The Wall Street Journal-20080206-Tiny Cars Make It Big
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Tiny Cars Make It Big
Full Text (1069 words)Finally, small is gaining some critical mass.
After decades of lackluster sales in the bigger-is-better U.S. auto market, tiny cars are surging in popularity -- even as the overall auto industry declines. Sales in the compact-car segment, which includes the Toyota Motor Corp. Yaris, Honda Motor Co. Fit and General Motors Corp. Chevrolet Aveo, rose 33% in the U.S. last year.
About 30,000 prospective buyers have put down a $99 deposit for a two-seater called the Smart fortwo. U.S. delivery of the Smart car, which is just under nine feet long, began last month. Other mini cars like the 13-foot-long Honda Fit and Ford Motor Co.'s Verve, a concept car that will go on sale in the next two years, are grabbing the attention of critics and consumers with high fuel efficiency and something long missing in the subcompact segment: stylish design.
Meanwhile, the choices for consumers are expanding. New entrants include the Mini Clubman, a stretched-but-still-tiny version of the Cooper that will go on sale Feb. 16, and BMW's 1-Series, a premium compact set to arrive this spring.
While auto makers have been pouring resources into small cars for several years, sales hadn't yet borne out the industry's hopes. But last year, the segment outshone the rest of the U.S. auto market; total light-vehicle sales fell 2.4%. Sales of once-popular large sport-utility vehicles fell 5.3%, big luxury cars like the Mercedes- Benz S-Class declined 8.8%, and the large-pickup-truck segment, long an industry leader, declined 2.7%, despite the arrival of new models from Toyota and GM.
Along with rising interest in small cars comes concern about their safety, especially on U.S. roads, where most other vehicles are larger: A four-door Ford F-150 pickup truck weighs about twice as much as a Nissan Versa. Safety experts say that while nearly all cars are safer than those of just a few years ago, smaller models typically are less crashworthy than larger ones.
But sustained high fuel prices are helping drive mini cars' increased popularity. Now that prices have hovered around $3 per gallon for more than a year, more drivers are taking the plunge to buy fuel-sipping compacts. The result, Ford says, is that sales of small cars and small crossover utility vehicles, such as the Honda CRV, are the only segments "positioned for near-term growth" in the U.S. Small- car sales here are expected to increase by 25% through 2012.
Also, car makers have come a long way in combating the bare-bones "econobox" image that long clung to compact cars. Many of the latest mini models are more attractive than their economy-car ancestors of the 1970s and 1980s. Models like the Nissan Motor Corp. Versa and the BMW AG Mini Cooper are stylish enough for people to buy them as fashion statements, not just badges of environmental awareness.
Auto makers, scrambling for new areas of potential sales growth, are responding by speeding up development of small models and trying to make them even more attractive to potential buyers. A Ford spokesman said the Verve concept car, which the company unveiled at the North American International Automobile Show in Detroit last month, has more interesting exterior styling and higher-quality interior materials than past small cars.
Car makers hope to use small, inexpensive cars to attract young first-time buyers to their brands. Auto makers are also wooing commuters and urban motorists who want high fuel mileage and easy parking from a car that is inexpensive but also stylish.
But small no longer means cheap. The coming Mini Clubman will cost almost $21,000, while the Smart starts at about $12,000, but better- equipped models are likely to cost a few thousand more, bringing it in line with prices for the more-substantial compact cars. BMW's compact 1-Series will start at about $29,000.
For some buyers, the cost seems steep. Sally England, a financial- services administrative assistant from Easton, Conn., says she has been interested in Daimler AG's Smart ever since she saw it during a trip to Europe in 2006. She says she plans to replace her 15-year-old Saturn sedan with one of the 40-mile-per-gallon two-seaters. But she finds the starting price a little high. It's close to that of more substantial cars like the Fit, Yaris and Versa that travel almost as far on a gallon of fuel but are more practical for highway use.
Ms. England says she hopes some early Smart buyers will be so uneasy with the car's size that they lose interest after a short time, allowing her to buy a slightly used one at a discount. "I may wait to see if some people turn them in after six months or a year," she says.
While traveling farther on a gallon of fuel is appealing, mini cars do have disadvantages. Their cabins are cramped compared with those of the SUVs many people are accustomed to driving. Since the little cars' engines are tuned to sip fuel, they often don't put out much power and can feel sluggish when accelerating into highway traffic. And, in an effort to make their cars more posh and powerful, auto makers often add luxury equipment and bigger engines, reducing the fuel-efficiency advantage.
The factor that is perhaps most likely to keep potential buyers away from mini cars is the worry that they won't hold up in a crash, particularly if they collide with a larger vehicle. A spokesman with the Insurance Institute for Highway Safety says the death rate for mini cars is 106 fatalities per million registered vehicles, more than double the 41 fatalities per million for very large models like the Lincoln Town Car.
Makers of small cars say the cars are designed to be as safe as possible in collisions. Smart's marketing tackles the crashworthiness question directly. Smart dealerships even have the fortwo's frame on display without body panels to show the "safety cell" where passengers sit and energy-absorbing bumpers called "crash boxes." The Smart hasn't been crash-tested yet, but the Insurance Institute plans to do so in the next month or two.
The Insurance Institute says cars in this category aren't good choices for drivers concerned mainly about safety. There are several fuel-efficient larger cars that offer far better occupant protection with only a small decrease in fuel efficiency.
"All cars have gotten safer, but you can't get away from the laws of physics," says Adrian Lund, president of the institute. "There's just less car there to protect you."
