Betting on the Little Guy

Americans in general have never associated small cars with high price tags.  They are seen as regular transportation and not premium vehicles.  In Europe this is simply not the case rather small cars are very popular and the price tags are not cheap.  They are fully featured cars with options many small cars do not have in the U.S.  With the new CAFE standards coming soon automakers in the U.S. are starting to realize that maybe we need to be a little more like Europe.  Smaller cars with higher fuel efficiency and more options.

The Detroit Auto Show was all about downsizing.  Engines were being downsized using lower displacement and it is all about getting more from less.  Utilizing forced induction both in the way of turbo charging and super charging the automakers are doing what they can with the latest technologies.  It is going farther then that.

Americans are realizing they need less.  Not everyone technically needs a Suburban to haul the kids to soccer practice.  The reality of it is when you are taking two kids to soccer practice you are not towing a 25 foot boat.  In fact most people that have large vehicles do not need them at all.  It is a perception and comfort thing.  While I know some of you are readying your pitch forks, just hear me out.  Yes, some people do need their large vehicles.  Some people actually do need SUV’s.  I drive an SUV and do use it to tow boats up north.  If we weigh out how much I need an SUV it is probably more then some but still less then others.

Interior of the 2012 Ford Focus

The automotive manufacturers are starting to bet on the little guys.  Ford’s new small car line up will begin with the new Fiesta.  The Fiesta has a base price just above $13,000 but that price can get very close to $25,000 after customizing it with a myriad of options.  Next Ford debuted the next generation Focus as a 2012 model at NAIAS last month.  The new Focus will be more refined while offering more options and features.  While they have not talked pricing you can naturally assume it will cost more.  The current Focus pricing starts a little over $16,000 topping out around $22,000.  It is estimated by some that while the base price of the the new Focus will increase slightly, a fully optioned Focus might approach $30,000.  That is a lot of coin for a small car.  The question is, are Americans willing to pay a premium on these new small cars?  Some are probably scratching their heads saying how could they charge so much.  We as Americans have been asking for the same product that Europe has been getting for years.  Ford has finally listened and decided it would be cheaper to amortize costs, thus the “ONE Ford” strategy comes to play.  Cars will be developed by Ford to be sold globally with minor changes for safety regulations and such.

2011 Chevy Cruze

Chevrolet is betting on the new Cruze to carry its sales in the compact car market.  This new model will replace the lackluster Cobalt which itself replaced the Cavalier.  The new Cruze is said to be rated at 40 mpg on the highway which is an impressive number to be sure.  The car is said to be dynamic to drive and offer the premium feel of a larger car.  That is exactly what these smaller cars with larger price tags will have to do.

So will we Americans embrace these smaller cars with larger price tags?  I think it all depends on where the starting price tag is.  This all goes back to my post about why strippers are important.  The base price on a model is what seems to drive traffic to show rooms.  Maybe that will change with time and it will be features that drive customers to the showroom.  One thing is for sure, the pricing and options work in Europe where people are paying more for less.  Are you really getting less?  In the end it is all about how you look at it.  You are getting more miles per gallon, you are getting more technology and amenities all in a slightly smaller package.  So the question is, will people buy these small cars that all the auto manufactures are betting on?

Tags: , , , , , , , , , , ,

4 Responses to “Betting on the Little Guy”

  1. Good post Joel.

    I think it definitely is an interesting phenomenon that the economy is driving: people are realizing more and more that they don’t necessarily need a Suburban or Expedition as an everyday car. Think of all the wasted interior space!

    Some people need an SUV (or truck) like these in some instances. Growing up my parents had to drive 3 kids to hockey practice and needed some way to transport all that gear! Now, my dad uses it driving from job site to job site because he has large building materials to haul around.

    Most people aren’t like that though. They want a big car just to simply have a big car. It’s draining their wallets and it is becoming an ever-increasing problem. Add to that the fact that perceptions are changing, and rather than large SUVs showing one’s affluence, they are instead showing you throw money away and don’t care about the environment.

    It’s interesting how people’s perceptions change over time…

    -Brad

    02/04/2010 at 10:29 am Reply
  2. Hey Joel,

    Thanks for recognizing this important shift. I think part of the reason that smaller cars are here to stay is that now – and I can only speak for Ford in this instance – we’re offering smaller more fuel efficient vehicles that don’t require the customer to sacrifice comfort and technology.

    In other words, you can almost approach the trim level of a luxury vehicle or a larger vehicle that typically has a higher margin to allow for more bells & whistles. In Ford’s case, this is because we’re focusing (no pun intended) on our core brands and we’re using global sourcing, development, design and manufacturing processes to minimize the cost. We’re finally able to offer value rather than just economy.

    Scott Monty
    Global Digital Communications
    Ford Motor Company

    02/04/2010 at 12:17 pm Reply
  3. Sally McCarbuyer #

    I would buy a Fiesta or Focus way before I’d consider any Chevy. That bowtie on the Chevy is such a turnoff. But I agree with you that high $20,000 for a small car is a stretch, maybe if gas prices shoot up and people stop buying bigger sedans.

    02/04/2010 at 3:34 pm Reply

Trackbacks/Pingbacks

  1. AutoBird Podcast – Esp 14: “Say Your Goodbye” - Accelerate Mpls - 02/09/2010

    […] blogs, AutoBird Blog and AccelerateMpls. The week in review included January’s numbers and Betting on the Little Guy.  We move along to the major news of the week segment.  This week […]

Leave a Reply