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The Fight for Subcompact Car Market Supremacy

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Until recently, the small and compact car segments have been the territory of Japanese and Korean nameplates like Honda and Hyundai. The market for small cars is booming and has become more competitive among automakers. Several things are playing into this fast growth for small cars, which all boil down to this: Detroit has noticed and the fight to become the subcompact car king is on.

Looking at sales figures in the small car segments, we can see that as of June of this year, sales growth is on an extreme uptick. Small cars, including compacts and subcompacts, have been gaining momentum with American buyers for some time as fuel efficiency and versatility become driving factors in today’s purchases. As the new car segment shows this growth, our analysis of search trends in the used car segments here at Carfax show similar trends. The growth in both the new and used car markets is being pushed by several factors, including big changes to the subcompact and compact cars themselves over the past decade or so.

They’re Growing

ford-fiesta-autovivaAlthough subcompacts are still, by definition, very small cars, they’ve been growing in many ways over the past decade. The tiny little subcompact that most drivers required a shoehorn to climb into has been replaced by a larger vehicle that comfortably seats four adults. Often with room to spare. Interior ergonomics, the increased use of stronger materials that allow thinner safety frames, and more have all come together to make the tiny exterior of the subcompact not always translate into a tiny interior as well.

One of the subcompact car market segment’s best-selling small cars, for example, is the Honda Fit. The second-generation of the Fit, produced from 2007-2014 grew slightly in size but also shrunk its cargo capacity by about half a cubic foot. These changes allowed for a much larger passenger space. Chassis changes and other improvements also added more space to interior leg room.

These interior growth updates were carried forward and added to the 2015 model. Most other small cars in the subcompact and compact car segments have seen similar updates to their interior space.

Meeting CAFE

One of the primary drivers of the growth of the small car segment are corporate average fuel economy (CAFE) requirements from the federal government. These mandates were updated a couple of years ago, and some of the first milestones are looming over automakers selling in the United States. This has resulted in not only a surge of compact and small cars to the American market, but also in some carmakers re-introducing models previously believed to have been put out to pasture. Chrysler reintroduced the Dodge Dart, for example, in order to enter the compact car segment.

The federal mandates in CAFE will require many manufacturers to sell more small cars in order to boost and keep their average fleet fuel economy high. This is manifesting as increased marketing for small cars. The Chevrolet Sonic, for example, is seeing a lot of advertising, The marketing for the larger, less fuel efficient trucks and SUVs in General Motors’ lineup are seeing less media time. This is an example of GM trying to find the balance between the profitable truck/SUV markets and the CAFE-necessary small car segments.

As manufacturers keep increasing the number of fuel-efficient models in their lineup, it also means more become available on the used car market as well. That’s great news for used car shoppers worried about fuel-efficiency.

Consumer Demand

dodge-dart-chrylser-groupAs all of this is happening and as economics and fuel prices constrict driving habits, consumers are now demanding more and more small, efficient cars. Going back to mid-year 2014 new car sales figures, we can see that many of the best-selling cars in the small car segments are seeing big upticks in their numbers. In fact, some of the best-sellers are from Detroit.

The Honda Civic and Toyota Corolla continually vie for the top two spots in compact sales. Yet not far behind them, and gaining, are the Ford Focus and Chevrolet Cruze. Sales figures for these cars put them neck-and-neck at roughly 26,000 new units for the first half of 2014. That’s only about 6,000 units short of the Corolla and Civic. These two cars, along with the Ford Fiesta, often make “top pick” and “favorites” lists in automotive journals as well. Meanwhile, Chrysler-Fiat are gaining ground quickly with the Dart and the Fiat 500.

In the used car market, small cars are also enjoying a fast growth trend as buyers look for more efficiency in a low-cost package. Search and measurable sales trends show that small cars are selling at a growth rate nationally. Car shoppers in the market for a subcompact can easily find many of these popular (and roomier!) late-model compact cars for sale at places like the all-new Carfax.com.

Alternative Options

Building on the trend towards higher fuel efficiency as a goal for many small car buyers and the inherent efficiency these small cars already possess, automakers are also introducing several alternative powertrain options. The Toyota Prius, of course, is a mainstay compact hybrid, but Detroit is getting in on the alternatives as well. The Chevrolet Cruze has been introduced with a diesel engine option with some success. The Ford Focus, Chevrolet Spark, Fiat 500, and others in the subcompact and compact segments have also seen electric versions offered. Ford also has the C-MAX and similar cars on offer as hybrid and plug-in hybrid options as does Chevrolet with the Volt. There are, in fact, more Detroit models available as alternative powertrain choices in the small car markets than there are Japanese or Korean.

Summing Up

As the new car market continues its trend towards smaller cars with higher efficiencies, we can expect the used car market to follow. Trends in used car sales are already showing a concerted movement towards smaller vehicles. This will only continue and likely get more robust as trends, such as leasing, feed more and more compacts into the used market over time. It’s worth keeping an eye on the electric cars and plug-in hybrids as they become available on the used car market with time.

Sources: New car sales figures taken from manufacturer reported sales notes released in June and July of 2014. Used car sales figures based on search trends and secondary market analysis from NADA .

Featured image by MTSOfan

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