Are There Too Many Small Cars?


Are There Too Many Small Cars?

Here’s an interesting notion: Are there too many small cars? Has the demand for more fuel-efficient and greener rides caused a glut of small cars on the market, and will have negative consequences?

Too Much, Too Soon? That’s what Gas 2.0 asked concerning small cars and whether there are too many of them in the pipeline for the near future. They point to a Reuters story about how that is a growing worry for some. The worry is sort of a basic econ class sort of a bother: Will the increased numbers of new small car models coming from major manufacturers in the next year cause an oversupply in the small car market segment? And if that happens, will circumstances then force car builders into the situation of offering large incentives just to move the critters off dealer lots and thereby reducing profits?

Gas 2.0 worries that this is due to the incoming CAFE regs. As most of you know by 2016 the new CAFE regulations will require automakers to average 35.5 mpg over their new car fleets. And the easiest way to hit that target (if your a car maker on the world stage, like GM and Ford are, not to mention Chrysler, with new partner/overlord Fiat) is to bring in retooled European models for the U.S. market.

Sources call this “a glut of small, fuel-efficient cars”, which I think might be premature and a little extreme, but others would beg to differ with me.

Market research firm CSM Worldwide for one. CSM says that the incoming small cars will be hitting the market just as fuel prices will probably have stabilized. This could cause demand for smaller and more fuel-efficient cars to drop off. Or to put it another way, with the current price of gas in the U.S. staying at a relatively stable $3 per gallon (give or take), U.S. consumers might not feel the need for smaller and more fuel efficient cars as they have over the last year, when fuel prices spiked.

That could be. American’s could, over the course of the next 12 to 18 months, start making money and running up the charge cards again. Start feeling like they did about nine years ago. I wouldn’t put it past us. We are, as Hunter S. Thompson so aptly put it:

“This may be the year when we finally come face to face with ourselves; finally just lay back and say it – that we are really just a nation of 220 million used car salesmen with all the money we need to buy guns, and no qualms at all about killing anybody else in the world who tries to make us uncomfortable.”


Source: Gas 2.0

Photo from Flickr user KiltBear

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