Friday, October 27, 2006

Economic myths about small cars

We (I'm including you, the loyal reader of the small car blog) are not the only ones lamenting the lack of small car options in Canada or the U.S. Is it a conspiracy? Not likely. It's primarily a matter of lack of demand. Although we North Americans do follow the trend of lusting after smaller cell phones, smaller cameras, smaller computers (Although I'm starting to doubt this last one. Have you seen the size of laptops these days? Forget portability, big wide screens are what the masses want apparently.) we buck the world trend when it comes to cars. Mr. John Smith wants his car big; Ms. Jane Doe wants her car to be higher up for a better view and more security. So the car makers (North American for not making them, Foreign for not importing them here) are not totally to blame. It's a culture thing. But we all know that clever marketing (aka. brain washing) can change the psychology of our wants and needs within a generation, heck even less than a decade (my commute to work is 10 minutes, I can't listen to music at work, I have a great stereo at home... why is it that I need an iPod again??)...

But wait! (I hear you economists rumbling out there...) Even if there was a demand for small cars, wouldn't the margins be too low to be worth the while of any manufacturer? Perhaps. But consider this:

First myth: Small cars, small profits. That's the thinking, but great car companies have been built on small cars. The Model T was pretty small and low-priced at times--$500, or some $7,500 today--and it made Henry Ford one of he richest men in the world. Volkswagen came out of the rubble of World War II with a small car, the Beetle, and grew into a world power. Toyota and Honda built their empires on small-car profits. Ford did quite well with its Escorts not too long ago, too. Small cars can make money.

Second myth: Wages here are too high for small cars. VW, Ford and Opel (German GM) make small cars in Germany, where wages are high. That Model T was built by very high priced labor: $5 a day.

-- Excerpt from "The Plot Against Small Cars" in the latest issue of Forbes (if you have a subscription, you can view the article here).

Convinced yet? Anyone want to try to get rich? You need a great psychology-altering marketing campaign, oh yes, and a great car to sell...


  1. Great blog, glad someone is trying to show North America that you don't have to drive in those huge cars.

    I am from Amsterdam Netherlands.
    My blog is about three small cars, the Citroen C1, Toyota Aygo and the Peugeot 107. have a look.

  2. Have a look here: