U.S. auto market may mimic Europe

Automakers plan for smaller cars to make inroads into domestic markets

The European automotive market has always boasted more smaller cars than the United States.

If consumers believe fuel prices will remain high, the United States may see its automotive market become more like the European market with fewer large vehicles on the road and more small cars.

Many small cars, especially front-wheel-drive, four-cylinder cars, become a part of the compact-performance market niche when an enthusiast goes about modifying its look and performance.

The compact-performance market niche has been growing strong over the past decade, taking the position as the second-largest market niche in the specialty-equipment industry. Last year, the compact-performance market niche grew about 12 percent over 2006, according to research by the Specialty Equipment Market Association (SEMA). SEMA serves the $36.7 billion vehicle accessorizes and aftermarket equipment industry.

The current state of the economy has caused shifts in consumer demand that may be permanent and not cyclical. This means that the supply may also take on a permanent change. Companies realize this problem and are investing money in permanent changes to align their supply with demand, according to SEMA research.

Motor Authority is reporting that Chrysler is also making several advances in the small-car field. Already confirmed for the U.S. is the new Versa hatch and sedan, which Chrysler is sourcing from Nissan, but a second smaller car based on the 2006 Dodge Hornet Concept is also in the works and will be launched in Europe and the United States by 2010.

Hopefully the new Versa will float Chrysler until they are able to meet new consumer preference with the Hornet. Automotive News is also reporting that Chrysler is idling the Dodge Ram pickup production plants in Mexico for two weeks.

Motor Authority is also reporting that Ford is going to retool U.S. truck plants to build Euro models. This is another bold change by an automaker that shows the quickness in the change in consumer preference towards smaller cars.

Motor Authority states that "although Nissan hasn't been as hard-hit by the downturn in the American car market as the domestic manufacturers, it is still moving to shift production from its Titan and Armada to the Altima sedan. Nissan's May sales were up 8.4 percent across all models, but the Titan and Armada dropped over 50 percent each while the Altima climbed 43 percent."

There will probably be an effect on the specialty-equipment market as consumer preferences rapidly change to smaller cars. The light-truck niche in the past has been the largest niche. The specialty-equipment market may see other niches, such as the compact-performance niche, begin to gain in market share, SEMA research indicates.

For more original SEMA market research, visit www.sema.org/research.

Source: Specialty Equipment Market Association (SEMA)