MANUFACTURERS YET TO UNLEASH THE POTENTIAL OF SMALL CARS

Nearly every automaker was punished by low light-vehicle sales in July due to high gas prices and a slowing economy. Despite low sales, certain fuel-friendly niches grew in sales, such as the small-car market, which boasted rapidly rising sales.

According to Business Week, Ford’s July sales were down 14%, General Motors sales were down 26%, Toyota was down 14% and Honda was down 2% in relation to the same month last year. In order to cope with this drop in sales, manufacturers are turning increasingly towards fuel-efficient vehicles and small cars to revamp the industry.

Small cars have shown the most potential for the industry. While Ford’s SUV sales were down 37% and pickups/vans were down 22%, its Focus model was up 16%, according to Business Week. A similar situation occurred at GM, where its small cars were up 17% and midsize cars were up 34%, even with their truck sales spiraling downward by 41%.

In fact, the biggest problem for the automakers has been meeting consumer demand in markets that have the greatest potential. Since small cars provide the smallest margins for manufacturers, they have generally been of little interest to a market focused on the sales of trucks and SUVs. Once gas prices increased and consumer demand rose for those vehicles, manufacturers found themselves lacking plants and facilities to saturate the market.

Take, for example, the Toyota Prius, which has been out of stock at dealerships consistently throughout the past few months. As a testament to the value of these vehicles, dealers have begun selling used Priuses at higher prices than new ones, even buying back the vehicles from owners they sold them to in previous years or months. 

According to Automotive News, this incredible situation has arisen due to consumers being unable to compare used vehicles to the price of new vehicles, which have been grievously out of stock. Without new vehicles for comparison, dealers have been able to charge higher prices, selling the same vehicles twice with profits both times.

SEMA’s members have the opportunity to cite this rapid trend towards smaller vehicles and prepare themselves for the rapid influx of such vehicles once manufacturers catch up due to consumer demand.

"Now THAT'S resale value ...", Automotive News. August 4, 2008,