U.S. Automakers and Consumers Thinking “Small”

General Motors, Ford Motor, and Chrysler were outsold for the first time by Asian automakers in May, the New York Times reports. Ten Asian manufacturers, including Toyota Motor and Honda, achieved a market share of 48.1 percent, while the 3 Detroit automakers combined for only 44.4 percent, a record low.

In addition, the Honda Civic, a compact car of which there are both gasoline and hybrid models, was the month’s top-selling vehicle, marking the first time a sedan has had higher sales than a truck in the United States since December 1992. Sales of the Ford F-Series pickup truck, previously the top seller, declined sharply, dropping 33 percent.

We can anticipate policy implications from this expansion of small car sales as well. According to the Hypermiler blog of the Daily Green,

The new 35 MPG by 2020 CAFE standards are going to be much more attainable with the economy driving fuel-efficient vehicles sales. Not only will fuel efficiency standards be easier to implement, but with automakers trying to capitalize on high-MPG subcompacts, they are likely to cut back on some of the fervent opposition they have shown to fuel economy regulation.

On the other hand, notes the Wired blog Autopia, declining sales in larger vehicles will likely force manufacturers to raise prices on smaller cars. Mark LaNeve, the marketing chief of GM, stated that the company will have to find some way to increase revenue, either by increasing MSRPs, reducing incentives, or adding higher transaction prices.

While the sales trends are certainly reflective of the country’s aches and pains over skyrocketing gas prices, the International Herald Tribune sees the silver lining, pointing out that American consumers have demonstrated their flexibility and shown that they can adapt to new prices without "turning their lives upside down."

The country should begin to see more hybrid and alternative fuel vehicles coming out of Detroit: GM’s board, for example, approved plans for the production of the Chevrolet Volt, which will be powered by batteries accompanied by a small gasoline engine. Over time, perhaps U.S. roads will begin to resemble those of Europe, where smaller cars have long been the norm due to even higher fuel prices. For more information about these automotive trends, and news about how car makers in Europe are also going greener, check out coverage by the Financial Times.