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Compact Vehicles Continue to Gain Market Share

January 18, 2007

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Fueled by the availability of more models for consumers, compact vehicles continue to gain a greater share of the U.S. new-vehicle market, according to real-time retail transaction data from J.D. Power and Associates.

The compact vehicle share of the total new-vehicle market rose from 27.9 percent in 2005 to 31.2 percent in 2006. During the same time period, the share of midsize vehicles dropped from 42.8 percent to 40.4 percent, while the share of large vehicles declined from 29.3 percent to 28.5 percent.

Six years ago, in 2000, compact vehicles accounted for just 23.8 percent of the market.

"Growth in the compact vehicle segments is being driven, in part, by an increase in the number of models and the popularity of small crossover vehicles," said Tom Libby, senior director of industry analysis at the Power Information Network (PIN).

In addition to an increase in the number of compact models available, price, styling and functionality are also factors contributing to the compact vehicle share growth. Libby also points out that gas prices in 2006 likely have some consumers still shying away from larger cars and trucks.

"It will be interesting to see if prices stabilize at or below $2.00 a gallon, whether we see a return to larger vehicles," said Libby. "I don’t think we will."

Due to their rise in popularity, compact vehicles are moving off dealer lots faster than they used to and much faster than the typical new vehicle.

Five of the seven segments with the fastest turn rates in the industry in December 2006 were compact vehicle segments, with the compact premium CUV (28 days) and compact basic car (35 days) segments ranking one and two, respectively, in the industry on this measure.

In addition, the turn rates for these two segments declined dramatically from December 2005 to December 2006, even though the industry’s turn rate climbed from 55 days to 67 days over the same time period. Seven of the 12 new models with the fastest turn rates in the industry in December -- among more than 290 models -- were compact vehicles.

Segment loyalty of compact vehicle owners, particularly in the non-luxury sector, is increasing as well. In the fourth quarter of 2006, 56.4 percent of all owners of non-luxury compact vehicles traded for another one -- up from 51 percent in the fourth quarter of 2005.

Furthermore, the percentage of owners of both midsize and large non-luxury vehicles trading to a compact vehicle rose as well, from 20.8 percent to 25.8 percent among owners of midsize non-luxury vehicles and from 7.0 percent to 9.1 percent among large non-luxury vehicle drivers.

Seven compact models were either introduced or confirmed for the U.S. market earlier this month at the 2007 North American International Auto Show in Detroit. Introductions focused on new smaller crossovers and more conventional small cars, according to Jeff Schuster, executive director of J.D. Power and Associates Automotive Forecasting.

The volume compact model introduced at the show was the restyled Ford Focus. It will continue on the same vehicle platform but with substantial upgrades to the exterior and interior styling. In addition to receiving upgraded styling, the Focus will be one of the first Ford models to offer the Microsoft Sync in-car digital system.

The Nissan Rogue is a noteworthy new crossover that also debuted in Detroit. Bearing a strong resemblance to its larger sibling, the Murano, the Rogue will compete in the compact CUV market this fall with the Saturn Vue, Ford Escape, Honda CR-V and Toyota RAV4, among others.

"We expect this segment to remain intensely competitive and under pressure from midsize crossovers as well as small conventional hatchbacks and sedans," Schuster said. "Overall, we expect it to maintain share near 8.5 percent of the market over the next two years."

The concept version of the Volvo XC60 was also introduced at the Detroit show. This model is the near production-ready sibling to the larger XC90, carrying the smaller theme to the premium market. Small crossover entries from Infiniti, Lexus, Cadillac and Audi are also in the pipeline, making this a significant growth segment. Volume in this segment is expected to quadruple, from 40,000 units in 2006 to 160,000 unit by 2008, according to Schuster.

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