Blog Posts by Tom Libby

Entry Level Car Segment Stumbles

With the ongoing focus on reducing dependence on Middle East oil and reversing climate change, it seems like a no-brainer that small cars are becoming more and more popular.  The only problem is that this is not as clear-cut as you might think. The entry level car segment (sometimes called the subcompact segment), whose products are sized and priced under the compact sedan segment that includes the Civic, Corolla, and Focus, etc., saw dramatic growth from 2005 to 2008, with its share of the industry more than doubling to 4.31% in 2008. That year played right in to the hands of this segment with the spring 2008 dramatic jump in gas prices to more than $4 a gallon.



However, since then entry level vehicles have lost share, and the segment now accounts for less than 3% of all new vehicle retail registrations, according to Polk registration data April 2010 CYTD. The segment's current share of 2.88% is almost a half point less than a year ago. While the entire new vehicle industry is up almost 10% in 2010, this segment is down 4%. The segment-leading Versa has enjoyed dramatic growth, but the other volume leaders, Fit and Yaris, are both down in double-digits. The Scion models are also suffering double-digit drops, and the G3 has been discontinued along with the entire Pontiac make.

The picture is not as bleak as one might think. It needs to be mentioned that the small vehicle arena is fragmenting, and there are other portions of it that are showing growth. Minicars (including the smart fortwo), entry level crossovers (including the Kia Rondo, Scion xB, Kia Soul and Nissan Cube), and the compact sedan segment (including  the upcoming Chevrolet Cruze and Volt and the Ford Focus, among others) are other areas of the small vehicle industry, and these categories generally are enjoying substantial new product activity and growth. 

Furthermore, the entry level car segment will soon be getting two major additions in the Ford Fiesta and Fiat 500, and these should help to reverse the declines mentioned above.  

Posted by Tom Libby, PolkInsight Advisor, Polk (07.29.2010)


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