US car market

Big is beautiful

Big is beautiful! is Timothy Roth’s personal credo. The electrical engineer from Pensacola, Florida maintains a lifestyle in keeping with the extra-large dimensions of the American middle class. His spacious, fully air-conditioned detached house, his sailboat in the Gulf of Mexico and his Ford F-150 in the garage also represent parts of this lifestyle. The impressive pickup truck is the pride of the family of four: a 5.4-liter engine, eight cylinders, 235 hp – it is teeming with power for highway cruising and trips to the Wal-Mart next door. Only occasionally does Roth use a smaller vehicle. “On the go-kart track in the amusement park,” he says with a grin.

Market shares shifted by the crisis

But even in the land of opportunity, public awareness of climate change and the finite nature of fossil fuels has been continually growing. The implementation of nation-wide upper limits for fuel consumption and CO2 emissions, known as the Corporate Average Fuel Economy (CAFE, the salesweighted average of fuel consumption), is pushing Americans to drive smaller cars.

Several vehicle manufacturers are reacting to the national guidelines by developing vans and SUVs that can circumvent the strict upper limits of consumption on account of their classification as trucks. In 2009, the Obama Administration promised that it will, from 2011 onwards, annually raise the CAFE requirements by three to six percent. For this reason, the manufacturers have to accept the widespread consumption restrictions of approximately 5 liters per 100 km (47 mpg) by 2017 and 3.8 liters per 100 km by 2025 (60 mpg).

Slowly rethinking

By now, the idea of mobility in the US is transforming above and beyond such legislative guidelines. In spring and summer 2008, fuel prices also rose due to high fuel consumption and crude oil speculations estimated at more than €3 per gallon. At that point many US citizens parted from their SUVs – often reselling them for lower than market prices – and replaced them with smaller cars or “crossover models.” The global financial crisis in the fall of the same year allowed crude oil prices to sink drastically, but the job market also collapsed at the same time. Many Americans sold their cars, big and small alike.

Currently, in a phase of increasing fuel prices, the new trend is called “downsizing” – at least in terms of the engine: “A record-breaking 43 percent of all of the registered new cars have a four-cylinder engine,” reports the Financial Times from the Detroit Auto Show. Ten years ago it was exactly half of that. The amount of the newly sold vehicles with eight-cylinder engines decreased from about 30 to 20 percent of the market share during the same time period. Since 2008, the sixcylinder engines, well known best sellers in the US, have been reintegrated after sales of four-cylinder engines. In 2009, only every third car had six combustion chambers in its engine.

Ambitious goals

Against this backdrop, progress should continue in this direction in the small car sector. “In the small car sector there are 350 models worldwide sold under 90 different brand names. In 2010 we are expecting a total of 16 million new registrations. The position of the US is less promising.” Miller is Vice President for Marketing & Industry Analysis at Polk, a consulting firm for automotive businesses in Southfield, Michigan. Car experts know all too well that the attitudes of people like Timothy Roth are very tenacious, at least until fuel costs rise and driving around in their beloved gas guzzlers becomes painfully expensive. However, car expert Hughes is optimistic: “The auto industry is in an exciting place right now. Never before have there been so many promising products. It’s the best time for innovative companies.” Their challenge will be to change and broaden the perspectives of customers like Timothy Roth: big is beautiful, but smaller is smarter.