DETROIT – As the smallest car with the lowest price among its brands, the Aveo is General Motors Corp.’s ambassador to North America’s B-car segment.

The entry-level sedan and 5-door Aveo5 hatchback, designed and built in South Korea by GM Daewoo Auto & Technology Co., rolled out in 2005 with Chevrolet badging in most parts of the world. GM now sells the car in more than 120 countries.

The new Aveo quickly took the segment lead in North America, surpassing the venerable Hyundai Accent. Monthly sales peaked at 10,416 units in June 2005, achieving 21.5% of the lower-small car market.

But even as the ’07 Chevy Aveo gets an interior and exterior redesign that makes it longer, wider and taller, it no longer is ahead of the increasingly crowded segment pack that has grown in step with higher fuel prices.

Toyota Motor Corp.’s Yaris, a replacement for the outgoing Echo, in July outpaced the Aveo in the U.S. with 10,137 deliveries vs. 6,552, Ward’s data shows.

The all-new Honda Fit, which launched in March, grabbed a 9.7% North American market share by its second month, but fell to 6.9% in July due to capacity restraint, the company says. The Fit saw 3,135 deliveries in the U.S. for July.

Other competitors include the Kia Rio, Nissan Versa and Scion xA. The B-segment, overall, saw 353,955 deliveries through July in North America – a nearly 12% increase over year-ago.

Nevertheless, Chevrolet General Manager Ed Peper says he is confident there still is plenty of room for the Aveo.

“We’re defying normal product lifecycles and introducing a totally new generation of car that we brought to market just two years ago,” he says at the ’07 Aveo’s press preview here.

Chevrolet’s small-car strategy places the Aveo, followed by the upper-small segment Cobalt and HHR cross/utility vehicle, as rungs on its youth-oriented sales ladder. Combined, the three show 40% growth from last year, Pepper says.

He stresses that GM brought the Aveo to market more quickly than its competitors, which he suggests now are playing catch up.

“Other manufacturers, those that pulled out of the economy car game some time ago, noticed our success and realized they needed to get back into the field,” Peper says. “So here came Toyota with their Yaris, Honda with their Fit (and) Nissan with their Versa.”

But the Yaris and Fit also came with slightly better fuel economy than the ’07 Aveo, which adds a 2 mpg (0.8 km/L) improvement for ‘07.

The new Aveo is rated as 27 mpg (8.71 L/100 km) city and 37 mpg (6.36 L/100 km) highway with a manual transmission, and 26 mpg (9.05 L/100 km) and 34 mpg (6.92 L/100 km) for the automatic.

This compares with the Yaris, which achieves 34 mpg (6.9 L/100 km) city and 40 mpg (5.9 L/100 km) highway with a 5-speed manual. The 4-speed automatic gets 1 mpg (0.4 km/L) less on the highway.

The base Fit is rated at 33 mpg (7.13 L/100 km) city and 38 mpg (6.2 km/100 L) highway with a 5-speed automatic. Fuel economy is 37 mpg (6.4 L/100 km) for the Sport model with the same gearbox.

The Aveo’s 1.6L 16-valve E-TEC II DOHC, with 103 hp and 107 lb.-ft. (105 Nm) of torque is unchanged for the U.S. market. However GM is developing a diesel version for sale in Europe.

With a length of 169.7 ins. (431 cm), the new Aveo grows by about 3 ins. (7.6 cm) and has more headroom than the previous generation. The rear track is widened slightly to 56.3 ins. (143 cm), while the wheelbase remains 97.6 ins. (248 cm). The trunk offers 12.4 cu.-ft. (350 L) of storage space, more than the previous model.

Chevrolet is investing half its Aveo advertising buy for Internet spots, something the brand didn’t do after the first model was launched. These include youth-centered websites such as and

“(The ad campaign) will be shaped to make a connection to Gen-Y buyers, at the same time reaching out to 35 (year-old)-plus consumers,” Chevrolet Marketing Director Cheryl Catton says.

The new base Aveo LS starts at $12,395, which includes a $565 destination charge. The LT is priced at $13,925 and with options tops out about $15,000. The $9,995 Aveo5 hatchback is not redesigned for ’07.

For GM to recoup market share among B-segment cars, it needs to deliver a global small vehicle that competes on features as well as price, says Erich Merkle, director of forecasting at IRN Inc. in Grand Rapids, MI.

He says the Yaris currently is undercutting the Aveo on price, while Toyota’s Scion models are loaded with more youth-oriented gadgets and gizmos, such as illuminated cupholders.

“In the subcompact space, there is outstanding opportunity to be had (for) GM’s relationship with (its Korean subsidiary),” Merkle says. “It will take more than just the Aveo, because it’s a nice car, but it’s still a cheap car.”

Peper argues the Aveo has enough content, such as available cruise control, a sunroof and iPod connectivity, to joust with any vehicle in the segment. “We’re ready to compete in a big way,” he says.

GM Daewoo plans to export 70,000 Aveos for sale in the U.S. this year, with worldwide production of about 250,000 units. However, the single assembly line at the Bupyeong plant in Incheon is running at full capacity.

Mike Allen, Aveo vehicle line director, does not rule out the possibility of producing the car outside of South Korea should demand dictate. “As the market demand grows, we’ll have to find places to build them,” he says.