Is Small The Answer?

It's all you seem to hear about these days, consumers rushing to buy small cars, while big trucks and SUVs languish on dealer lots. "The SUV is dead," some have declared. From my perspective I think that such comments are a bit premature. Read the rest of the blog to see what I'm getting at...

Across the US and Canada last week, the oil companies saw fit to raise prices, by up to 25 cents a gallon in some places, blaming it on Hurricane Ike which caused them to shut down some of their platforms in the Gulf of Mexico. And it seems this year, the sheer guile and greed of the oil companies has been unprecedented, considering that when demand softens, it seemingly takes forever for the price of fuel.

Now I'm not about to go off on a rant against the oil companies, but this price gouging has had quite an effect on our car buying habits. Everywhere you go, dealers have got MPG signs posted on their lots. One concessionaire, not too far from where I live has put his hybrids right out front, lining the lot with big signs advertising their rated fuel economy numbers in big letters on the doors - smart move. There are those in the automotive media who believe small cars are the future in this country. I'm not so sure. Back in the 1973-74 when OPEC shut off the taps and there was a fuel shortage (here that Exxon Mobil?) buyers did indeed gravitate toward smaller vehicles, but on the whole it was largely temporary, by 1976, most were back to buying big cars again.

In 1979 another fuel crisis happened, but again, demand for small cars didn't last. In the last two decades, as the price of oil fell, it was pick up trucks and SUVs that the public wanted, to the point that in many cases trucks were outselling cars by two to one. Compare sales of the Ford F series to the best selling car in America in the 1990s and you'll see the figures were almost double. So now that small cars are apparently in, have we changed our vehicle buying habits for good? I don't think so. Most North Americans I've met don't like small cars. Out on the road they don't feel safe. Stats published by the National Highway Traffic Safety Administration have proved time and again, that in accident, the occupants of a smaller car are time and again likely to come off far worse than those in a larger vehicle. Most of the car companies don't like small cars either, since the profit margins on them are slim at best and even on the used market, small cars tend to bring in less money, since being cheaper and less durable, often wear out more quickly than larger vehicles. So it seems that right now, their only trump card is fuel economy. And if the price of fuel were to drop again, you'd likely see a major swing back to larger vehicles. I think the problem is that in North America, unlike Europe, we don't live in a small car culture and the best strategy an automaker can come up with in our market is to make large, efficient vehicles. In the current economic climate, it looks like now, more than ever they've got a serious incentive to do it.