Gas cost fuels rise in subcompacts

Automakers to launch new models selling for $10,000 to $12,000

December 24, 2005|By DETROIT FREE PRESS

DETROIT -- The next big thing in cars is, well, small.

General Motors Corp., Nissan Motor Co., Toyota Motor Co. and Honda Motor Corp. are among major automakers planning on launching new subcompact cars next year that deliver high fuel economy and some unexpected features at an affordable price of about $10,000 to $12,000.

With gas prices over $2 a gallon, many drivers are willing to give up space and comfort for economy. For the first time since 1981, cars are outselling the combined results of pickups, sport utility vehicles and minivans. And if gas prices again reach or even pass this summer's $3 a gallon, the trickle of subcompact car buyers could become a rush.

Car buyers may also be lured to the new subcompacts by something they can't get with used cars - a new car warranty and the latest features and gadgets, said Edward J. Peper Jr., Chevrolet's general manager.

"Urban areas are getting more congested, making small cars more practical," he said.

Make no mistake; these cars aren't the spartan, entry-level cars of years past. Many are larger and offer features that, until recently, were found only on luxury models.

"They're not econoboxes anymore," said Joe Phillippi, principal of AutoTrends Consulting in Short Hills, N.J. "These cars increasingly are no longer what we would call entry-level."

The all-new Chevrolet Aveo, to be unveiled at the Greater Los Angeles Auto Show in early January, will feature as standard equipment a radio input jack for iPod music players, adjustable front headrests, seat-mounted side-impact air bags and dual-stage front air bags.

Optional features include a power sunroof, six-CD changer sound system, steering-wheel mounted audio and cruise control, chrome door handles and heated and power foldaway outside mirrors.

The new Aveo, which will go on sale in U.S. dealerships in May or June, arrives just 2 1/2 years after Chevrolet introduced the subcompact in November 2003.

An Aveo with a manual transmission gets 27 miles a gallon in the city and 35 on the highway.

Peper said the Korean-made Aveo now accounts for 40 percent of U.S. sales in the subcompact segment, and 75 percent of its buyers are new to GM.

But it will face more competition next year when other models - all with equally offbeat names - arrive on the market.

While car buyers in Europe and Japan already are familiar with many of the new subcompacts, high gas prices are now making them an option in the U.S.

Next spring, Toyota is to begin selling the Yaris subcompact, a replacement for the poor-selling Echo. The Echo's bland styling has hampered its sales since it arrived in 1999.

Honda will expand its lineup next year with the new Fit subcompact car. Honda's new Civic small car has grown larger, with more features, making room in the lineup for the more diminutive Fit.

And Nissan's new Versa - short for versatility - will go on sale in June or July next year. "The timing is good because, while fuel prices have stabilized, it's still on people's minds," said Jed Connelly, senior vice president of sales and marketing for Nissan North America.

All the new choices could help the segment grow as much as 5 percent to 6 percent, Chevrolet's Peper said.

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