B Segment Earns an A-Plus for Auto Industry

Demand for Tiny Cars Has 'Skyrocketed'

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DETROIT (AdAge.com) -- While new-car sales slumped 12% last month as consumers fretted over the economy, their mortgages and soaring gas prices, there was one bright spot for the auto industry: the so-called B segment.
Toyota Yaris
Toyota Yaris

The segment consists of compact budget brands and includes the Toyota Yaris and Hyundai Accent. According to Automotive News, B-segment sales jumped 23.7% to 25,832 units in March vs. the same period a year ago; B sales are up 33.6% for the first quarter to 65,472 units.

For the month, B brands even outperformed small economy cars, which include the Ford Focus and Honda Fit. That segment slid 5.7% in March to 148,254 units but rose by almost 2% for the first quarter to 442,354 units, according to Automotive News.

SUV fad fading?
For Americans obsessed with their SUVs, it's a significant shift. "Only in the past six months are we seeing a change in attitudes about small cars," said Art Spinella, president of CNW Marketing Research. Their cheaper sticker prices, better fuel economy and more fun-to-drive models are driving sales, he said.

What's more, men now represent more than half of buyers in the small-car segment. "That has not happened since I started this business in 1985," Mr. Spinella said.

Yaris was the top seller among the B team last month, reporting sales of 12,953 units, 83% higher than March 2007. By comparison, Toyota Division's total sales dropped almost 3% in March to 192,791.

'Off the charts'
Although the Yaris tally was only about half that of Corolla, which sold 25,109 units in March, Tom Libby, senior director of auto consultant Power Information Network, said the Yaris' performance was "off the charts," because anything more than 6,000 units in the category is extraordinary. "Demand has just skyrocketed," he said.
The B Roll

PIN's B-segment car data (PIN includes the Honda Fit and Nissan Versa in that ranking, while Automotive News does not) revealed the category captured a 3.2% share of total industry volume, up from 2.8% in February. "I've never seen it above three before," Mr. Libby said.

Auto-info shopping site NADA Appraisal Guides, at nadaguides.com, found that of the 25 vehicles showing the biggest jumps in consumer pricing requests in the first quarter, nine were compact cars—the most of any segment. Among small cars, requests for prices jumped the most for the Mazda3, up 105% during the period, followed by the Toyota Yaris, up 102%.

'Serious shoppers'
"We consider those people to be serious shoppers," said Tara Baukus Mello, lead market analyst for the online outfit. She said consumers who shopped on the site in March are likely to buy in April or later.

Wes Brown, VP of consultant Iceology, said the B segment has limited growth potential because the small models aren't practical for families of five. As such, he said, the explosion in budget cars' popularity is only short-term, especially because "within three to five years carmakers will have larger vehicles in other segments that will get better mileage."
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