Ford Bullish on Small Cars
Ford kick-started the SUV revolution with the introduction of the Explorer SUV in the '90s, but the next big opportunity it sees is in small cars. That's according to Ford sales analyst George Pipas, who spoke to a gathering of Chicago-area media recently. Who are the buyers that will drive growth in this segment? Pipas says it’s Millennials, a demographic that wasn't even driving when the Explorer debuted.
It's easy to see why Ford is focused on Millennial buyers, which it counts as those born from 1980-95. Every day about 11,000 Millennials become old enough to drive in the U.S., according to Ford. With 50 percent of first-time buyers choosing small cars, there are sales to be had, Pipas said.
For Millennials, though, small doesn't necessarily mean basic. "[Millennials] want more than an econobox in a small car," he said. "They will give up something else to get what they want on the car."
Though Millennials will be a force in the market, Pipas says there are other factors working in small cars' favor, including one that might not immediately come to mind.
"Gas prices are way overplayed in determining what people buy," he said. "The volatility [of the price of gas] is important. Volatility makes people uncertain."
The changing mindset of the American consumer also seems poised to figure into the buying equation. "People are a little more thoughtful about what they buy," Pipas said. "People are moving from conspicuous consumption to careful consumption."
Ford may be showing a renewed interest in small cars, but it won't have free rein of the segment, as it's filled with solid competitors from the likes of Toyota, Honda and others. But if Ford's recent introductions like the Flex and Fusion Hybrid are anything to go by, the new Fiesta and Focus should be impressive entrants. If I were in the market for a small car and had the luxury of time, I'd wait to check them out before making a purchase. We'll have plenty of auto show coverage on both in the coming months.
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Cost also has to be considered. As people become more careful with their money, and the amount they borrow, lower cost becomes more important. Smaller cars cost less on average.
Coming soon to a rental car lot near you.
We keep hearing this strategy of auto makers targeting younger buyers with small cars, and it never works. I think the Ford analyst finally hit the nail on the head here though when he said "They will give up something else to get what they want on the car." What they will first give up is the car being new. Look at the companies that sell a lot of small cars and look at their average buyer age. They aren't selling these cars to young buyers, because young buyers don't buy new cars.
That being said, if they can increase demand for their small cars after they've been used, then resale prices should be higher which makes them more affordable for older buyers to buy. But they have to realize they aren't going to sell these cars directly to young people.
A young buyer will buy a new car when it's priced like a used car. That isn't happening. Good luck putting a dent in your sales by having "Millennials" buy cars they simply cannot afford. I'll continue driving my mom's car, thanks.
American car manufacturers make a mistake when they assert that people won't buy basic. I WANT an econobox! And I'd pay good money for a simple, reliable small car.
Do they really think we all can't live without sporty acceleration, GPS and XM Radio and power windows?
How about a car that is cheap to buy, cheap to operate and maintain, and does what cars do-get me from one place to another? I'd bet that there is a huge market for such a car, that nobody is serving.