What we see here is that over the period I examined, the popularity (as
measured by new sales) of small cars decreased 49%, from ~40% of new
car sales in 1990 to just over 17% in 2007, while Large SUV sales
increased 2,575%, and Midsize SUV sales increased 392% over the same
period. By 2007, these latter two categories accounted for 28% of US
new auto sales in 2007, about the same combined market share as medium
and large cars. Contrary to the loud noises coming from Washington D.C., Detroit, and elsewhere, this chart proves beyond a shadow of a doubt that Americans are not, in fact, fans of the small car. Still don't believe me? Then perhaps you'd care to see what Small Car sales look like compared to gas prices:
Despite regular conventional gas prices increasing 113% (4.3% CAGR)
since 1990, new car sales still decreased, as evidenced by the
relatively significant negative correlation between the two.
Interesting, huh? Let's take a closer look: 
Over the horizon encompassed by this data, the trend away from Small
Cars is undeniable, however, I say this with the caveat that it appears
over short time periods, this trend slows, or over very-short time
periods, may even reverse. As the above chart shows, when gas prices
spiked ~30% in 2000, small car sales increased 9%, however, they
subsequently decreased 37% while gas prices doubled. I would like to
examine the more recent data showing gas prices spiking in 2008, but
unfortunately, such doesn't appear to be available yet (if it is,
please let me know!)Note: For those playing the home game, I downloaded my data directly from the Department of Transportation, Bureau of Transportation Statistics, and The Federal Reserve, and the Department of Energy. I will also make all of my data and calculations available for (the more ambitious among) you to keep me honest.
Hello,
Three notes:
a) Small size and high fuel efficiency are highly correlated, but not perfectly. I think there would be incredible demand for more fuel efficient medium and large cars. I for one really would love a more fuel efficient Minivan. I need the minivan for the family, but it drives me nuts that no one has made available in the US a more fuel efficient, hybrid minivan.
b) You seem to assume that what "Amercans want" is a static, independent variable. Demand is difficult to model, but the auto companies work to create demand, not to simply tap into "what Americans want." If the marketing and product design that went into the SUV boom were instead invested in highly efficient vehicles (small, medium and large) I am sure the demand curves would be very very different.
c) "What Americans want" sounds like the holy grail that no one should mess with, but Americans (well, humans) are not always that good at knowing what they want (see the entire field of behavioral economics) especially when the tradeoffs are very long term. I don't "want" to worry about fuel efficiency per say--it is far more pleasurable to focus on the design/power/features of a car, but I also don't want my kids and grandkids to face a world a massive dislocations, resource wars, catastrophic weather, etc in 30-60 years. It is very hard to make a "rational" decision when choosing between a short term definite benefit and avoiding a long-term less definite risk, but it is impossible to expect the "American people" to make sure decisions reasonably when a significant part of the political/corporate class in our country has invested massively in misinformation about the long term risk of climate change. If you have been bamboozled into thinking Climate Change is a hoax or even just convinced it is still "up for debate" why not buy a gas guzzler? But this tells you less about what American's want than about how sadly we have been lied to--propoganized--by folks who want you to buy that SUV now and discount climate change.
Thanks for reading, and for the comment. Let me respond in-kind.
a) That's my prognosis as well, and one that I think will become increasingly apparent as I post the next 2-3 posts in this series, forthcoming over the next week or so. I think the Big-3 are on the right track with hybrid SVUs and moreso with cylinder de-activation technology, just needs to find its way into more and more vehicles as you've pointed out.
b) My assumption, if you can call it that, is that what American consumers preferences are represented by their actual purchasing decisions. I agree demand is not static, but some trends are significant-enough (magnitude, frequency, etc) such that they're undeniable, methinks. Of course, if you bring not just marketing, but monetary incentives (long-term high fuel price, government/dealer/manufacturer taxes/payments, etc) into the picture I'm sure that'd have a measurable effect.
c) All fair points here so no argument from me. I think ceteris paribus most people would rather drive faster/comfier/sexier (less fuel efficient, more expensive, etc) cars, but that's where the Government can intervene with Pigovian taxes/subsidies, which I will likely discuss in later posts in this series. Want to encourage more fuel efficient cars, less miles-driven? Tack-on a progressively higher (with time) gas tax, use proceeds to build-out efficient and fast public transportation, just to pick one way that could work.
Great analysis, but what if the 90s is an anomaly? What happens if you go further back to the 1980s, the 1970s?
Also wondering if your price of gas is the real price, or the nominal price? If the cost per gallon is dropping in real terms than it adds to the incentive to not consider fuel economy in the purchase decision.
Another thing to look at might be share of vehicle sales by gas mileage. Not necessarily just size of vehicle. And I think as far as fleet mileage standards go automakers lobbied hard to make sure their SUVs were classified as trucks. But could be mistaken about that.
Thanks, and that may be a possibility, unfortunately, as I was planning to disclose in later posts, the only overlapping annual data I could find from all the sources began in 1990, for gas price specifically, here http://tonto.eia.doe.gov/dnav/pet/hist/mg_rco_usw.htm
You'll see in my next post a discussion about the SUV thing, hopefully I'll have it done tomorrow.
Sorry, but just wanted to add Americans don't like BAD small cars. Create something stylish and good, like the BMW did with the Mini and there will be demand for it. VW saw the same sort of pent up demand when it released its retro-Beetle. And of course Toyota's Prius, the definitive hybrid. Yes, these are essentially niches, but no one make, model or style is going to dominate and contribute a high share of profits. These days market strength comes from being able to address a multitude of niches -- build and design for a mass market and all that gets created is something bland and undesirable.
I agree that style/design are an important factor, however, the cars you mentioned are, and have been available for what, a decade?
I'll give you that the Dodge Neon, Ford Focus, and Chevy Cobalt, Geo Metro, etc, etc ad nauseum aren't exactly exciting cars, but what about the Honda Civic, Acura RSX, Mazda Miata, etc, etc. There are plenty of interesting small cars out there, but Americans have been increasingly shying away from them regardless.
Some other factors that might be worth considering, and might be coming in later posts:
1) The increased popularity of leases that made it easier to get a larger car.
2) What does the fleet of cars on the road look like? Are people more likely to hang onto smaller cars so they tend to buy less often?
3) Do used car sales trends mimic the new car sales trends? Or are more small cars bought used?
4) Hyundai and Kia entered the US market and have now grown to 4% and 3% of the US market respectively. Not with large vehicles.
http://online.wsj.com/mdc/public/page/2_3022-autosales.html
Did manufacturers miss out on attracting new buyers with affordable entry level vehicles and lose a lifetime customer?
5) Could the market for new car sales have been bigger if manufacturers did offer appealing smaller cars? Maybe they missed something in evaluating demand by assuming, as you do, that American drivers want big. Why else would Toyota have created an entirely new brand: Scion?
As you guessed, some of those topics will be addressed in the next few posts on the subject.
In response to #5, this is a bit of a longer discussion, but many small cars run on negative to small profit margins, so I'd imagine there isn't/wasn't alot of promotion/advertising/etc that'd encourage folks to drive smaller cars. Of course, I don't have the data at my hands to really support this, so keep that in mind.
I have the impression that cars started big (I've seen some old Model-T Fords up close and they are huge!) They stayed big right through the 70s. Then the oil shocks hit and in the 80s, we started buying small cars.
After gas got (relatively) cheaper again in the 90s, people returned to the big cars they had always driven. If you are just looking at recent history, it looks like we fell in love with SUVs and other elephants. But it's just a return to normal.
Anyone care to graph car size over time for the last 100 years? Not sure what measure you'd use.
Just as an example, the wheelbase of the Olds 88 (I had a 67 Delta):
1949 121"
1954 122"
1959 123"
1969 124"
1977 116"
1986 110"
Wheelbase of the Toyota Corolla (not incl Tercel):
1966 90"
1978 93"
1983 94"
1987 96"
1998 97"
2003 102"
Wheelbase of the Camry
1983 102"
1992 103"
1997 105"
2002 107"
2007 109"
Wheelbase of the Buick Regal:
1978 108"
1988 106"
1997 109"
I'd say that after 1973 Detroit started introducing more smaller cars while Japan introduced very small cars that got steadily larger. Notice that the Camry ended up the same wheelbase as a Buick Regal and only an inch shorter than the last Olds 88. Today's tiny Yaris, Mini and Aerio all have a 7" longer wheelbase than the 1990 Corolla.
While I imagine that data exists, I haven't yet found it. Any suggestions?
I suspect that Americans are willing to purchase small cars because they are cheap. One thing this article ignores is how poor the profit margin for small cars in the US. American makers loose money on small cars almost across the board and foreign makers post profits only by writing most of their R&D off on foreign sales. If American consumers were actually asked to pay on the sticker what it actually costs to make the car (which is what would have happen if small cars are indeed supposed to make up a lion's share of the domestic auto market as the US government supposes), I suspect that small cars would be even less popular.
Agreed, and I mentioned in that in my above comment from yesterday evening. Its outside the scope of what I'm trying to cover with this series, but I'm quite curious how its so difficult to turn a profit on a small car. I've heard the argument that small cars have less features to juice margins, but small does not imply bare-bones or cheap, at least not necessarily, so I'm just not buying that.
"Americans want small cars," is a bit of a straw man. Relatively few Americans fit comfortably into subcompact cars. We eat well and are tall and wide by global standards. Many of us have a lot of big toys and like to tow them around.
Americans do want more fuel efficient cars, but many of us balance, and have been able to afford to balance, fuel efficiency with comfort, utility, affordability and safety. As others have noted, small cars are not uniformly cheaper and more fuel efficient than family sedans.