Chevy Sonic-to-Fiat 500 Surge in Big Year for Small Cars

Source: Chrysler Group LLC via Bloomberg

A 2012 Fiat 500. Close

A 2012 Fiat 500.

Close
Open
Source: Chrysler Group LLC via Bloomberg

A 2012 Fiat 500.

Small cars are selling big for brands from Chevrolet and Fiat to Toyota, Volkswagen and Honda, on pace to capture the largest share of the U.S. auto market since 1993 and driving the best sales month in four years.

High gasoline prices coupled with the best crop of compact and subcompact cars that the market has ever seen drove a 50 percent increase in sales of small sedans, coupes and wagons last month. Diminutive models were huge for almost every automaker, accounting for one in five sales for the first time in more than three years.

While Toyota Motor Corp. (7203) and Honda Motor Co. (7267) models still lead the pack, U.S. automakers proved they can wow shoppers, too. General Motors Co. (GM)’s Chevy won the subcompact and compact segments last month with its Sonic and Cruze, Ford Motor Co. delivered more small cars than in any September in a decade, and Chrysler Group LLC’s Fiat brand set a second straight monthly record.

“These cars that a while back were perceived as econo- boxes now come standard in some cases with 10 airbags and all the other features available in bigger, more expensive cars,” Tom Libby, an analyst at R.L. Polk & Co., said in a telephone interview. “Whether it’s the Civic or the Focus or the Sonic or whatever, everybody agrees these are much, much better cars with more integrity than their predecessors.”

20% Share

Sales of cars such as Ford’s Focus and smaller jumped 50 percent in September to 240,288, the biggest increase among vehicle segments, according to Autodata Corp. The small-car market made up 20.2 percent of deliveries in the month, the most since August and July 2009, when smaller vehicles benefited from the U.S.’s “cash for clunkers” trade-in program.

At this rate, 2012 may be the year of the small car. The segment accounted for 19.3 percent of the U.S. market through September. The last year that small cars held a greater share of the U.S. industry was in 1993, when the segment was 20.5 percent of the market, Autodata said.

“Traditionally small cars were purchased by people who couldn’t afford anything else,” said Jesse Toprak, an industry analyst for TrueCar.com, a vehicle pricing and data company. “Right now, that’s not the case. We see people choosing them because they find them more appealing.”

Deliveries of Detroit-based GM’s Chevy Cruze jumped 42 percent to 25,787 last month, topping the year-to-date leader, Honda’s Civic. In its first full year on the market, Chevy’s Sonic is running away with the subcompact segment previously led by Ford’s Fiesta and Honda’s Fit. Sonic deliveries more than quintupled in September, leading GM’s 97 percent surge in small-car sales for the month from a year earlier.

Chevy’s Lineup

“Chevrolet has a pretty competitive lineup now when you go from the micro car to the subcompact to the compact,” said Libby, the Polk analyst in Southfield, Michigan. “That tends to create a synergy where they feed off each other.”

Ford delivered 91 percent more Focus compacts and introduced its new C-Max hybrid last month. Sales of those models plus the Fiesta subcompact climbed to 24,628, the best September for the Dearborn, Michigan-based automaker’s small cars since 2002. That year, the industry sold at least 15 percent more cars and trucks than analysts estimate for 2012.

Amanda Rinker was one of Ford’s 19,736 Focus buyers last month. When the 24-year-old freelance writer and editor set out to replace her Ford Fusion sedan, she and her husband wanted more features such as a touch-screen with navigation and satellite radio. And they wanted to save at the pump when taking trips to the beach from their home in San Antonio to Port Aransas, Texas, about three hours away.

Gas Prices

“Mostly it was gas prices that really took us to a smaller car,” Rinker said in a telephone interview. “We can afford more luxury in a smaller car. Bigger cars cost more money and more features cost more money as well. To afford another monthly payment, we dropped down to the Focus.”

Honda and Toyota, rebounding from car shortages at this time a year ago tied to Japan’s tsunami, increased sales of their bellwethers Civic by 57 percent and Corolla by 43 percent.

“It’s cool and hip right now to be frugal,” said Tamara Darvish, vice president of Darcars Automotive Group in Silver Spring, Maryland, which owns seven Toyota and Scion franchises. “Consumers are thinking much more logically than emotionally compared to how they did in the past.”

Deliveries for Fuji Heavy Industries Ltd. (7270)’s Subaru Impreza models soared 82 percent. The Impreza, unveiled earlier this year at the New York International Auto Show, is one of more than 25 small-car models that automakers redesigned or introduced as new since 2011, according to Polk.

Dart’s Climb

Chrysler’s Dodge Dart, which began rolling into dealerships in July, was initially available only with manual transmissions. With shipments ramping up and models with automatics now becoming more available, deliveries climbed 72 percent from August to 5,235 last month.

The Fiat 500, a disappointment last year for Chrysler and Fiat SpA (F) Chief Executive Officer Sergio Marchionne, set a record for the second month in a row, with sales surging 51 percent to 4,176 in September.

Demand for small cars, as with gasoline-electric hybrids, tends to rise and fall based on fuel prices. A gallon of regular gasoline cost an average of $3.782 at the end of last month, up 10 percent from $3.433 a year ago, according to AAA’s Daily Fuel Gauge report. The price last month peaked at $3.871 on Sept. 13, 5.9 percent below the record $4.114 set in 2008.

“With higher fuel prices at the beginning of September, the small-car segment moved to just over 23 percent of the overall industry, with much of the strength at the end of August flowing through to the first half of September,” Erich Merkle, Ford’s sales analyst said Oct. 2 on a conference call.

California Gains

In California, the biggest U.S. auto market, gasoline stayed above $4 throughout September following a refinery fire Aug. 6 that reduced supplies in the most populous U.S. state. Prices have continued to rise, reaching $4.655 yesterday.

Just as the case was for the national market, Ford’s small- car deliveries in California were the company’s best in a decade, Merkle said.

“That is where we have been making our gains, starting with Fiesta, followed by the new Fusion and we are just now starting sale of C-MAX,” Merkle said in an e-mail.

Volkswagen AG (VOW)’s Beetle, redesigned in 2011, more than tripled its September sales of a year earlier. The automaker has delivered 21,566 of them this year, compared to 924 in 2011’s first nine months. Wolfsburg, Germany-based VW also placed its Jetta 18th in sales among all vehicles last month.

Sales of Kia Motors Corp. (000270)’s Rio, which also returned to the market as a revamped model last year, surged in September to 3,171 from 190. The automaker also delivered 42 percent more Soul wagons and 27 percent additional Forte compacts than a year ago.

“Small cars were unseasonably strong in September, trucks were unseasonably weak, and gas prices were a part of this,” said Toprak, the analyst at Santa Monica, California-based TrueCar. “It’s also the products that are propelling demand. They are more appealing and there are some strong new models.”

To contact the reporters on this story: Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net; Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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