All Small Cars Are Not Created Equal

Compacts and subcompacts are up 40% in 2008. But in the long run, more than size will matter

by Michael Frank

American car buyers are quickly shifting to much smaller, more fuel-efficient models. But according to studies of initial quality done by J.D. Power & Associates, buyers aren't targeting just high fuel economy. Close behind gas mileage is a desire for reliability, followed narrowly by workmanship. If you don't believe the studies, the proof is in the high-mileage cars that are the hottest, and those that are laggards.

Here's a list of 18 sub-$20,000 compacts and subcompacts (save the Toyota Prius (BusinessWeek.com, 6/6/08), which nudges through the $20k barrier). Data listed are the manufacturer's suggest retail price (MSRP), fuel economy (city/highway), and the EPA's measure of annual fuel cost (all figures are for lowest-cost models and manual shift unless the automatic gets superior mileage). The last stat is the percentage increase or decline in sales through six months this year.

SALES WINNERS

Honda Fit $13,950; 28/34; $1,991; +67%

Toyota Yaris $11,550; 29/36; $1,930; +39%

Scion xB $15,650; 22/28; $2,571; +39%

Mini Cooper $18,050; 28/37; $2,038; +33%

Pontiac Vibe $15,310; 26/33; $2,127; +28%

Ford Focus $14,755; 24/35; $2,201; +27%

Nissan Versa 1.8S; $12,980; 27/33: $2,127; +20%

Chevy Cobalt $14,410; 22/30; $2,604; +19%

Honda Civic: $14,810; 26/34; $2,536; +19%

Kia Spectra $12,895; 23/30; $2,374; +15%

SALES LOSERS

Pontiac G5 $15,675; 25/35; $2,127; -4%

Mazda 3i $13,895 24/32; $2,281; -1.8%

Chevy Aveo $12,170; 24/34; $2281; -1.65%

Dodge Caliber $14,965; 24/29; $2,374; flat

Toyota Corolla $14,405; 28/37; $1,991; -3%

Toyota Prius $21,500; 48/45; $1,338; -3%

PT Cruiser $15,970; 21/26; $2,682; -38%

Suzuki Forenza/Reno $14,249; 20/28; $2,682; -43%

Your first impression might be that the Prius isn't selling. But it is, at a higher volume than almost any other car on these lists. In fact, Toyota (TM) had just a four-day supply of Priuses on hand in June—every car that dealers got was spoken for. So Toyota is going to shift production to make yet more Priuses to meet skyrocketing demand. Also, such cars as the Honda Fit (BusinessWeek.com, 8/21/06) and Mini Cooper (BusinessWeek.com, 5/29/07) might have even higher sales numbers if there were more of them to sell. Mini, for instance, had only a five-day supply of cars as of July 1 this year. Honda (HMC) may double its production of the Fit to meet demand, and Civics (BusinessWeek.com, 6/7/06) are also selling flat out.

The real question is why some high-mileage cars are selling and others are moribund. Why is the Chevy Aveo (BusinessWeek.com, 12/27/06), which is roughly the size of the Kia Spectra (BusinessWeek.com, 8/7/07) and about the same price, not seeing increased sales, especially when it gets marginally superior fuel economy? Why is the Mazda 3i losing sales to the Ford Focus (BusinessWeek.com, 4/16/08), a stable mate under the Ford (F) corporate umbrella, when, again, prices and mileage figures are similar? And why, oh why, is the Honda Fit screaming off the lot?