Smaller car trend
July 16th, 2009 by Richard Aucock
CAR buyers are choosing smaller cars, due to economic and environmental pressures, plus scrappage incentives.
JATO Consult has clear evidence of the trend, following an extensive study into the market.
Car manufacturers are responding to such downsizing by offering higher-specification models, in order to retain profit margins for car dealers. Buyers switching from larger models are also demanding smaller models with more features.
‘The likes of MINI and Fiat are the leading examples of how manufacturers can take advantage of market trends,’ said David Di Girolamo, head of JATO Consult.
‘They have both made small, cheaper to run cars into desirable fashion accessories, and consumers are spending considerable sums of money buying high-specification versions.’
MINI owner BMW drew special praise from JATO, as an example of a car brand that’s responded to changing market conditions. The 1 Series has brought in new customers, while EfficientDynamics technology has made the larger cars acceptable to a wider pool of eco-conscious buyers.
This means the trend for smaller cars is not the bad news some car dealers may fear. Manufactures have raised real terms’ list prices since 2003, meaning higher profits per model.
But, to justify this in customers’ eyes, cars are better value for money, with increased quality, space, safety and specification. In short, car buyers are more willing to pay the premiums, as the cars are better.
‘These cars satisfy the need for consumers to be buying smaller, more economic cars, yet still deliver the manufacturers a healthy profit, which hasn’t always been possible with small cars’, added Di Girolamo.
‘Our report comes at an interesting time. Taxation, incentives and European legislation are all affecting model specifications and buying habits, whilst the economic crisis is putting more pressure than ever on both company and household budgets.’