That is true, but it is also true that all carmakers need to sell their small cars for reasonable prices–even if it leaves little or no profit margin–in order to get younger drivers to buy them.
Many studies over the years have shown that if a young car owner really likes his/her first new car, he/she is more likely to be a loyal buyer of that brand in the future.
And, as their income grows over the years, then those buyers will be more likely to buy that carmaker’s more expensive models, all of which have a significant profit margin.
It’s amazing how Toyota , Nissan and Honda became the monster companies they are with nothing but small cars. Obviously you can make a profit selling small cars But it’s harder - and very easy to start depending on the larger vehicles for profit.
Mercedes owns Smart Car and will push those to meet the Corporate Average Fuel Economy (CAFE) standards since most of their vehicles are higher powered and are not economy cars… Agree with Mike that Japanese and Korean companies make excellent small cars at a profit. It’s just more difficult and really requires world class management and engineering to achieve.
So we agree that its the CAFE standards from DC that are causing a production change that otherwise would not happen?
Absolutely.
Have you noticed even Toyota, Nissan, and Honda have added large profitable vehicles to their lineups?
Honda has the Ridgeline, Nissan has the Titan, and Toyota has several vehicles that would qualify as large profit-makers.
It’s certainly a factor, but auto production doesn’t happen in a vacuum. Factories and corporations interact with many aspects of their environment. The regulatory environment is just one factor in the decision.
But their bread and butter are still mid to small size vehicles
Toyota, Honda, and Nissan now sell more trucks/SUVs/CUVs than they do cars (last month, getting about even for the year):
http://online.wsj.com/mdc/public/page/2_3022-autosales.html
…and in addition, even their small and midsize models have gotten larger over the years. What I would call a small economy two- or three-door hatchback has become a lot harder to find.
I doubt if enough Smart cars are being sold to have much effect on anything.
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I agree with you. I was pointing out that manufacturers can’t just raise the price so these cars at least break even. Yes, you must have an entry level car, even if you don’t make much on it.
That said, I don’t think the “I bought my first car from X so I’ll always buy X” really works anymore. Younger buyers are far less brand loyal that baby boomers or boomers parents. That first car can sure make a BAD impression, though. “My X was always in the shop so I won’t EVER buy an X again, and I’ll tell all my friends on FB” Social media can tank a car maker’s reputaion very, very quickly.
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Toyota has Lexus, Honda had Acura, Nissan has Infinity and now Hyundai has Genesis.
…and Mazda “had” Amati, until they pulled the plug at the last minute.
The Mazda Millenia (how can one car have a plural name??) was originally supposed to be the first model from Mazda’s luxury level marque, Amati.
VDC-Just curious, could you mean the short lived Kia Amanti ? Which by the way was a really nice reasonably priced vehicle.
Nope, Mazda was going to have a separate line called ‘Amati’. I had forgotten about that…
And most make trucks which is where significant profit can be had…
Small to mid size vehicles sell extremely in South America. Obviously Cafe numbers have nothing to do with those sales. They wouldn’t be in those markets if they weren’t making money.
Ahem, sales in South America though have nothing to do with meeting the US fleet CAFE standards. Sure small cars sell well in other places but in the US its another matter. We have thousands of miles of open Interstate and they are well traveled. Not very comfortable in a buzz box.
Long ago, I gave up on the thought that most other people had as good a memory as I do, but I must have temporarily ignored that reality…
…and…