Filed under: Forecasts, Consumer experience, Competitive strategy, General Motors (GM), Toyota Motor Corp. (TM), Economic data
We’ve heard a lot of news over the past 12 months about soaring fuel prices and the effect it is having on the major automakers. With record-high oil prices, and gasoline running about $4.10 a gallon, drivers are spending more and more money to fill up their tanks. One of the natural options for people has been to move towards less costly, small, and simple automobiles.
General Motors Corp. (NYSE: GM) noticed that fuel-efficient automobiles will be more appealing to consumers, and announced last week plans to reduce production at its truck division (a bit late to join the celebration, but at least it’s something for the struggling auto maker). Toyota Motor Corp. (NYSE: TM) is also slashing truck production during three months at its U.S. plants.
While It is true that most less costly cars don’t offer the same luxury when compared to sedans or SUVs, they come with a lot of options that can satisfy each individual need. Among the cheapest automobiles available, the article points out Honda’s Fit ranked No. 11 at $13,950, a small car whose standard version comes with an adjustable steering column and four-speaker audio system, and is equipped with multiple airbags in the front, rear and side. Other cars that follow the same logic are the Chevrolet Aveo, ranked No. 2 at $11,460; the Toyota Yaris, third at $11,550, and the Kia Spectra, fifth at $12,895.
However, if you are taking into account only the lowest price when choosing a vehicle, then the cheapest new automobile available in America is the Korean-made Kia Rio, which starts at $10,890. For this low price, you must be aware though that you won’t get air conditioner, audio system, power window or power door locks. Another car that made its debut last year in the U.S. is the Smart Fortwo whose base model Pure is priced at $11,590; it comes with a manual transmission, and offers power locks and electronic stability control as standard.
Safety is another issue that the consumer must take into account. It is difficult to purchase a cheap automobile that offers the safety we may be looking for. For additional safety features people may find themselves reaching into their pockets. Compared with vehicles from the past, though, today’s small cars are safer, the Insurance Institute for Highway Safety stated. Thus the Toyota Yaris, Smart Fortwo Pure, Honda Fit and Nissan Versa all got the IIHS “good” rating in front- and side-impact crash tests, while the Versa and the Mitsubishi Lancer were able to earn “good” in rear-impact testing. Analysts anticipates further safety improvements but for every positive change there will be a cost to pay.
For Americans, times are definitely changing. It can easily be argued that the days of “cheap” gasoline that the American consumer has enjoyed for so long will never be back. If this proves to be true, then you are going to continue to see more and more drivers moving into the smaller cars, and if the auto makers want to stay in business they need to recognize that sooner than later, or else they will definitely pay the price.
Eliza Popescu is a financial writer for the on the internet investment advisory service Investor’s Observer.
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