Americans buying small cars in bigger numbers

updated 8:36 p.m. ET June 29, 2007

YPSILANTI, Mich. - She's driving a 2002 Honda Accord that gets about 30 miles per gallon of $3 gas, so why is Emily Beeton at a dealership looking for a smaller car?

Because the used Honda Civic coupe she wants gets even better mileage.

"I just like the practicality," Beeton of Plymouth said Thursday night while shopping for a smaller car at a Honda dealer in downtown Ypsilanti, about 30 miles west of Detroit.

Auto sales statistics show there are many others like her, with the market shifting toward gas-thrifty compacts last month in record numbers.

In May, the compact car share of the market reached a record 21 percent, up from about 15 percent three years ago, according to data from Edmunds.com, an automotive Web site.

Industry analysts say that trend likely will continue when automakers release their June sales results on Tuesday, at least until gas prices subside as expected after the summer driving season.

The small car trend doesn't bode well for the Detroit Three, which don't have as new or as many small models as the competition and rely more on sport utility vehicles and trucks for sales.

"With the small cars as strong as they are, that tends to help the Asian badges," said Paul Taylor, chief economist for the National Automobile Dealers Association.

Asian and some European automakers have increased incentives on small cars, also making them more attractive, Taylor said.

While gas prices may be motivating small car buyers, the cars also are becoming more fashionable, said Jesse Toprak, senior analyst for Edmunds.com.

The small car boom should help Nissan Motor Co., which Edmunds research predicts will be up double-digits over June of last year. Nissan recently introduced its redesigned Sentra small car, timed perfectly for the nationwide spike in gas prices, Toprak said.

Edmunds sees June sales drops for Ford Motor Co. and General Motors Corp., which have been trying to wean themselves of low-profit sales to rental car companies. Chrysler should show an increase, but more than 30 percent of its sales are going to fleet buyers, Toprak said. Toyota and Honda also should see increased sales, he said.

Traffic on the Kelley Blue Book Web site for car shoppers indicates that June sales should drop overall when compared to the same month last year, said Jack Nerad, Kelley Blue Book executive market analyst.

He also saw strong interest in small cars, but traffic down on larger vehicles such as Hummers.

But Taylor said the economy has bounced back, and that should be reflected in increased light vehicle sales.

Because of the continued homebuilding slump, truck sales are likely to be down in June, which will affect the Detroit Three, he said. There is, however, reason for optimism later in the year, as corporate truck buyers get back into the market, Taylor said.

And Toprak predicted the market will shift back from cars toward trucks as the summer comes to an end.

"I think that the seasonality factor where SUVs and trucks tend to do better in the fall and winter is going to reverse the trend by the time we get into the last quarter of the year," he said.

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