Detroit: Will Americans Ever Buy Small Cars?

Earlier this fall, Holly Ballard Gardner was looking to trade in her Toyota Land Cruiser for a smaller vehicle. The 45-year-old drives roughly 400 miles a week chauffeuring her three sons from her Tucson, Ariz., home to their various activities. Interested in trimming her gas expenses, she was eyeing a Honda Fit, a Volkswagen Beetle convertible, or a Volkswagen Jetta diesel. But she ultimately decided to hang on to her Land Cruiser, which has already racked up 160,000 miles. "The reality is that I can't have a car any smaller than a full-sized SUV," she says. A big vehicle is essential to carting around her boys, their friends, the dog, backpacks, and assorted sports equipment.

That's not exactly what a leaner and more eco-conscious Detroit expects to hear. For years now, the auto industry's critics have been calling for Detroit to roll out small, stylish, and fuel-efficient cars that they say Americans are clamoring for. The question is, do we really want to drive small cars? Since consumers are just beginning to scout dealerships for year-end bargains, actual sales figures may be a month or so away, but the answer, according to some analysts, is already clear. "Americans don't want small cars," says John Wolconowicz, an auto analyst for IHS Global Insight. Domestic auto companies feel compelled to offer smaller vehicles because of pressure from the government to do so, he says. But as long as the price of gas remains below $4 a gallon, he doubts consumers will bite.

Whether we want the vehicles or not, automakers are committed to a small-car sales strategy. Over the next three years, manufacturers plan to roll out at least 10 new small-car models. These aren't the sluggish, bare-bones autos of years past. They represent a new generation of more hip, European-style cars that are full of pep, with glitzy interiors and pricey new technologies you'd expect to see on luxury cars. Tighter new federal fuel-economy standards and pressure from the government to think environmentally friendly are helping to fuel the trend.

General Motors is unveiling three new small cars—the Chevrolet Cruze, a small car due next year; the Spark, a minicar due in 2011; and the Chevy Aveo, a compact—while Chrysler will unveil the Fiat 500 in 2011. "Compact cars are the sweet spot" and will likely be the fastest-growing part of the market, says Mike DiGiovanni, executive director of global market and industry analysis at GM. He notes that GM is presuming a return to high oil prices that will cause the market to shift to smaller vehicles. At the same time, recognizing Americans' need to drive long distances, DiGiovanni says GM is also focused on making its midsize vehicles more fuel-efficient, so it has an appealing lineup across the board.

At Ford, there are no plans to abandon production of its popular trucks. But the company is making small cars a priority, launching the Ford Fiesta and a Focus replacement next year, as well as the C-MAX, a compact car with sliding doors and three rows of seats, in 2011. The company's only small-car offering, the Focus, has been a success, says George Pipas, Ford's chief U.S. sales analyst. "We can't even think about growing our market share without having a very strong presence in the small-vehicle market," he says, noting that the Focus already represents 11 percent of the company's sales.

Not everyone is so big on Americans going small. "We do expect to see more small cars in the future, but not to the extent that Ford is predicting," with the share of the market remaining below 25 percent, says Mike Omotoso, senior manager for global powertrain for J.D. Power and Associates.

Why? Like Gardner and her Land Cruiser, many Americans still crave space. Melinda Mallari Swan, a 56-year-old living in Hinckley, Ohio, traded in her Suburban for a Honda Civic when gas prices peaked at $4 a gallon. But after driving it for more a year, she says the only time she loves her Honda is at the gas pump. "I can't haul around Girl Scouts, pets, and gardening equipment like before," she says. She also misses "the safety, comfort, utility, and four-wheel drive."

The perception that bigger is safer will be hard for automakers to shake, says Adrian Lund, president of the Insurance Institute for Highway Safety. While small cars are getting safer, he says, "bigger and heavier vehicles still provide their occupants better protection. Size and weight do matter."

That sentiment still seems to be evident on dealer lots. Jack Kain, a Ford dealer in Versailles, Ky., said the F150 truck remains his biggest seller. He predicts trucks and minivans will continue to outsell small cars, at least in his area. "People won't give up the luxury or the weight and the safety of the larger car," he says.

But Ford's Pipas is confident that many will embrace the industry's new focus. "We can't grow just selling pickup trucks and sport utility vehicles," he says. Detroit's big hopes, he admits, are riding on the future of small cars.