Compact Vehicles to Continuously Gain Share in the US Market

by : Joe Thompson

According to real-time retail transaction data from the Power Information Network (PIN) a division of J.D. Power and Associates, compact vehicles are still gaining a greater share of the US new vehicle market as more models of compact cars are made available for consumers.

The compact share of the total new vehicle market rose from 27.9% in 2005 to 31.2% in 2006. During that time, the share of the midsize vehicles dropped from 42.8% to 40.4% while the share of the large vehicles plummets from 29.3% to 28.5%. It should be noted that six years ago specifically in the year 2000, compact vehicles accounted for just 23.8% of the market.

According to Tom Libby, Senior Director of Industry Analysis at PIN, "Growth in the compact vehicle segments is being driven, in part, by an increase in the number of models and the popularity of small crossover vehicles."

Aside from the increase in the number of available compact models, price, styling and functionality are additional factors that contribute to the compact vehicle share growth. Libby also stressed that the prices of gas in 2006 may have caused some consumers to shy away from purchasing larger cars and trucks. Not to mention the high maintenance and repair cost of of larger cars and trucks.

Libby further stated, "It will be interesting to see if prices stabilize at or below $2.00 a gallon, whether we see a return to larger vehicles...I don't think we will."

Due to the popularity of compact vehicles they are moving off dealer lots more quickly than they used to and are sold quicker than the typical new vehicle. Last December 2006, five out of the seven segments with the fastest turn rates were compact vehicle segments, with the compact premium CUV (28 days) ranking 1st and the compact basic car (35 days) segments ranking second.

Segment loyalty of compact vehicle owners specifically in the non-luxury sector is also increasing. Likewise, percentage of owners of both midsize and large non-luxury vehicles trading to a compact vehicle increased as well from 20.8% to 25.8%. There is also an increase from 7% to 9.1% among large non-luxury vehicle drivers.

And for this year, 2007, seven compact models have made their debut at the North American International Auto Show in Detroit. The seven compact models that were introduced focused on new smaller crossovers and more conventional small cars---and that's according to Jeff Schuster, Executive Director of J.D. Power and Associates Automotive Forecasting.

Among the vehicles introduced during the 2007 NAIAS includes Ford Focus, Nissan Rogue, Volvo XC60 and some small crossover entries from Infiniti, Lexus, Cadillac and Audi. Volume in this segment is also expected to quadruple from 40,000 units in 2006 to 160,000 units by 2008, according to Schuster.