US Buyers Collide With Auto Makers, Government On Small Cars
08 April 2009 - 11:11PM
Dow Jones News
U.S. auto dealers remain packed with surplus small cars that,
like hybrids, have lost the sheen provided by last year's spike in
gasoline prices.
Americans' attachment to cars that, by European and Asian
standards, seem large and over-powered appears to be far from
over.
The sentiment poses problems for manufacturers and regulators
eager to push them - with incentives and other aid - toward
producing smaller, more fuel-efficient vehicles.
"The impending [Corporate Average Fuel Economy] regulations are
not in line with what [U.S.] consumers want and need in a vehicle,"
said HIS Global Insight analyst Rebecca Lindland.
Small vehicles are piling up on dealer lots. Dealers had 340
days of supply of Chevrolet Aveo subcompact cars in March, compared
to 113 days supply a year ago, according to Autodata Corp. Around
60 days is considered ideal.
Days supply of the compact Ford Focus jumped to 95, from 54 a
year ago. The Toyota Yaris subcompact is at 130 days, up from
33.
Lindland said historical evidence showed small cars' appeal to
U.S. buyers during gasoline-price spikes is fleeting.
"Consumers would purchase small cars, and then they would move
away and adapt to the high prices," Lindland said of reaction to
the two oil crises of the 1970s.
If that switch in sentiment is repeated, it would collide with
efforts by auto makers to make a more dramatic shift toward more
fuel-efficient offerings.
Overseas buyers have long steered away from larger vehicles
because of higher tax rates on fuel. When gasoline prices rose
above $4 a gallon in the U.S. last year, they still remained well
below the level seen across continental Europe before the
spike.
Lindland said many auto companies have overestimated the appeal
of small vehicles to the next generation of U.S. drivers.
Jim Lentz,who heads North American sales for Toyota Motor Co.
(TM), sees demand for the segment growing, but maybe not until the
end of the next decade.
"If and when we see sustained higher fuel prices, we will see a
sustained shift to smaller cars," Lentz said on the sidelines of
the New York auto show Wednesday. "We will get to that point. But
it will not be immediate, it will be generational."
Ford Motor Co. (F) was among those pushing smaller vehicles at
the event, with its Fiesta sub-compact - long a best-seller in
Europe - set to debut in the U.S. next year.
Fiat SpA (FIATY), aims to bring its own brand of small vehicles
back to the U.S. through a planned alliance with Chrysler LLC.
In a sign of things to come, Chrysler highlighted its new Jeep
Grand Cherokee, a larger, more powerful SUV, alongside a tiny Fiat
500 at the New York show.
-By Sharon Terlep, Dow Jones Newswires; 248-204-5532;
sharon.terlep@dowjones.com
(Jeff Bennett in Chicago contributed to this article.)