Domestics spur small-car revolution
American automakers have vastly improved their small cars, and sales are up dramatically.
After decades of offering small cars that were at best mediocre, but often downright terrible, American automakers seem to have finally figured out how to do them right. Chevrolet and Ford saw compact-car sales surge in 2011. Now Chrysler is jumping into the fray with its all-new Dodge Dart, just unveiled at the 2012 North American International Auto Show in Detroit.
The 2013 Dodge Dart, which will go on sale in the second quarter, is the first car developed jointly by Chrysler and its parent company Fiat. It offers five trim levels, 12 exterior colors, 14 color and trim options, three engines and three transmissions. The attention to detail and craftsmanship inside and out is noticeable. Without even driving it, we're confident in saying that it's a much better product than the 1990 Dodge Omni — or even 2010 Dodge Caliber, for that matter.
Those older Dodges were developed when the prevailing approach of American automakers was to make small cars as cheap as possible, often at the expense of certain creature comforts. That approach has officially become obsolete. "The last 18 months is really where that has happened," says Kathy Graham, a Dodge spokeswoman. "Consumers do not want to sacrifice anything when downsizing from a large car."
Downsizing Without the Sacrifice
Sit in the back seat of a Dart and it's clear they don't have to anymore. The Dart has more rear-seat legroom than the larger Hyundai Sonata and Kia Optima, and more overall passenger volume than the Chevrolet Malibu, says Brian Cox, Dodge brand manager. The Malibu, Optima and Sonata are all midsize cars, whereas the Dart is classified as a compact.
Besides making interiors more accommodating, automakers are also stuffing small cars with more gadgets and gear than they did before — things such as heated seats, high-tech touch-screen systems, back-up cameras and peppy turbo-charged engines. The downside for consumers is that prices on compact cars have gone up.
Consumers don't seem to mind, however. In fact, they appear happy to pay more for a better car, at least where the Chevrolet Cruze is concerned. The Chevrolet Cruze replaced the compact Cobalt in 2010 and is a marked improvement over that model. Sales for the Cruze were up 81 percent in 2011 versus sales of Cobalt and Cruze combined in 2010.
What's more, the average price of a Cruze is more than $3,000 more than that of the Cobalt, which was a car with a cheaply made interior in the way of small cars past.
Ford is seeing similar success with its new Focus. Its price is up more than 25 percent since getting redesigned for the 2012 model year.
Adopting a European Mindset
"Overall, the theme is you don't have to be embarrassed to drive a small car anymore," says Tim Barnes, director of product planning and strategy at Mazda USA. "It's a very European mentality." Small premium cars have long been popular in Europe, where high fuel taxes and narrow roads make them appealing.
Thus far, MINI has owned the premium small-car space. Given the increased competition in the compact-car segment, MINI has held the line on pricing, says Patrick McKenna, manager of product planning for MINI USA. It raised prices on MINI Cooper models last July by $100, when the new model year clicked over. But it made floor mats standard, which are a $100 option, he say. "So basically, the price stayed the same."
Keeping costs low is not MINI's main strategy, though. It sells cars on the virtue of their driving performance, unique design and high build quality. The fact that the MINI Cooper gets cross-shopped with the BMW 3-Series proves that consumers see it as a premium product, McKenna says.
Value Is Key
Brands such as Chrysler and Mazda are under more pressure than MINI in terms of creating a good value. That is turning into a tricky proposition: Loading up compact cars with enough features to attract buyers looking to downsize often pushes their price point into midsize car territory. "That's a real challenge," Mazda's Barnes says.
To overcome that, automakers are using dramatic design. Styling is an important factor for customers considering the Mazda3, the company's compact offering, Barnes says. Even though consumers might be able to get a larger Mazda6 sedan, minus a couple of amenities, for about the same price as the compact Mazda3, they don't get the slick look.
Size Does Matter
Still, there is a limit to how small American consumers are willing to go — and in that regard, they are decidedly un-European in their tastes. Cars the size of the tiny Mazda2, which went on sale in the U.S. last year, are hugely popular in Europe. But in the U.S., Mazda sells five or six compact Mazda3's for every subcompact Mazda2, Barnes says, and it's mostly first-time car buyers who go for the smaller Mazda2. It just goes to show that size is relative: A compact Mazda3, which most Americans would say is small, is considered rather large in other countries.
But given American tastes, Barnes sees much of the downsizing happening with consumers going from a midsize car to a compact. He says he doesn't expect the subcompact segment to pick up significantly. "I see the compact segment growing. It offers the best of both worlds," he says, referring to fact that many compact cars now offer the interior space of a midsize car in a smaller, more efficient package. "It's a better compromise for everybody."
Soon, the cheapo small cars of yesteryear will be but a distant — painful — memory.
Matthew de Paula wanted to be an automotive journalist ever since reading his first car magazine in grade school. After a brief stint writing about finance, he helped launch ForbesAutos.com and became the site's editor in 2006. Matthew now freelances for various outlets.
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With gas prices oscillating in the three to four dollar range, an economy that has cut our net worth and jobs that are more likely to lead to a pay cut rather than a pay raise it appears the author thinks people are buying cheap cars for their quality.
What a country we live in.
We have been promised so many times about a quality built, Chrysler car and have come up empty. Now they teamed up with a foreign company Fiat to come up with the Dart. I know things change, but this is the same Fiat , that in the 70's and 80's manufactered cars that were not only fun to drive , but broke down on american roads but a furtune to fix?
The new 2013 Dodge Dart looks interesting, but in order to convince consumers of it's improved reliability perhaps all the domestic manufacturers should offer warranties that match Hyundai & KIA's 10yr 100,000 miles.