Japanese Subcompacts, With Room for Profit

FISH · 02-14-2006, 08:00 AM

http://www.latimes.com/business/la-f...ck=1&cset=true

A new generation of fuel-efficient cars is on its way, perhaps dealing another blow to Detroit.

By John O'Dell, Times Staff Writer

Small is the new big.

Not too long ago, the world's automakers were engaged in a virtual arms race to satisfy the American public's appetite for hulking sport utility vehicles.

General Motors Corp.'s jumbo-sized Chevy Suburban was topped by Ford Motor Co.'s mammoth Excursion. GM's Hummer, originally a U.S. military vehicle, was sold in a civilian model to buyers who wanted to tower over other motorists. Even the Japanese got into the race.

Now Japan's big automakers stand to profit from galloping gas prices as they prepare to roll out a batch of fuel-efficient small vehicles. The move could spell additional trouble for Detroit, which still seems obsessed with gas-gulping muscle cars.

The subcompacts from Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., which established themselves here in the 1970s with small, reliable, fuel-efficient vehicles, will deliver fuel economy in high-30-miles-per-gallon territory at prices starting at about $12,000.

In March, Toyota will launch the Yaris sedan and three-door hatchback, followed by Honda's Fit, a five-door hatchback in April, and Nissan's Versa hatchback in May and a sedan in the fall. The Yaris is a third smaller than the Suburban and weighs almost a ton and a half less.

Toyota is seeking to follow up on the popularity of its Scion xB, a refrigerator-shaped vehicle popular with young buyers. Last year alone, Japan's biggest automaker sold Americans 156,000 cars in the Scion line.

Toyota and its two rivals are taking aim at a group of younger buyers who otherwise shop for used cars. They hope these people will become Honda, Toyota or Nissan loyalists for life, moving up to the automakers' larger and more profitable models.

The Japanese carmakers said fuel costs didn't figure in their calculations — the small cars were planned before fuel prices soared.

"Toyota started studying U.S. small-car possibilities in 2001," said Jim Lentz, general manager of the Toyota division. "We began understanding how big generations X and Y would be and how … small cars were getting bigger and more expensive. We saw opportunity."

Already there's some buzz about the new Japanese cars even before they hit showrooms.

The Honda Fit's "cool looks" persuaded Annie Tsai, 20, a Temple City nursing student, to wait until it goes on sale in April to buy her first new car. She's the prototypical customer for the new subcompacts: young, budget-conscious and concerned about style, safety and reliability.

"It's cute, it's affordable, it gets great mileage and it's still a Honda," Tsai said.

American automakers may now find themselves with too few small vehicles in their arsenals.

Detroit has long believed that demand for subcompacts is too small to make them profitable, said George Peterson, president of AutoPacific, a market research firm in Tustin.

Ford's U.S. operations president, Mark Fields, said a subcompact would be a welcome addition to the carmaker's offerings because "small is big."

But development of a U.S. subcompact probably is at least two years away, as Ford executives are consumed with reversing a U.S. sales slide and mounting manufacturing and healthcare costs.

A subcompact is typically 12 to 14 feet long, bumper to bumper. Of the new Japanese subcompacts, the smallest is the Toyota Yaris hatchback at 12.5 feet. A Honda Civic compact sedan is 14.7 feet long and a Chevrolet Suburban SUV measures 18.3 feet.

Subcompacts, called B-segment cars overseas, are big sellers in Asia and Europe, where their small size makes them ideal for scooting through traffic and narrow, twisting city streets. And their fuel economy is a big lure in countries where gas costs $4.50 to $5.50 a gallon.

Dozens of subcompact models are sold in the rest of the world and are particularly popular in Asia. Honda's Fit was voted Japan Car of the Year in 2001 and was the bestselling car in that country the next year, toppling the perennial champ, Toyota's Corolla. Since then it regularly has been Honda's bestselling car in Japan and one of that country's top sellers.

Toyota has sold more than 1 million Yaris models since 1999.

But in the U.S., except for a short period during the gas crunch of the 1980s, subcompacts haven't done well because they lack the power and size that most consumers want in a family car. Subcompacts accounted for less than 1.5% of passenger vehicle sales in the U.S. last year.

Among American carmakers, only General Motors sells a subcompact. Its South Korean-built Chevrolet Aveo outsold all other subcompacts in the U.S. last year, posting a 20% sales hike as dealers sold 68,085 Aveos — about 30% of all subcompact sales.

But the new entries from Japan are expected to steal some of GM's sales.

"Cars like the Aveo just won't have the cachet with consumers as small cars from a Toyota or Honda," said Wes Brown, an auto analyst at market research firm Iceology in Los Angeles. "The Japanese have that reputation for quality."

The new Japanese subcompacts, which max out at about $15,600 for a top-of-the-line Toyota Yaris, come with long lists of standard and optional equipment. And their modern looks have little resemblance to the boxy cars of three decades ago.

For 2007, the first full year on the market, Toyota expects to sell 70,000 Yaris models and Honda expects to sell 50,000 Fits. Nissan hasn't announced its sales goal.

All three cars were first sold elsewhere but were designed with the American market in mind, so meeting U.S. safety rules and consumer expectations incurred minimal costs, said Jed Connelly, senior vice president at Nissan North America in Gardena.

And because they are hits overseas, the companies' costs are already covered, "so U.S. sales will be all gravy for them," said Mike Chung, an auto industry analyst for Edmunds.com.

The extra sales would continue the growth of the big Japanese companies, while American carmakers keep losing market share to foreign brands, Brown said. Last year, Japan's automakers captured a record 32.2% of the U.S. market, up from 22.8% a decade ago, while the American companies' share fell to a record low of 56.9%, down from 73.5% in 1995.

If the new Japanese small cars sell well in the U.S., the carmakers probably won't stop.

All sell several small-car models overseas that could be tweaked to meet U.S. standards.

Nissan executives two years ago in San Francisco showed off a micro-van sold in Japan called the Cube. They said it was a question of only when, not if, it would be sold here.

*

Car comparison

Japanese automakers will soon introduce these subcompacts.

Nissan Versa

Length: Five-door hatchback, 14 feet; four-door sedan, 14.6 feet

Engine: 1.8-liter, four-cylinder with 120 horsepower

Transmission: Six-speed manual, four-speed or continually variable automatics

Mileage: Highway/city combined, 38

Price range: $12,000 to $15,000

*

Honda Fit

Length: Five-door hatchback, 13.1 feet

Engine: 1.5-liter, four-cylinder with 109 horsepower

Transmission: Five-speed manual or five-speed automatic

Mileage: City/highway, 33/38 automatic; 34/39 manual

Price range: $13,000 to $15,500

*

Toyota Yaris

Length: Sedan, 14 feet; three-door hatchback, 12.5 feet

Engine: 1.5-liter, four-cylinder with 106 horsepower

Transmission: Five-speed manual or five-speed automatic

Mileage: City/highway, 34/39 automatic; 34/40 manual

Price range: $11,530 to $15,630

*

Sources: Toyota, Honda, Nissan

Bravada · 02-14-2006, 10:05 AM

Now I'm seriously interested in this African Elephant. What's the fuel consumption?

CarShark · 02-14-2006, 10:18 AM

How does Toyota expect to sell 70,000 copies of the Yaris? They must expect the market to grow a lot. I've never known that to happen, but it might if gas keeps going up the way it does.

uujjj · 02-14-2006, 10:56 AM

The Yaris is the size of an older Corolla. A Corolla is the size of and older Camry. The Yaris is basically going to take the market that the Corolla left behind when it grew.

asim · 02-14-2006, 10:58 AM

Why do they have to associate Chevy with the Suburban...what about the hot selling Aveo?

spartacus1224 · 02-14-2006, 10:59 AM

Quote:

Originally Posted by Bravada

Now I'm seriously interested in this African Elephant. What's the fuel consumption?

30 to 50 gallons of water a day. If you give him fuel, he will obviously perform better.

Arizona Slim · 02-14-2006, 11:09 AM

That guy waited until pretty late in the article to mention that GM has been in this market for several years. I actually think the Fit looks pretty nice, they did a little segment on it on Autoline Detroit last weekend. I think one of the prolems the Aveo will have is not offering all the safety items as standard equipment. The Fit is going to have standard side curtain airbags, abs, etc. Maybe the new Aveo will have all that, I dunno.

And what's Ford doing with the Focus? How can you have maybe the best small car on the market and just let it fade away?

JVal14 · 02-14-2006, 11:10 AM

That's convenient that they never mention that GM leads the subcompact market with Aveo; they make it sound like the class is a Japanese invention. They also apparently don't remember that while the Americans were racing to build hulking SUVs, GM also lead the mileage race for years with the Metro.

**paul8488** · 02-14-2006, 11:13 AM

Quote:

Originally Posted by Arizona Slim

That guy waited until pretty late in the article to mention that GM has been in this market for several years. I actually think the Fit looks pretty nice, they did a little segment on it on Autoline Detroit last weekend. I think one of the prolems the Aveo will have is not offering all the safety items as standard equipment. The Fit is going to have standard side curtain airbags, abs, etc. Maybe the new Aveo will have all that, I dunno.

And what's Ford doing with the Focus? How can you have maybe the best small car on the market and just let it fade away?

When you do the same with your midsize sedan, and minivan (well not best but darn fine), and compact truck, you may as well let your compact car slide too.

I sure hope the Aveo steps up with seat and roof-rail airbags. If GM went to all the problem of redesigning a car for 2006 without 6 airbags (especially a small car that really benefits from having them) then there is no hope left for them.

Arizona Slim · 02-14-2006, 11:18 AM

Quote:

Originally Posted by paul8488

When you do the same with your midsize sedan, and minivan (well not best but darn fine), and compact truck, you may as well let your compact car slide too.

Yeah, I guess I shouldn't be surprised by Ford letting a great model starve to death. And yet I am. Every time they do it.

zaxxis · 02-14-2006, 11:25 AM

Quote:

Originally Posted by Arizona Slim

That guy waited until pretty late in the article to mention that GM has been in this market for several years.

He also ignores the fact that the Japanese have been in overdrive pushing new SUV and Full Size Truck models. Last time I checked, Toyota had one or two of them...

mbukukanyau · 02-14-2006, 11:32 AM

wow, They barely mentioned GM's Aveo! The Best Seller in the sub-compact segment...
then went on to say "But the new entries from Japan are expected to steal some of GM's sales."
wow! The Aveo is coming new and a new Hatch will be on sale by year end...
I doubt anyone is going to take sales crowns from GM.. The New Aveo is hot

Arizona Slim · 02-14-2006, 11:38 AM

Have they shown the new Aveo hatch yet? The sedan looks nice, but I'd really like to see what they have in store for the 5-door.

Another problem for the Aveo is that, compared to the new Honda/Toyota/Nissan subcompacts, it will be the least powerful and also the least fuel efficient. I'm basing that on the current Aveo's mileage ratings, since the powertrain is carrying over to the 07 model.

johnny smallblock · 02-14-2006, 11:57 AM

Quote:

Originally Posted by zaxxis

He also ignores the fact that the Japanese have been in overdrive pushing new SUV and Full Size Truck models. Last time I checked, Toyota had one or two of them...

When GM builds a new full-size SUV they're "missing the market" and "dependant on gas guzzling behemoths" when the Japanese do it, the "domestic manufacturers are losing more market share."

It sucks, but it's reality until, I think, the Malibu or the Impala outsells the Camry.

01cavalier · 02-14-2006, 12:00 PM

I know it comes late in the article, letting some people not even finish it thinking no US automaker makes something in the subcompact class, but at least it is mentioned. GM should be selling other more effecient subcompact and compact models. The diesel Aveo would sure be nice...

02-14-2006, 08:00 AM	#1 (permalink)
FISH 3.6 Liter V6 Join Date: Apr 2005 Location: Brisbane Australia Drives: 2005 VZ 190kW 5 speed auto Calais. Posts: 1,032	Japanese Subcompacts, With Room for Profit http://www.latimes.com/business/la-f...ck=1&cset=true A new generation of fuel-efficient cars is on its way, perhaps dealing another blow to Detroit. By John O'Dell, Times Staff Writer Small is the new big. Not too long ago, the world's automakers were engaged in a virtual arms race to satisfy the American public's appetite for hulking sport utility vehicles. General Motors Corp.'s jumbo-sized Chevy Suburban was topped by Ford Motor Co.'s mammoth Excursion. GM's Hummer, originally a U.S. military vehicle, was sold in a civilian model to buyers who wanted to tower over other motorists. Even the Japanese got into the race. Now Japan's big automakers stand to profit from galloping gas prices as they prepare to roll out a batch of fuel-efficient small vehicles. The move could spell additional trouble for Detroit, which still seems obsessed with gas-gulping muscle cars. The subcompacts from Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co., which established themselves here in the 1970s with small, reliable, fuel-efficient vehicles, will deliver fuel economy in high-30-miles-per-gallon territory at prices starting at about $12,000. In March, Toyota will launch the Yaris sedan and three-door hatchback, followed by Honda's Fit, a five-door hatchback in April, and Nissan's Versa hatchback in May and a sedan in the fall. The Yaris is a third smaller than the Suburban and weighs almost a ton and a half less. Toyota is seeking to follow up on the popularity of its Scion xB, a refrigerator-shaped vehicle popular with young buyers. Last year alone, Japan's biggest automaker sold Americans 156,000 cars in the Scion line. Toyota and its two rivals are taking aim at a group of younger buyers who otherwise shop for used cars. They hope these people will become Honda, Toyota or Nissan loyalists for life, moving up to the automakers' larger and more profitable models. The Japanese carmakers said fuel costs didn't figure in their calculations — the small cars were planned before fuel prices soared. "Toyota started studying U.S. small-car possibilities in 2001," said Jim Lentz, general manager of the Toyota division. "We began understanding how big generations X and Y would be and how … small cars were getting bigger and more expensive. We saw opportunity." Already there's some buzz about the new Japanese cars even before they hit showrooms. The Honda Fit's "cool looks" persuaded Annie Tsai, 20, a Temple City nursing student, to wait until it goes on sale in April to buy her first new car. She's the prototypical customer for the new subcompacts: young, budget-conscious and concerned about style, safety and reliability. "It's cute, it's affordable, it gets great mileage and it's still a Honda," Tsai said. American automakers may now find themselves with too few small vehicles in their arsenals. Detroit has long believed that demand for subcompacts is too small to make them profitable, said George Peterson, president of AutoPacific, a market research firm in Tustin. Ford's U.S. operations president, Mark Fields, said a subcompact would be a welcome addition to the carmaker's offerings because "small is big." But development of a U.S. subcompact probably is at least two years away, as Ford executives are consumed with reversing a U.S. sales slide and mounting manufacturing and healthcare costs. A subcompact is typically 12 to 14 feet long, bumper to bumper. Of the new Japanese subcompacts, the smallest is the Toyota Yaris hatchback at 12.5 feet. A Honda Civic compact sedan is 14.7 feet long and a Chevrolet Suburban SUV measures 18.3 feet. Subcompacts, called B-segment cars overseas, are big sellers in Asia and Europe, where their small size makes them ideal for scooting through traffic and narrow, twisting city streets. And their fuel economy is a big lure in countries where gas costs $4.50 to $5.50 a gallon. Dozens of subcompact models are sold in the rest of the world and are particularly popular in Asia. Honda's Fit was voted Japan Car of the Year in 2001 and was the bestselling car in that country the next year, toppling the perennial champ, Toyota's Corolla. Since then it regularly has been Honda's bestselling car in Japan and one of that country's top sellers. Toyota has sold more than 1 million Yaris models since 1999. But in the U.S., except for a short period during the gas crunch of the 1980s, subcompacts haven't done well because they lack the power and size that most consumers want in a family car. Subcompacts accounted for less than 1.5% of passenger vehicle sales in the U.S. last year. Among American carmakers, only General Motors sells a subcompact. Its South Korean-built Chevrolet Aveo outsold all other subcompacts in the U.S. last year, posting a 20% sales hike as dealers sold 68,085 Aveos — about 30% of all subcompact sales. But the new entries from Japan are expected to steal some of GM's sales. "Cars like the Aveo just won't have the cachet with consumers as small cars from a Toyota or Honda," said Wes Brown, an auto analyst at market research firm Iceology in Los Angeles. "The Japanese have that reputation for quality." The new Japanese subcompacts, which max out at about $15,600 for a top-of-the-line Toyota Yaris, come with long lists of standard and optional equipment. And their modern looks have little resemblance to the boxy cars of three decades ago. For 2007, the first full year on the market, Toyota expects to sell 70,000 Yaris models and Honda expects to sell 50,000 Fits. Nissan hasn't announced its sales goal. All three cars were first sold elsewhere but were designed with the American market in mind, so meeting U.S. safety rules and consumer expectations incurred minimal costs, said Jed Connelly, senior vice president at Nissan North America in Gardena. And because they are hits overseas, the companies' costs are already covered, "so U.S. sales will be all gravy for them," said Mike Chung, an auto industry analyst for Edmunds.com. The extra sales would continue the growth of the big Japanese companies, while American carmakers keep losing market share to foreign brands, Brown said. Last year, Japan's automakers captured a record 32.2% of the U.S. market, up from 22.8% a decade ago, while the American companies' share fell to a record low of 56.9%, down from 73.5% in 1995. If the new Japanese small cars sell well in the U.S., the carmakers probably won't stop. All sell several small-car models overseas that could be tweaked to meet U.S. standards. Nissan executives two years ago in San Francisco showed off a micro-van sold in Japan called the Cube. They said it was a question of only when, not if, it would be sold here. * Car comparison Japanese automakers will soon introduce these subcompacts. Nissan Versa Length: Five-door hatchback, 14 feet; four-door sedan, 14.6 feet Engine: 1.8-liter, four-cylinder with 120 horsepower Transmission: Six-speed manual, four-speed or continually variable automatics Mileage: Highway/city combined, 38 Price range: $12,000 to $15,000 * Honda Fit Length: Five-door hatchback, 13.1 feet Engine: 1.5-liter, four-cylinder with 109 horsepower Transmission: Five-speed manual or five-speed automatic Mileage: City/highway, 33/38 automatic; 34/39 manual Price range: $13,000 to $15,500 * Toyota Yaris Length: Sedan, 14 feet; three-door hatchback, 12.5 feet Engine: 1.5-liter, four-cylinder with 106 horsepower Transmission: Five-speed manual or five-speed automatic Mileage: City/highway, 34/39 automatic; 34/40 manual Price range: $11,530 to $15,630 * Sources: Toyota, Honda, Nissan __________________ “For the looks, I think the Charger tries too hard to look cool. It's the fat guy with a bald patch wearing fiery tattoos and a muscle shirt. The G8 is the mixed martial arts champion that strolls around in dockers and a golf shirt because he knows how to fight and doesn't feel the need to impress anyone with a tough guy outfit." Michael_S

02-14-2006, 10:05 AM	#2 (permalink)
Bravada 70 MPG Two Mode Saturn Hybrid Join Date: Nov 2004 Location: Warsaw, Poland Posts: 10,860	Re: Japanese Subcompacts, With Room for Profit Now I'm seriously interested in this African Elephant. What's the fuel consumption?

02-14-2006, 10:18 AM	#3 (permalink)
CarShark Banned Join Date: Jun 2005 Posts: 1,041	Re: Japanese Subcompacts, With Room for Profit How does Toyota expect to sell 70,000 copies of the Yaris? They must expect the market to grow a lot. I've never known that to happen, but it might if gas keeps going up the way it does.

02-14-2006, 10:56 AM	#4 (permalink)
uujjj 3.9 Liter V6 Join Date: Dec 2004 Location: Urbana, IL Drives: zx3 Posts: 784	Re: Japanese Subcompacts, With Room for Profit The Yaris is the size of an older Corolla. A Corolla is the size of and older Camry. The Yaris is basically going to take the market that the Corolla left behind when it grew. __________________ To stay employable in the future in this country, you need to have highly marketable skills that are unlikely to be shipped overseas. So, brush up on your brooming and cash register skills.

02-14-2006, 10:58 AM	#5 (permalink)
asim Firebird Concept (the turbine one) Join Date: Mar 2005 Location: Houston, TX Posts: 11,271	Re: Japanese Subcompacts, With Room for Profit Why do they have to associate Chevy with the Suburban...what about the hot selling Aveo? __________________ I'll make a new sig. Later.

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02-14-2006, 11:09 AM	#7 (permalink)
Arizona Slim 6.0 Liter Vortec V8 Join Date: Jun 2005 Location: The Lonesome Crowded West Drives: 04 GMC Sierra 06 Dodge Magnum Posts: 1,508	Re: Japanese Subcompacts, With Room for Profit That guy waited until pretty late in the article to mention that GM has been in this market for several years. I actually think the Fit looks pretty nice, they did a little segment on it on Autoline Detroit last weekend. I think one of the prolems the Aveo will have is not offering all the safety items as standard equipment. The Fit is going to have standard side curtain airbags, abs, etc. Maybe the new Aveo will have all that, I dunno. And what's Ford doing with the Focus? How can you have maybe the best small car on the market and just let it fade away?

02-14-2006, 11:10 AM	#8 (permalink)
JVal14 3.9 Liter V6 Join Date: Oct 2004 Location: SoCal Posts: 994	Re: Japanese Subcompacts, With Room for Profit That's convenient that they never mention that GM leads the subcompact market with Aveo; they make it sound like the class is a Japanese invention. They also apparently don't remember that while the Americans were racing to build hulking SUVs, GM also lead the mileage race for years with the Metro. __________________ Blah blah blah....green green green....global warning....blah blah....carbon footprint....green green....blah blah....catch phrase...talking head...blah blah blah

02-14-2006, 11:32 AM	#12 (permalink)
mbukukanyau 7.0 Liter LS7 V8 Join Date: Dec 2003 Location: In front of my computer Drives: 2006 HHR 2002 Corolla-Before I saw the light Posts: 8,051	Re: Japanese Subcompacts, With Room for Profit wow, They barely mentioned GM's Aveo! The Best Seller in the sub-compact segment... then went on to say "But the new entries from Japan are expected to steal some of GM's sales." wow! The Aveo is coming new and a new Hatch will be on sale by year end... I doubt anyone is going to take sales crowns from GM.. The New Aveo is hot __________________ Before Understanding comes Faith "Legislatures represent people, not acres or trees"-Earl Warren Last edited by mbukukanyau : 02-14-2006 at 11:35 AM.

02-14-2006, 11:38 AM	#13 (permalink)
Arizona Slim 6.0 Liter Vortec V8 Join Date: Jun 2005 Location: The Lonesome Crowded West Drives: 04 GMC Sierra 06 Dodge Magnum Posts: 1,508	Re: Japanese Subcompacts, With Room for Profit Have they shown the new Aveo hatch yet? The sedan looks nice, but I'd really like to see what they have in store for the 5-door. Another problem for the Aveo is that, compared to the new Honda/Toyota/Nissan subcompacts, it will be the least powerful and also the least fuel efficient. I'm basing that on the current Aveo's mileage ratings, since the powertrain is carrying over to the 07 model. Last edited by Arizona Slim : 02-14-2006 at 11:52 AM.

02-14-2006, 12:00 PM	#15 (permalink)
01cavalier 6.0 Liter LS2 V8 Join Date: Jul 2005 Location: Portland, OR Drives: 2007 Cobalt Posts: 4,818	Re: Japanese Subcompacts, With Room for Profit I know it comes late in the article, letting some people not even finish it thinking no US automaker makes something in the subcompact class, but at least it is mentioned. GM should be selling other more effecient subcompact and compact models. The diesel Aveo would sure be nice...

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