"Economy cars used to be referred to as penalty boxes," says Geno Effler, manager of public relations for Kia Motors America. "Inexpensive cars don't have to be dull."
TRANSPLANTS FIND FOLLOWING
Imports and Japanese transplants are leading the charge. Ford Motor Co.'s new Focus entry has shot up the sales' charts since bowing in live TV commercials last fall. On the downside, General Motors Corp. and DaimlerChrysler's Dodge and Chrysler brands are slumping.
Through the first half of 2000, the Ford Focus newcomer is just 18,006 units behind segment leader American Honda Motors' Civic, according to Automotive News.
"There's definitely a shift to the imports," says Dick Macedo, exec VP-sales and marketing at Kia. "It's obvious the domestics have other priorities." Kia's Sephia ranked 11th last year in the category, based on annual sales of 82,211. This year, Kia Motors added another category entry, Spectra.
GM's Chevrolet Cavalier, second behind the Honda Civic in unit sales last year, slipped to fourth place in the first half of 2000. John Middlebrook, VP-vehicle brand marketing at GM, says sales of Cavalier and its sister model, the Pontiac Sunfire, are down because "we've had production shifts" to increase truck capacity.
LOSING MONEY ON CARS
GM is still losing money on its small cars, he confirms, declining to reveal whether it was still the $1,500 per vehicle it was several years ago.
Prices in this small and subcompact sector range from $9,434 for the Hyundai Accent to $13,670 for the Chevrolet Cavalier, which doesn't leave much latitude for profit.
GM's models aren't as fresh as its rivals. The last major redo on Cavalier and Sunfire was in 1995. GM delayed the next major redesign, set for the 2002 model year, until 2004 after consumer research gave the look a thumbs down.
The vehicles are important to GM because nearly 70% of Cavalier and Sunfire buyers stay with GM for their next vehicle, Mr. Middlebrook says.
Doug Scott, president of consultancy Allison-Fisher International, observes GM's Saturn S series is slumping, with sales down 17% through June. "GM has to get back on track" in the segment, he says.
In contrast, Hyundai Motor America is hot. Consumers seem to be buying into Hyundai's nearly 2-year-old ad campaign touting its industry-leading warranty. The South Korean importer's Elantra ranked ninth in unit sales in the category during the first half 2000. Unit sales of Hyundai's Accent, ranked 13th. Both are up 70% in unit sales.
Auto marketers "finally got great new products in the segment that are a lot better than just a few years ago," says Wes Brown, an analyst at consultancy Nextrend.
Sales in the category should total 2.5 million this year although drop to 2.3 million next year when an industrywide slowdown is anticipated.
FUN TO DRIVE
Toyota Motor Sales USA's newest entry is the Echo, targeted at Generation Y in ads that broke last October. Echo replaced the Tercel, which "was known as the cheap Toyota and was never bought on image or was fun-to-drive" like Echo, says Steve Sturm, VP-marketing at the automaker.
"There's a lot of choices out there and their styling is fresh and innovative," he says, adding the category is growing because of new entries, Gen Y reaching driving age and the market's view of the low-priced entries as alternatives to used cars.
Although Focus has "incredible momentum," Mr. Scott doesn't expect the car to "blow away" the Honda Civic for the segment sales' crown.
Neither does Mr. Brown, who says "Honda typically has perfect launches. Focus could pull it off if Honda has problems changing over its plant for the major redo of the 2001 model."