Autoblog

Smaller cars generally arent very profitable.

Toyota never made much money on Tercels or Echos or Scion Xa's and Scion Xbs. They make big money on Lexus's, pickups, and SUVs. And they make a decent profit on Camrys, no doubt. Note that the Xa and Xb have been replaced by larger cars that get much worse gas mileage.

Even Honda is trying to get into the big vehicle market with the Pilot and the Ridgeline. And today's Civic is far bigger than the Accord of a few years back.

With gas prices going up, small cars will get more profitable, but GM, Ford, and ChryCo will sorely miss SUV and full size pickup profit margins. So will Toyota, Honda, and Nissan.

BTW - I drive a 95 Miata, which is smaller than any car you can buy in the USA today. I'm just stating financial reality.

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Holy cow Dave. As of 2007 Toyota had sold 30 million corolla's. I don't have the numbers for the Honda Civic but I'm sure it's close. The Mazda 3 seems to have revived Mazda. I'm sure the Sentra's been a big seller for Nissan.

There isn't much of a markup on smaller cars but the manufacturers will make up the profit based on the number of units sold. I don't know for sure about other manufacturers but cars like the Corolla and Tercel were the cars that financially made Toyota, which is now the most profitable car company out there.

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@ dave
Businesswise, all car markets have to be similarly profitable, at least on the margin. Couldn't say the same about high-end car markets such as sportscars and exotica, where relevant economic phenomena arise (such as Veblen and Giffen demands) that exceed general rules of investment and profit.
You absolutely couldn't back the argument of cheaper cars being less profitable. In fact, see FIAT or Nissan as good examples of the exact opposite.

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@hydrogenvodka

Are you braindead?

Nissan almost went bankrupt and was bought out by Renault.

Fiat has long since abandoned the idea of selling cars in the USA because they can't do it profitably.

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@sw-

The Civic is no longer a small car.

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The interesting thing is that Jay Leno has taken (or earned) a lot of money in endorsements and personal appearances on behalf of automakers.

To say "It ain't that hard folks -- make better cars." Says a lot about his personality, which by most accounts is passive aggressive. I guess we're seeing that here.

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There are many car companies that are profitable selling small cars. Notice the key difference in thinking. Americans think markup of small cars is small and therefore wanted to sell primarily big cars. That is cost accounting. However, the Japanese threw cost accounting out the window and said instead how can we make overall profit selling small cars, forgot about individual markup per product, but at the bottom line level of all profit made. It is a fine distinction that changes anything. Has anyone read "The Goal".
No offense Dave, but Nissan almost went bankrupt not because of small cars. And the fact that the Civic is technically as big as the old midsize just goes to show how efficient car makers are getting at selling small cars.
America can make a good small car, we just got to change our thinking about them. They are not bad, and they are not unprofitable!!

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@Dave,

Check your facts... The Scion Xb sales fell when they released the bigger version.

Small cars are highly profitable, especially now. Microeconomic theory aside, look at where the market is heading.

Nissan's troubles in the late 90's has little to do with the classification of the products they were selling. Nissan almost went bankrupt because they had problems establishing their brand overseas (beyond Japan), were facing troubles due to the extremely slow growth in the Japanese economy during that time period, and were selling products that were of low quality. (Note that if you change the word "overseas" to "domestically", "Japan" to the good old "USA," and "Nissan" to "The Big 3" you pretty much have the story above us.)

The question is not "do we produce small vehicles or not?" Yes, the Big 3 must produce small vehicles. It's so clear that someone who knows where gas prices are heading and knows nothing about the auto industry should be able to determine that. The thing is that the Big 3 should learn from Mercedes' mistake with trying to establish the C-class as a heavy competitor to the 3 series and IS... When you make an entry-level car you don't have to dumb down the engine, use awful cheap materials, and dumb down the design. They shouldn't fear cannibalism so much. To simplify things and in a monochromatic world their choices are clear: Fear that the small cars are going to cannibalize their more expensive cars (which aren't selling well enough at all), or don't fear cannibalism and sell high quality small cars in bulk.

It's foolish to stand by the auto companies on this. They aren't facing a massive lose-lose situation. C'mon, people... We live in the United States of America. Of course we can get this right. If we can lead the world in the most complex medical sciences and in technological breakthrough, we can definitely lead in the auto industry. Perhaps we just need different, less established, domestic companies to enter the market. But perhaps the Big 3 can just get things going right.

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Contrary to what you think, the Americans do not lead in the most complex medical sciences and technologies. The medical field is not clearly divided into countries, its a world phenomenon, the Europeans and Asians contribute a lot to medical sciences, even Cananda contributes a lot, in fact if you do a research to population ratio, Canada's is much higher. As for technological breakthroughs, sadly, those occur less and less in the states nowadays, Japan and Taiwan is stealing a lot of the limelight.

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Both Ford and GM have been meeting or beating the competition with the last generation of cars! I say he should have said this 5 years ago and not now when they seem to have turned the corner. What I really think is he wants the fifth gear job and this is his way of showing that he will say whatever it takes to get the job, either right or wrong.

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The Accord hasn't been as small as the civic any time in the last fifteen years.
More like twenty years ago.

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@Dave... "maller cars generally arent very profitable" ya, boy that BMW is sure taking a loss on MINI..

Oh wait, they're not... The whole freakin line is very profitable... why? Becaue it's not a dumbed down small car.

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@Dave,

For a manufacturer that specializes in making small cars, is it any wonder that Fiat doesn't sell well in the US?

In case you don't know this, but the maker of the humble 500 and cute Pandas own Alfa Romeo, Meserati and Ferrari.

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The reason those ancient sixes are still sold as base engines is because fleets want them.

When you have a service department trained and experienced in keeping one drivetrain going, and baselines for part replacement, and a warehouse full of parts, throwing all that away to get better throttle response for some employee whose job isn't 'enjoy driving' doesn't make sense.

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Johnny what are you talking about? The 4.2 atlas 6 is as big as a small black 5.3 that you're saying is too big. And it puts out less power and torque than the 5.3. And it gets the same mileage (aka in the Trailblazer).

If you don't want to move up to a small block, why would you want to move up to a big atlas motor?

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GM could easily get 300hp from their inline6. (variable intake valve timing, bigger pistons from I4/5 4.4 liters 300hp, 300ft-lbs)

Or GM could make a new V6 derived from the LS3. A 4.6 liter V6, add VCT 330hp on regular.

Where is the 6 speed automatic for the half-ton, 1500, 6L50?

Heck for fleets, GM could install their inline 5 cylinder engine. 250hp 250ft-lbs & a 6 speed automatic would be very capable

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