Canada's decades-old romance with small cars is waning, a victim of stable pump prices, better fuel efficiency for larger rides, and a dramatic shift in consumer tastes.
Despite a long list of good small cars and fuel-thrifty alternative powertrains – hybrids, plug-ins, cleaner diesels – consumers are snapping up CUVs, SUVs and pickup trucks at a fantastic clip.
Sales of all eight of Canada's favourite small cars are fizzling, some cratering dramatically. The Honda Civic, Canada's best-selling car for 17 straight years, was off by 5.6 per cent through the first quarter, year-over-year. That's shocking. But the Ford Focus was down a whopping 17.3 per cent, and Chevrolet's once-popular Cruze slid 14.8 per cent.
J.D. Power and Associates says this trend – versus a blip – is not entirely about cheap gas, either. In 2014, when the national average retail price of regular fuel hit an all-time high of $1.28 per litre, light trucks constituted 58 per cent of Canadian vehicle sales, up from 52 per cent in 2009, as the market researcher reported in a note to clients.
In the United States, Ford is cutting hundreds of jobs at a plant producing small cars after having set an April sales record for SUVs and crossovers.
Still, fuel prices are accelerating the decline of small cars. Auto analyst Dennis DesRosiers says that the dramatic drop in crude prices puts more money into the hands of consumers, in part explaining why they buying bigger, more expensive vehicles.
Canada's and Ford's best-selling vehicle is the F-150 pickup, whose sales outpace the best-selling car, the Civic, by more than 2:1. As DesRosiers reports, while sales of eight of the top 10 passenger cars are down, seven of the top-10 light trucks are up, year-to-date.
"Since most of the top passenger cars are compact or subcompact, and most of the light trucks are pickup trucks and crossover utility vehicles, the sales of the top 10 cars and trucks are in part reflecting the decline in gasoline prices," he writes in a note to clients.
Gas-guzzling sports cars are up 36.4 per cent, luxury cars are up 18.2 per cent, and large pickups (6.8), large vans (39.7), compact luxury utilities (47.5), and large sport utilities (39.6) are all up dramatically.
Here's what happens when gas gets cheaper, says DesRosiers: the typical Canadian light vehicle consumes approximately 1,820 litres of fuel a year. A 10-cent decline at the pump translates into $182 saved. A 20-cent decline equals $364 saved and a 30-cent decline, $546 saved. When consumers start feeling the benefits of nearly $50 a month saved at the pump, the jump from a small car to a functional and image-gratifying light truck reaches the tipping point.
Much of the 15 per cent jump in overall fuel efficiency over the last 25 years has come in the last handful, says DesRosiers, as car companies moved to meet government-mandated fuel economy targets for 2016 and even tougher ones for 2025.
"Every time, without exception, an OEM increased fuel efficiency, consumers moved to a larger and/or a more powerful but less fuel-efficient vehicle," says DesRosiers.
Research shows that fuel economy is really not a sales differentiator with consumers, but an expectation, says J.D. Power. "Owners expect great fuel economy, and only if they view their performance as outstanding (10 out of 10) does fuel economy become a loyalty factor."
Last year, sales of mainstream crossover and utilities increased 18.3 per cent and the luxury kind jumped 19.4 per cent. If this trend continues, Canadians will make compact utilities the most popular type of vehicle for 2015 – more so than full-size pickups and compact cars.
Goodbye small cars. Our new love is the small utility.
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