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Entry Level Car Segment Stumbles




With the ongoing focus on reducing dependence on Middle East oil and reversing climate change, it seems like a no-brainer that small cars are becoming more and more popular.  The only problem is that this is not as clear-cut as you might think. The entry level car segment (sometimes called the subcompact segment), whose products are sized and priced under the compact sedan segment that includes the Civic, Corolla, and Focus, etc., saw dramatic growth from 2005 to 2008, with its share of the industry more than doubling to 4.31% in 2008. That year played right in to the hands of this segment with the spring 2008 dramatic jump in gas prices to more than $4 a gallon.



However, since then entry level vehicles have lost share, and the segment now accounts for less than 3% of all new vehicle retail registrations, according to Polk registration data April 2010 CYTD. The segment's current share of 2.88% is almost a half point less than a year ago. While the entire new vehicle industry is up almost 10% in 2010, this segment is down 4%. The segment-leading Versa has enjoyed dramatic growth, but the other volume leaders, Fit and Yaris, are both down in double-digits. The Scion models are also suffering double-digit drops, and the G3 has been discontinued along with the entire Pontiac make.

The picture is not as bleak as one might think. It needs to be mentioned that the small vehicle arena is fragmenting, and there are other portions of it that are showing growth. Minicars (including the smart fortwo), entry level crossovers (including the Kia Rondo, Scion xB, Kia Soul and Nissan Cube), and the compact sedan segment (including  the upcoming Chevrolet Cruze and Volt and the Ford Focus, among others) are other areas of the small vehicle industry, and these categories generally are enjoying substantial new product activity and growth. 

Furthermore, the entry level car segment will soon be getting two major additions in the Ford Fiesta and Fiat 500, and these should help to reverse the declines mentioned above.  

Posted by Tom Libby, PolkInsight Advisor, Polk (07.29.2010)


About The Author

Tom currently uses his passion for the auto industry to serve as a Solutions Consultant for IHS Automotive's Loyalty Practice. His past roles here include Sr. Forecasting Analyst and PolkInsight Advisor (he worked for two years in Polk’s Woodcliff Lake, New Jersey office). Tom's other interests include reading, gardening, sailing and running. Aside from Detroit and New York, Tom has also lived in Los Angeles, Denver, and Boston, where he drove a taxi for two years. Tom has also traveled extensively in the United States and overseas, including an overland trip across Asia after graduating from college. Tom is inspired by people who practice what they preach and enjoys socializing with friends that he's met throughout his career and from school.

Tom is a past member of the Board of Directors of the Society of Automotive Analysts (SAA). During the 2009 calendar year, Tom was President of that organization. He is an active member of the Automotive Press Association, and in the past has written a blog for the online version of the Detroit Free Press. Tom has a bachelor's degree in history from Amherst College, an MBA with a marketing concentration from Columbia University and once served as an Adjunct Professor of Market Research at Pepperdine University in Malibu, California.


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