People In U.S. Moving Towards The Small Cars

Apr 11, 2008

Americans appear to have finally cast away their deep fear of subcompact and compact autos. Ford Motor Co. says the trend has been building slowly since 2004 as Baby Boomers downsize and their children start buying cars.

But it is picking up serious speed now as oil prices pierce a record US$112 a barrel, harkening back to the 1970s energy crisis when gas-sucking pigs like the V8-powered Chevrolet Caprice sat on dealer lots while buyers flocked to new four-cylinder vehicles made by Toyota Motor Corp. and others.

“Anybody that has to have a car is starting to move into a smaller size,” George Magliano, director of automotive industry research for consultancy Global Insight, said on Thursday. “We’re seeing more of this move this year.”

Carmakers in the United States sold 8% fewer vehicles in the first quarter compared with the same quarter last year.

However, they sold nearly 4% more small cars, Ford says, including everything from Honda’s Fit to Ford’s own Focus.

“The acceleration is probably as much due to a growing acceptance of the fact that gas prices will be high forever,” said Ford sales analyst George Pipas. “It wasn’t until last year that the average price of unleaded gasoline stayed consistenly around the $3 level.”

One answer may lie in replacing size and power with comfort and function. Ford says that as people are moving down into smaller vehicles, they are spending more on interior equipment and extras. The average new Focus, for example, has a transaction price that’s $2,000 higher than one year ago, the company says.

“We tend to demand much in the way of comfort in a vehicle,” Mr. Magliano said. “You guys don’t love your cars like we do down here.”

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