CAR Says Small-Car Spike Only Temporary

THERE'S NO LONG-TERM SHIFT TO SMALL cars under way in the U.S., and lofty fuel-economy regulations could come at the cost of jobs, says Sean McAlinden, chief economist at the Center for Automotive Research.

“Yes,” he tells a steel seminar in Livonia, when gas prices rise, so does the market share of small cars. “But if you wait, year after year, and if there is economic growth and growth in personal disposable income, it would offset the increase in fuel prices.

“In other words, people get used to it and they climb back out of their little cars and into something bigger, and it happens over and over again. This is a temporary spike in small-car sales.”

Ward's data shows small cars accounted for 20.6% of light-vehicle sales in April, a 20-month peak for the segment. Only the “Cash-for-Clunkers” scrappage program in 2009 saw higher levels. Prior to Clunkers, the last time small cars accounted for a bigger share of monthly sales was July 2008, also a period of gasoline-price spikes.

The shift to small cars in April also pushed fleet fuel economy to a near-record high in the first quarter, Ward's data shows.

Do not read a long-term trend into those numbers, though, McAlinden says. In addition to consumers making up the cost of fuel through household income, auto makers also are beginning to offer midsize cars with fuel-efficient powertrains making them more competitive with econoboxes.

That does not mean the Detroit Three, a group historically dependent on truck sales, should turn away from the small cars they have introduced recently.

McAlinden says history shows every $0.10 rise in fuel prices translates to an average 1.7% drop in Detroit Three market share.