slightly larger, slightly more expensive cars.
The bottom line: CSM forecasts that microcars will make barely a ripple in the U.S. market. Fewer than 100,000 microcars will be sold annually through 2013, according to CSM's seven-year forecast.
Bigger small cars
But CSM expects annual sales of subcompacts to rise from an estimated 300,000 in 2007 to more than 550,000 in 2013.
By buying a Fit, for example, rather than a Smart, "you are still going to get excellent fuel economy, plus a substantially bigger vehicle overall," says Dave Terebessy, a CSM analyst.
"When you look at that from a safety perspective and then from a value equation as a consumer," he says, "I think that is why you see the weakness in the forecast."
But the microcar segment still intrigues automakers.
DaimlerChrysler is investing heavily to bring the 2008 Smart ForTwo to the United States. Smart USA, owned by UnitedAuto Group, will distribute the car and is establishing a dealer network. The re-engineered ForTwo, a two-passenger car barely 8 feet long, goes on sale here early next year.
Smart USA will not predict U.S. sales but says the FourTwo will not be a flash in the pan.
On-line interest
Ken Kettenbeil, Smart's director of communications, says smartusa.com has had almost a million visitors since June. More than 50,000 people have signed up to receive Smart's newsletter.
"These are strong indicators that there is a pent-up demand for a brand like Smart," Kettenbeil says. The ForTwo's base price will be under $12,000.
General Motors is considering a small Chevrolet hatchback based on the New York concepts. But executives admit doubts about microcars' appeal in the United States.
"The question is whether or not this market would embrace a vehicle smaller than Aveo," said Ed Welburn, GM's design chief, in an interview at the New York show.
The three Chevrolet concepts were designed at GM's studio in South Korea. While microcars are acceptable to buyers in much of the world, GM stylists were conscious of U.S. tastes. They created an illusion of greater size, designing flared fenders to make the concepts appear wider than they are.
"We had to make sure the outside of the vehicle has a substantial look," and that the concepts "don't look frail," says Dave Lyon, GM's executive director of design, Asia Pacific.
GM car by 2010?
GM says it has not decided whether to sell such a small car in the United States. But CSM expects GM to market a microcar in the United States beginning in 2010.
How small are GM's concepts?
The shortest car sold in the United States today is the 2007 Mini Cooper, at 145.6 inches. The three GM concepts are 141 inches long. And the GM concepts are 11.7 inches shorter than the smallest Chevrolet sold here, the Aveo5 hatchback.
Jim Hall, vice president of the AutoPacific consulting firm in Southfield, Mich., says size and design aren't the only factors in predicting the success of a Chevrolet microcar. Dealers also must be willing to sell them and resist the urge to steer shoppers toward larger, more profitable cars.
"What money is in it for the dealer?" Hall asks, citing the small margins of the current Aveo. "The dealers don't like to do a lot of trade in them."
