The situation is such that automakers have figured out that selling fewer but more expensive cars is more profitable and also, there is a chip shortage and new car inventory is down and also gas prices are very high and also automakers have largely abandoned the small car market. What gives?
The moment is different than in 2008, when gas prices were sky high and small cars were all the rage, because American automakers were in crisis back then and open to ideas and some in need of a government bailout. Chrysler, even, floated ambitious electric car plans back then before it didn’t. The mood was that EVs and small cars were the play, and Hummer was not, because that is what the market demanded, and the car companies weren’t making money anyway.
The situation, now, is that the many car companies are making money, and they’re doing that by not selling small cars, even though the price of gas is very high and, in theory, there should be a demand for smaller, more fuel-efficient cars. The problem with that, though, is that bigger cars in 2022 are more fuel-efficient than they were in 2008, so there is less pressure on automakers to go small, because a base Ford F-150 gets 25 mpg combined in 2022, and it got 16 mpg in 2008, when a Honda Fit got 30.
That is to say that there is also less pressure now to go small for consumers, while dealers and automakers can pretend that a massive shift to EVs is imminent. Inventory, in any case, is the most immediate issue, as people are buying anything they can get. The Wall Street Journal had a look on Sunday at the situation:
Typically a $2-a-gallon jump in gasoline price is enough to alter consumer behavior, but in today’s market, it is tough to quantify that change, said Jay Joseph, vice president of marketing and consumer experience at American Honda Motor Co.
“We’re not seeing a true open market,” Mr. Joseph said. “If we had cars on the ground, I think we would see a temporary shift to passenger cars right now. But there is no supply of anything.”
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“Even if you do get something that is a little bit larger, it is more fuel efficient than it was back then,” said Jessica Caldwell, an auto analyst at Edmunds.
Some car companies, such as Honda, Toyota Motor Corp. TM +2.51% and Hyundai Motor Co. , are better positioned to accommodate buyers looking for better fuel economy, mostly because they have stuck to their small-car and sedan offerings. The challenge is they don’t have many in stock, she added.
The WSJ also quotes a dealer who says that high gas prices are helping people become aware of EVs, which, great, but also most people can’t afford to buy a new EV, because they are too expensive in America, even with government subsidies.
Anyway, consider a Mitsubishi Mirage as your next automotive purchase, if you can find one, because it might be the worst time in history to be in the market for a small, fuel-efficient car. Or at least a small car with modern safety standards. And, sure, the death of small cars will only be final when the BMW 3 Series goes away, but that car is as affordable as an EV. Small cars may or may not make a comeback in America, but we sure could use it.