Car Buyers Are Talking Small But Buying Big, a Nightmare Scenario for Carmakers

Last Updated Jun 14, 2010 12:17 PM EDT

AutoTrader.com is the largest online source for car classifieds with more than three million listings, much to the consternation of the newspapers that have largely lost that business. And according to AutoTrader, the consumers who visit its site are showing rising interest in smaller cars and "buying green" -- but when it comes time to put money down on a new or used purchase, they often chose their old, larger standbys.

This is a huge challenge for carmakers, who have no idea how to estimate the size of the market for small vehicles. Indeed, consumers have been all over the map with them. The default position for many is big cars, but they rush to buy economy models when gas prices spike -- then blame automakers for not having them on the lots. For companies with a five-year planning cycle, it's a bit of a nightmare.

A clear example is shown in the seesawing fortunes of the Smart fortwo, which sold 24,000 in 2008 ($4.50 a gallon) and just 14,000 in 2009 ($2.50 a gallon). "People had their hands in their pockets in 2009," said Jill Lajdziak, president of Smart USA, who undoubtedly had her hands full supplying dealers with the right number of cars.

Since I'm frequently asked for car advice, I can attest to the fact that people often say one thing and do another. People ask about green cars, but they're really looking for confirmation that their chosen vehicle -â€" often one large enough to accommodate a Cub Scout pack, haul a pair of dogs and tow a boat simultaneously -â€" is the smart pick. I often try to convince them that they could be perfectly happy with something much smaller (and maybe borrow a truck one or two times a year), but this argument has seldom prevailed.

Automakers will go awry in estimating market demand if they rely on consumer polls, which consistently show huge interest in fuel efficiency and buying smaller next time. People say they want 50-mpg cars, but those sentiments aren't reflected in actual buying patterns, which show trucks and SUVs still selling well. And yet carmakers frequently cite these surveys when introducing new small car models.

What do people actually buy, despite a bad economy and high fuel prices? The top-selling vehicle in the U.S. is the Ford F-150 pickup truck, which sold almost 50,000 in May. Second was the Chevy Silverado, at 33,000. Neither is fuel-friendly. In Japan, the Prius is number one.

It comes down to "want" versus "need." People say they "need" huge gas guzzlers, but in my opinion they actually just "want" them. There's some deep-rooted psychology at work here. The head says small, the heart goes big. Women are probably "greener" overall, and they purchase 65 percent of all new cars and 53 percent of used ones. But they also care more about the family's needs, and that leads them in many cases to go for the Suburban over the Prius.

For a company like GM, which is investing a lot in small cars like the Cruze going forward, this translates into some wariness as they shut down SUV assembly lines. And since big vehicles are quite a bit more profitable than small ones, there's even more caution.

AutoTrader is convinced that consumers buy cars not by category -â€" two-door sedan, sports coupe and such â€"- but make decisions based on how cars will fit into their lives. To that end, it recently launched a new "Lifestyle Center," which lets people search in categories like "Family Focus" (the top researched family friendly vehicles), "Smart Saver" (cars in a variety of price ranges) and "Going Green" (hybrids and fuel-efficient cars).

Indeed, the site bears out that shoppers are at least thinking green. The top-researched station wagon, for instance, is not some hulking behemoth but the Volkswagen Jetta Sportwagen, which in diesel trim gets 30 mpg in the city and 41 on the highway. The most researched van is the Honda Odyssey, probably the most fuel-efficient entry at 17/25 mpg. As might be expected, the Prius is a big destination car.

As AutoTrader analyst Shawn Tucker told me, "A lot of people decide they need seven-passenger vehicles, and we try to give them the most environmentally friendly choices within that category." I would argue, however, that there really aren't any green choices that can accommodate seven. The Chevrolet Tahoe Hybrid gets 21/22 mpg, which isn't going to get us off foreign oil (though it's the best of the large SUVs).

"We see an increase in research on electric cars, improving mileage, and increases in smaller-size cars such as hatchbacks and coupes," Tucker said. "But if they don't find the utility they need they go back to the bigger ones." He pointed out that such searches are tied closely to fuel prices. With the appearance that gasoline has reached a "plateau" (albeit at around $3 a gallon) the green car searches may die down a bit.

Tucker analyzes car buying, but he's a consumer too. He told me he "needs" a minivan, because "I have two kids, and a nephew who rides with us on a regular basis." The man who restored 11 Porsche 914s waxes nostalgic for his Taurus wagon with rear-facing third seat. "That could carry everything," he said.

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Photo: Flickr/David Hilowitz