Once fuel had reach $4.05 a gallon nationally, we watched as truck sales plummeted and small/compact car sales got a little boost. People in the industry began to say that compact cars were going to appeal to more Americans and make up a larger percentage of vehicles sold here in the United States. The trick is said to be selling these small/compact cars for a profit. Up until recently the major domestic automakers had been able to make up to $12,600 profit on Large Luxury SUVs, but selling a small/compact car only raked in about $2,400 bucks. Once you subtract anywhere from $3,000 to $5,000 for fixed costs you could actually end up with a negative number. Which means that a solid business case to produce small/compact cars here in the U.S. is not always an easy case to make; other than to help offset CAFE. Although, Mazda seems to be able to make a business case for them, and they sell tons of them!
Of course now there is talk of ‘premium small cars’ becoming popular with Generation Y and possibly becoming a more lucrative business venture. With fuel prices dropping again to around $2 a gallon only time will tell what the future of the small/compact car will be here in the United States. Still, injecting premium content into a small car may go a long way in appealing to an increasing number of people who don’t think small size should equal skimpy content.