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NINETY EIGHT REGENCY

U.S. small car rush may create oversupply, CSM says

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U.S. small car rush may create oversupply, CSM says

DECEMBER 9, 2009 - 12:01 AM ET

DETROIT (Reuters) -- A new lineup of small cars slated for U.S. showrooms next year may create an oversupply of compact vehicles in the U.S. market at a time when gas prices remain stable, an industry forecasting firm said on Tuesday.

Automakers including General Motors Co. and Ford Motor Co. are rushing to launch new fuel-efficient small cars and electric vehicles in 2010 to meet tighter fuel economy standards in the United States and attract buyers that have gravitated toward smaller cars.

Michael Robinet, vice president of forecasting at CSM Worldwide, said if gas prices are steady from today's levels of under $3 per gallon "extreme pressure to channel smaller vehicles in the market due to CAFE and emissions standards will raise incentives and lower profitability."

Automakers are required to raise their fleetwide average to 35.5 miles per gallon by 2016 under a U.S. law aimed at cutting carbon emissions and spurring development of fuel-efficient vehicles.

Glut of small cars?

Globally, automakers and governments are estimated to spend about $428 billion a year by 2020 under a worldwide push for promoting greener transportation, CSM said.

Increasing competition in the subcompact and compact segments, which have long been dominated by Asian automakers, may also hamper Detroit automakers' goal of making money on selling small cars, CSM said.

CSM CEO Craig Cather said, "It is very possible that U.S. automakers will not achieve their objectives of selling small cars at a profit."

GM plans to launch its Chevrolet Cruze small car in the U.S. market in the third quarter of 2010, a vehicle it said was capable of reaching 40 miles per gallon in highway driving. GM also aims to launch the Chevrolet Volt electric car at the end of next year.

Domestic small cars

The No. 1 U.S. automaker is counting on a series of upcoming fuel-efficient vehicles like the Cruze and the Volt to revitalize its lineup as it tries to reverse a long-running slide in market share after emerging from a government-financed bankruptcy on July 10.

Ford is set to roll out the Fiesta small car in the United States by early summer and a redesigned Focus compact car later in 2010 -- which the company has touted as two key U.S. car launches next year.

Chrysler Group LLC, under the management of Italy's Fiat S.p.A., also plans to bring the Fiat 500 subcompact to the U.S. market at the end of 2010.

The trend toward smaller, more fuel-efficient vehicles will continue as the U.S. economy recovers and gas prices start to rise, CSM said. But a gradual increase in prices is not sufficient enough to drive demand for such vehicles, it added.

"We need a little bit more that that," Robinet said, citing gasoline taxes or another oil shock as possible catalysts for boosting demand.

Edited by NINETY EIGHT REGENCY
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Actually just my two cents...but the small cars should be here just in time for higher fuel prices and lower supplies...

Chris

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here is the deal. there were not enough small car choices. and we do need to encourage more choice in small cars.

but this whole article further underscores the big problems created by the global warming sham and the greed of wall st.

carmakers cannot downsize their operations or production 50% in one year. Nor can they design and build a car for sale in 6 months to respond to violent swings in the market which were overly influenced by the greed, oil speculation, and overhype about a scientific theory causing a meltdown of society.

the auto market like many is one that needs stable influences. we can't have the ebb and flow between undersized cracker boxes (see 1980's GM lineup and cars from 2009+) and gargantuan SUVs. Every time the market overreacts to the psychotic ecoweenies, it ruins the car market for 10 years.

what DOES make sense is to continuously have evolving small car choices and let the people decide their viability on the market. I would bet in this point and time just about anything small will sell, if it has a low price tag in a depressed economy. as long as the small cars are cheap in the USA at some point the dealer will be able to unload them. it will just take sales away from used and more expensive new ones.

if cars and insurance were inexpensive enough and structured so that it was financially viable to keep a 3rd car (for errand hopping and to save gas) i think you's see a lot of sparks, aveos, and cobalts be sold as go getter spares.

Edited by regfootball
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There will be a glut of small penalty boxes. The good ones, like all good product, won't have inventory issues. So the Fit and Fiesta will probably be fine, the Mini has never had problems, but I'll play a tiny violin for the Aveo.

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I'll play a whole New Orleans Jazz band if Chryco and Fiat can team up to bring us cars like the 500 and MiTo.

Chris

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CAFE needs to be repealed, or at least reigned in at current levels. Forcing ppl into Sparks will be a disaster and could bring the final death knell to the domestic auto industry. And outside, undue influences brought to bear on oil prices... gasoline prices... are criminal.

Let people drive what they want to drive. Give them choice, from Sparks to ZR1s to Suburbans. People do NOT need to be herded. Trust them, trust the market, and build what's in demand... or die.

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Reg and Ocn have the right of this issue.

Everyone needs to step back and take a deep breath, or we will all regret our headlong rush into stupidity.

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I've never owned and probably will NEVER own a sup-compact.

Compact is the smallest I'll ever go.

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Reg and Ocn have the right of this issue.

Everyone needs to step back and take a deep breath, or we will all regret our headlong rush into stupidity.

+1

Gotta keep it simple...

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CAFE needs to be repealed, or at least reigned in at current levels. Forcing ppl into Sparks will be a disaster and could bring the final death knell to the domestic auto industry. And outside, undue influences brought to bear on oil prices... gasoline prices... are criminal.

Let people drive what they want to drive. Give them choice, from Sparks to ZR1s to Suburbans. People do NOT need to be herded. Trust them, trust the market, and build what's in demand... or die.

Spark has nothing to do with CAFE. Various industries successfully lobbied for an attribute-based system, which doesn't penalize automakers for making large vehicles. Hyundai's target MPG, for instance, is much higher than GM's. Basically it's about incremental fuel economy gains across all vehicle sizes. And it's possible... just look at the whopping 20%+ gain of the 2011 Mustang V6.

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Well if it has "nothing to do with CAFE", then I cannot think of a single valid reason for its existence.

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Well if it has "nothing to do with CAFE", then I cannot think of a single valid reason for its existence.

What about people who want a really basic, super inexpensive new car? In the UK, a Spark starts at ₤6,495... or 40%+ less than the cheapest Ford Fiesta there.

The fact remains... the latest CAFE regs allow for lower MPG standards for manufacturers of larger vehicles. No one is forcing you into a Spark.

Edited by pow
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