QOTD: Did Wealthy Buyers Kill Small Cars?
An economist took to The New York Times to argue that the inexpensive small car was killed by wealthy buyers.
Conventional wisdom, of course, has held that automakers, particularly the Detroit Three, have disdained small cars because SUVs and pickup trucks, particularly those that use body-on-frame platforms, are cheaper to build and popular with American buyers. This makes them more profitable.
The author, Clifford Winston, acknowledges this, but he suggests there are other causes, too. He blames protectionist policies from both Democratic and Republican administrations, plus a desire on the part of automakers to cater to buyers who could afford luxury vehicles -- especially luxury trucks and SUVs.
Winston suggests that in order to get the industry, including foreign automakers, to start selling affordable cars again, tariffs must go away and the market must be opened to the Chinese -- with restrictions in place to keep the Chinese from undercutting competition with unfair practices.
The whole piece is worth a read. What say you -- is Winston correct? Or is it more simple than that -- is it just that certain types of cars simply cost less to build and are in more demand? Or is it a combination of things?
Sound off below.
[Image: Hyundai]
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Tim Healey grew up around the auto-parts business and has always had a love for cars — his parents joke his first word was “‘Vette”. Despite this, he wanted to pursue a career in sports writing but he ended up falling semi-accidentally into the automotive-journalism industry, first at Consumer Guide Automotive and later at Web2Carz.com. He also worked as an industry analyst at Mintel Group and freelanced for About.com, CarFax, Vehix.com, High Gear Media, Torque News, FutureCar.com, Cars.com, among others, and of course Vertical Scope sites such as AutoGuide.com, Off-Road.com, and HybridCars.com. He’s an urbanite and as such, doesn’t need a daily driver, but if he had one, it would be compact, sporty, and have a manual transmission.
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Wealthy buyers are going to continue to buy what they want/can afford - 3-row CUVs/SUVs and full size pick ups.
Problem is that the typical American buyer were never really interested in anything smaller than a compact (see Venue and Kona sales volume Tucson, Santa Fe and Palisade sales), and would rather purchase a compact or larger (usually CUV or SUV) used over a new smaller vehicle.
These lower volumes make it more difficult for automakers to turn a profit by building in the US, as US production makes it too expensive to export.
That's why so many automakers build their small, lower margin models in Mexico.
Not only is Mexico a large market for these types of vehicles, Mexico also has numerous FTAs which allows automakers to further increase economies of scale.
Replicating tooling just for the US market makes no sense financially.
It’s not the wealthy, it’s the spoiled. I started driving in late 70’s. Getting out on my own I was expected and willing to buy bare bones. Gen X,Y,Z will never accept bare bones at anything. My first car with AC was late 80’s. First automatic transmission was mid 90’s. I have only owned 3 new vehicles as my personal vehicle. All pickups. For my wife’s retirement I got her our first everything on it luxury vehicle to travel with. I still drive a 12yr old 1 step above the bottom Tundra. Trust me, I can afford anything I want. Frugal wins but doesn’t get you clicks on social media. No one forces you to buy more than you need.