With edge overseas, new Japan entries pave way

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Evan Hirsh, VP-consultant at Booz Allen Hamilton's auto practice, has more than 18 years in management consulting and has worked with a wide range of marketers around the globe. Based in the Cleveland office, his specialty is sales, marketing and distribution channels. The co-author of "Channel Champions" gave Jean Halliday, Advertising Age's Detroit bureau chief, his take on the small-car market. Below is an edited transcript.

How will the small-car segment grow?

Several things will drive a higher penetration of smaller cars for a while. As fuel prices go up, people move to smaller, less powerful cars. Fuel prices reaching higher levels meaningful enough can change the economics for consumers to switch to smaller cars. People shift downward to smaller cars because they cost less to operate. Also, it's faddish for some people. It's much more acceptable to be seen in a hybrid than in a big SUV even though the people who drive hybrids are not driven by economics.

In Europe, you have vehicles with utility and size, like Renault Scenic, a small SUV that allows people to get [the most out of] the "U" in SUV. It could catch on here. Companies that are investing a lot around the world in small cars can leverage them here.

Japanese players looking to grow in new segments, there's an opportunity in small vehicles and they have platforms elsewhere in the world. It's a place to gain share. All the big Japanese automakers have plans for smaller "A" segment cars in the U.S. ["A" is the smallest-size segment.] You'll see growth in the "A" segment and smaller cars, and you'll see share continue to be lost by big SUVs.

Do Americans want small cars?

It's really fundamental. The data suggest people would like to have as much power and space as they can afford. They prefer to have bigger vehicles. The only things that can change it are regulation and technology. Some regulation by the federal government could force some more fuel-efficient cars. I don't see that happening, although higher fuel prices might do that on their own. Or if we find cheaper powertrains, whether [for now-pricey] hybrids or diesels, that could be sold [for less than] the premium prices we have today.

Was the jump in small-car sales due to Katrina and resulting high gas prices just a blip?

Gas prices are not going to drop down a whole lot. People now have seen gas prices at elevated levels, and they have less belief it's a small blip.

GM admitted in 1997 it was losing money on small cars in North America. Can carmakers make money on small cars?

Yes. Is it as profitable as a big SUV? No. Some global players have these vehicles because they meet the needs of other markets.

Is Detroit behind in small cars?

The companies that are ahead in small cars have big positions in markets where fuel prices are high, so they already have vehicles designed for those markets they can leverage here. There's been a shift and a lot of investment by the Big 3 into small cars, sort of after the fact.

Are big cars and trucks still beautiful?

If I can afford it-big is beautiful.
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