Thursday, January 11, 2007

The Hot Niche in the Auto Market

From the auto show in Detroit come news that the econobox is hot. Except that they are  not really econoboxes any more:

The small, entry-level vehicles used to offer few frills and raised concerns over safety. But a combination of factors — elevated gasoline prices, a focus on slick designs and technology marketed to young drivers — have helped give the "B-cars" more visibility in the crowded auto marketplace.

Japanese automakers brought three new models to showrooms last year, the Toyota Yaris, Honda Fit and Nissan Versa, increasing interest in the segment.

The newcomers joined the Chevrolet Aveo, which General Motors Corp. builds through its relationship with South Korea-based Daewoo, Kia Motors America's Spectra and Rio models and the Hyundai Accent.

And sales are good:

Two niche small vehicles will be shown — BMW will raise the curtain on the new 2007 Mini Cooper, while DaimlerChrysler is showing its two-seater, the smart fortwo, which is expected to appeal to congestion-pressed city drivers.

But the segment is expected to grow. Sales of seven vehicles in the category were up nearly 50 percent in 2006, to more than 290,000 units, according to figures released by Autodata.

The cars are being shown in Detroit, but guess what? They're not coming from there. While European and Japanese companies have already got them on the street, Ford is "interested" in doing something in the category.

And so, just as we saw with hybrids, the American auto industry seems to remain incredibly out of touch with market shifts. Ford and GM are only now figuring out that the SUV bandwagon is no longer the key to big profits, while their competitors are already eating their lunch in the small car segment. (Chevy has an entry, but only because of their relationship with other manufacturers.)

Our domestic auto industry is fascinating to me, because it's endlessly behind the curve. It didn't take any marketing genius to see this coming. You'd think that in some corner of an auto company, there's be somebody with plans in place for small, efficient vehicles that appeal to consumers ready to roll out when the time is right. If nothing else, you'd think they'd have been addressing the small-car niche that has always existed in the US - for example, among big-city drivers for whom a car is a nice accessory, not a necessity, and who have always liked things that are small, stylish, and reasonably priced.

If you're not paying attention to what your customers want, somebody else will. That seems to be the endless, ever-repeating story of Detroit.

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