The New 40mpg Target and Why Nobody Seems to Care

The new target for small cars seems to be 40mpg highway and several have made that goal, many without using hybrid power trains. So why don't these cars sell well?

by Aaron Turpen

The new benchmark for the small car segment is 40 miles per gallon (highway). A couple of years ago, the number was only in the realm of hybrids, but today's compact cars are very capable of hitting that mark and many do so.

In fact, even in the mid-sized family car market segment, our Top 5 Family Fuel Sippers for 2011 list featured three cars that make that 40mpg or better highway grade. In compact cars, there are even more.

Ford has four 40mpg+-capable cars, two of which are compacts (the Fiesta and the Focus). Neither of those are hybrids. The Hyundai Elantra, the Chevrolet Cruze, and others are also compacts capable of 40 miles per gallon or better.

So why aren't these cars selling?

The entire small car segment is less than robust in terms of sales. Even as vehicle sales rise overall, analysts are saying that the small car segment continues to decline. The fastest-growing segment is the much-maligned sport utility (SUV) and crossovers.

For the past year, sales of small cars like the Honda Fit, Toyota Yaris, several cars in the Scion and Suzuki brands, and other small vehicles have all dropped by 30% or more in the past year. Even hybrids are seeing a punch.

Many in the green automotive press blame gasoline prices for the lack of interest in small, fuel efficient cars. That's an easy scapegoat, however, that ignores fundamentals of the North American automotive market.

2011 Hyundai Elantra

The real culprit is not gas prices, it's marketing and perceived need.

The problem lies with consumer perceptions, marketing, and the needs of most car buyers. Reading most of the commentary in the green automotive press, one would assume that the majority of American car buyers are young, single, workday commuters. This group, of course, is perfectly suited to small cars. But this group doesn't make up the majority of Americans.

Most car buyers are middle-aged families with 4 members, one of which is probably in a child seat. The compact car is barely adequate for this family in terms of size and definitely won't be getting the touted 40mpg with all of those passengers in it.

Consumers expect more room in their cars ñ Americans have expected that since the beginning when Henry Ford rolled out his first black carriages. They also expect useful features, decent looks, and the ability to get an aging 6-foot frame in and out of the car with relative ease. None of that happens in a compact car.

Most vehicle marketing aims at the middle-aged, family segment. It's the largest market for automotive and the most lucrative. Watch any television station for any amount of time and nearly all of the car commercials you see will be touting mid-sized cars, SUVs, pickup trucks (usually quad-cabs), and the like. Very few compacts will be seen anywhere. The young, fresh out of college, ìsporty-compact-please" market is not currently buying and is, incidentally, the most unemployed of all Americans right now.

Of course, gas prices do play a role, but they aren't the major one. It's culture and marketing.

Proof is in the pudding. It's not just Americans.

The strongest-selling segments in Asia and Europe are also mid-sized and larger vehicles. Few of the established vehicle markets of the world have their main sales being in compacts and smaller cars, in fact. Yet in Asia and especially Europe, fuel prices are several times that of those we have in the U.S. and Canada.

Meanwhile, all market segments have shown vast improvement on all fronts in the past ten years. Safety, reliability, and fuel economy have all improved over the last decade. Since 1990, fuel efficiency in all light-duty vehicles (passenger cars, light trucks, etc.) has improved an average of about 14%. That's not insignificant. In fact, small cars have seen the least improvement overall with the majority of improvements going towards traditional ìgas guzzlers" like pickups and SUVs.

So the 40mpg target is a good aim and one that all manufacturers are aiming for, but with it being in sight for only the market's worst-selling segment, it's not going to have a big impact. Yet. It should be noted that mid-sized hybrids are gaining ground and breaking the 40mpg barrier.

Further, the most active and most-easily targeted segment, which are corporate fleets, have seen huge improvements in economy and incentives for continuing that improvement. This is especially true for alternative-fuel vehicles such as compressed natural gas, hybrid, and electric drive vehicles, which are selling much faster in the fleet sector than in retail.

This trend will likely continue as vehicle economy improves, first in the fleet and finally in the driveway.

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