Business Week recently published a great article about the U.S. car industry. “Automakers Go on the Small-Car Offensive” asks some provocative and important questions. What will happen to GM and Ford’s nine new small car models “without the incentives of high gas prices and Federal subsidies?”
Interesting proposition to contemplate. After all, we Americans like full size sedans, station wagons, hybrids and SUVs. Given this economy, fewer discretionary dollars, undulating gas prices and a Federal government’s recent Cash for Clunkers program, small cars are selling. But for how long?
As the article states: “And what happens when high gas prices or government handouts go away? Americans buy what they want.” Exactly.
Since vehicle designs must be planned three or four years out, and increased fuel efficiency is required by the government, the question is: will the Big Three be able to roll out the cars Americans really want to buy? Or will the decisions being made today force more of us to purchase foreign cars than ever before? These are important questions.
Here’s the kicker: in spite of the fact the government is pushing small cars, gas prices can fluctuate wildly and incentives are being given to consumers to go smaller: Americans don’t like small cars. This is a classic marketing case study in the making. Give the consumer what they want and they will buy. Give the consumer what you want to make and have them buy and good luck!
Take a gander at this telling part of the article: “Carmakers badly want to believe that Americans like small cars. Eric Noble, president of the CarLab, a consulting firm in Orange California, says several European and Asian carmakers have hired him to do consumer research on small-car demand. When consumers gave them the thumbs-down, the clients asked him to rewrite the questions to see if that would change the result. It didn’t”.
The American consumer’s view:
- Small cars are unsafe.
- Small cars are for people who can’t afford better cars.
- Small cars don’t offer the power, space and cargo room of family sedans and SUVs.
The American car manufacturer’s response:
- During the recent Cash for Clunkers program, carmakers spent “about $1,900 per compact to help spur sales”.
- Carmakers are loading small models “with creature comforts and technology in hopes of winning customers and charging them a premium.” So much for the cheap compact car.
- More and more investment is being made in rolling out smaller cars. By 2013, all American and foreign compacts combined will total 600,000 cars in a market where 2.5 million are sold.
- What kinds of incentives would be required for you to purchase a small car?
- Since fuel efficiency continues to increase, do you think it unwise for American carmakers to push smaller cars when consumers clearly demonstrate they want to purchase family sedans and SUVs?
- What do you think will ultimately happen to the U.S. carmakers if they don’t make the kinds of vehicles most consumers want to buy?
I’d love to hear from you.