'Small cars' sales rise again in a falling US market

Once shunned by carmakers trying to make a go of it in the supersized American market, small cars are catching on again.

Once shunned by carmakers trying to make a go of it in the supersized American market, small cars are catching on again.

It should be said that America's idea of a "small car" is substantially different from European viewpoints. For example where the VW Golf is a family hatchback here, the Golf is a fully-fledged small car. A Fiat Punto is something you give your five-year-old to play with out the back.

Even with the rising sales in these "small cars", they're not going to solve the industry's myriad problems: together the 41 car models and eight compact sport utility vehicles that make up the segment account for less than 20 per cent of total annual US passenger vehicle sales.

And profits from small cars are typically much lower than those from large cars and trucks.

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But as petrol prices stubbornly have stuck near the $3-a-gallon mark (€2.20), small cars and SUVs have been the car industry's only bright spots in the US.

Even as the overall car market has fallen 2.9 per cent through April from the first four months of 2006, sales of small cars rose 0.2 per cent, and small SUVs gained 38.6 per cent.

Dodge has its Hemi, Ford its F-150 pickup and Toyota its Prius hybrid, but it's the Mazda3, an upscale compact with sporty European styling, that stands out as one of the hottest cars in the industry.

Augmenting the Mazda3's widely praised good looks, taut handling and long list of standard and optional features, is a very competitive price tag and a fuel economy rating that would embarrass any SUV.

Although Mazda introduced the car in late 2001, and it should be on its last legs before a major redesign, sales rose nearly 30 per cent for the first four months this year, after a 22 per cent gain in 2006.

Whether shopping for a Mazda3 or a full-size Buick, "Americans are still concerned about bang for the buck," says Alex Rosten, an industry analyst for online car information provider Edmunds.com.

Today's small cars "are not the stripped-down models of 30 years ago," Rosten adds.

Indeed, most small cars and SUVs these days offer as standard or optional equipment such features as air conditioning, power windows and door locks, traction control, side-curtain air bags, four- and six-speaker stereo systems with multi-disc CD players and iPod connectivity, navigation systems, power sunroofs and leather seats.

"People are looking much more closely at small cars, but they still want them to be interesting," says George Peterson, president of market research firm AutoPacific.

The reasons for buying are as varied as the buyers, and have always included fuel economy. But until recently that concern was far down the list, Peterson says. Now it has become a big factor in the market shift.

On one side, the US government's demand for better overall fuel economy is driving many carmakers to add small cars to their fleets to offset the gas-gulping large trucks and big cars with V-8 engines that provide most of their sales, says Eric Noble, president of CarLab, a car research and product planning consultancy.

And on the customer side, "gas prices, then features and size", are driving buying decisions for many, analyst Rosten says.