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The Honolulu Advertiser
Posted on: Tuesday, July 4, 2006

Subcompact comeback inspired by expensive gas

By Greg Wiles
Advertiser Staff Writer

Yuka Nakatsuka signals her approval as her husband, Brian Nakatsuka, tries out the view from the driver's seat of a 2007 Toyota Yaris at Toyota City in Mapunapuna. "I don't care about style. I care about the gas mileage," Brian Nakatsuka said. "I care about style," Yuka Nakatsuka countered.

JOAQUIN SIOPACK | The Honolulu Advertiser

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NEW-CAR SALES MAY FALL BY 2%

Hawai'i's automobile dealers are expecting a solid though not spectacular year for new sales of cars and light trucks in 2006, according to a forecast by Auto Outlook Inc. for the Hawaii Automobile Dealers Association.

The Malvern, Pa.-based research firm is forecasting sales will slip 2 percent from last year, but said they will remain at a good level for the Islands. It projects total new-vehicle registrations will exceed 68,800 this year.

"It's tailing off a little, but historically speaking, it's still a very good year," said Stan Masamitsu, president of the Tony Hawaii Automotive Group Ltd.

The decline from last year won't be as steep as nationally, where Auto Outlook estimates there will be a 2.8 percent decline.

"The Hawai'i economy remains strong, and the construction industry appears to remain strong," said Rick Ching, senior vice president of Servco Pacific Inc. "It will still be considered a good year, even if it's off from a very strong 2005."

Advertiser Staff

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Donna Yoshimura and her daughter, Dena, stood eyeing up Toyota Motor Corp.'s new Yaris, admiring its lines and, more importantly, its sticker price of about $14,000.

"It's cheap. It's small," said Dena. "You're paying a used-car price for a new one."

And "it's good on mileage," chimed in Donna, who also planned to look at Honda Motor Co.'s new subcompact, the Fit, as she shopped for a graduation present for her daughter.

Indeed, the Yaris, Fit and Nissan's soon-to-debut Versa are attracting attention for their 30-something gas mileage and sub-$14,000 starting prices. The new cars are generating buzz about the subcompact category and are forecast to help resuscitate sales for the smallest car class nationally.

The three Japanese cars are being introduced in the U.S. after selling well in other countries with higher gasoline prices. They join other subcompacts already in the market, including Chevrolet's redesigned Aveo, Hyundai's Accent and Kia's Rio.

Even people who aren't traditionally buyers of the entry-level cars are taking a look at them because of the gasoline savings and not-your-father's Pinto styling. The cars may appeal to empty-nesters who don't have to drive around their kids, or as a second family car for people who like something economical for running to the market or commuting.

"Those cars are going out as fast as they are coming in," said Don Brower, general sales manager at Pflueger Honda on Ala Moana, talking about the Fit. "Those cars are going to have a high demand for the next year or so."

U.S. subcompact sales are forecast to be one of the fastest-growing car segments this year by Boston-based Global Insight Inc., a consultant and economic forecaster. It projects sales will jump to more than 300,000 units this year from a little less than 200,000 last year.

The gasoline economics are also clear. Someone driving 10,000 miles a year and getting 20 miles a gallon will have an annual gasoline bill of $1,550 at $3.10 a gallon. Switching to a car getting 32 miles would save more than $580 a year.

"It's practically the right product at the right time," said Jesse Toprack, an analyst with Santa Monica, Calif.-based Edmunds .com. He said Yaris' sales have jumped beyond its predecessor, the Echo, making it a significant product for Toyota.

Car dealers said it's difficult to say whether the trend will become permanent, with more people forever tilted toward subcompacts, compacts and hybrids.

Dealers said people are asking more questions about fuel efficiency, but they continue to buy sport utility vehicles and large trucks that typically haven't been at the top of the mileage list, dealers said. Sales of the biggest SUVs may be slumping as people trade down to so-called "crossover" vehicles, or SUVs built on lighter car chassis instead of truck frames.

"There are people who need trucks for business purposes or for some functionality they can only get with a truck or SUV," said Rick Ching, senior vice president of Servco Pacific Inc., the state's largest automobile seller with its Toyota, Scion, Suzuki and Chevrolet vehicles.

He said Servco has been pleased with Yaris sales and with its customer demographic that ranges from first-time car buyers to elders and folks who just want basic transportation with good mileage.

At Honda dealerships, the reports are similar. Attractive styling and more features add panache that earlier subcompacts may not have had.

"It's not like 'I'm buying this because I can't afford anything else,' " said Stan Masamitsu, president of the Tony Hawaii Automotive Group Ltd., which sells the Fit as well as the Hyundai Accent subcompact, and will have the Versa, Nissan's subcompact entry that is scheduled to drive onto car lots this month.

"Calling it entry level is a little bit misleading."

But small isn't beautiful for everyone. Honolulu resident Chad Okumoto, 36, said the Fit was too tiny for his liking as he looked at a Suzuki Aerio for his fiancee.

The Aerio still gets an enviable 30-plus miles a gallon on the highway. So do the Honda Civic and the redesigned Nissan Sentra, both of which are bigger than subcompacts. George Magliano, director of Global Insight's automotive industry research, says the new subcompacts may steal some buyers away from their compact cousins, but that long-term, the subcompact market is limited.

"The market is going to grow, but it's not going to explode quite like people expect it," Magliano said. "People like to have a little more room."

Reach Greg Wiles at gwiles@honoluluadvertiser.com.

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