Market Insight: Small cars put to the test

AUSTRALIA’S long and deeply held affection for small cars is being put to the test, with official VFACTS sales figures released this week by the Federal Chamber of Automotive Industries showing a continued month-on-month decline in the popular segment.

The small-car segment is still the largest in terms of sheer volume. With 93,176 sales so far this year, small cars command a 20.6 per cent share of the overall new-vehicle market – well ahead of the next-highest-selling segment, large SUVs, which has a 12.1 per cent share with 54,571 sales year to date.

However, last month’s deep 16.6 per cent decline marked the fifth successive monthly fall for the segment – down between 2.5 and 13.8 per cent in every other month this year – to be 9.6 per cent behind compared to where it was after five months of trading last year.

Consider also that the small-car segment fell 3.9 per cent overall last year, posting a string of nine monthly falls in a row (from March through to November), after four years of solid annual growth from 2010-13.

So with the exception of the ‘mad December’ end-of-year sell-off last year, small-car segment sales have been heading southwards – month in, month out – for the past 15 months.

The segment is not about to be overtaken by any other class of vehicle anytime soon, but the sheen looks to be wearing off, with some of the big players recording sizeable falls.

The most noticeable decline last month was for the Toyota Corolla, which recorded a massive 30.6 per cent drop in sales, with 2688 units shifted, compared with May last year.

Putting the result into context, Toyota Australia public relations manager Mike Breen told GoAuto that the Corolla’s haul of 3871 units in May last year was an all-time record for the brand.

Australia’s top-selling car for the past two years, Corolla is running lineball with last year in YTD terms and maintains its lead in the sales race, its 17,598 new registrations some 1300 units clear of the Mazda3 (16,300).

It is enough for Mr Breen to consider Corolla’s overall performance this year as “a very pleasing result”, particularly given the competitiveness of the segment, and to predict that the model’s sales will remain buoyant for the remainder of the year.

“For the rest of the year, we expect to have continued strong sales for Corolla, similar to the last two years, which were both above 43,000 units,” he said.

 “At this stage last year, Corolla was number two on the sales charts by about 950 units so far this year, Corolla is leading by almost 1300 units.

“As we have said on many occasions over the years, Corolla being the top seller across the industry has never been a target. It’s still not a target. We will have a strong year for Corolla, but whether it remains number one at the end of the year depends on many factors.” While Corolla remains steady overall, some of its key rivals have taken a tumble this year, which has driven down the overall segment.

The Mazda3 has fallen 11.7 per cent so far this year, while Holden’s Australian-built Cruze has slid 13.9 per cent to 6249 after a big 24.7 per cent drop in May. Honda’s Civic also continues to dive, down 51.7 per cent to 1816 units YTD.

Ford has blamed supply issues for a decline in Focus sales – down 50.9 per cent to 3544 units – ahead of the arrival of the mid-life facelift in August, while the third-best-seller in the segment, Hyundai’s i30, has lost 17.4 per cent to 10,280, due in part to a 34.7 per cent drop-off last month.

Mitsubishi’s ageing Lancer is relatively steady, down 2.2 per cent to 3378, Nissan’s Pulsar is 17.9 per cent off last year at 3188, Subaru’s Impreza has dipped by 29.5 per cent to 1814 (despite major price reductions) and Alfa Romeo’s Giulietta is down 49.5 per cent to 538 following a price increase to the refreshed range in December last year.

Some bright spots in the segment include Volkswagen’s Golf, which is up by 10.7 per cent to 9147, despite a decline last month of 9.0 per cent. The Golf is now the fourth-best-selling car in the sub-$40,000 small-car segment.

Peugeot’s new-generation 308 is up 162.1 per cent to 705 units, helping lift the French brand’s overall sales, which niche models such as Skoda’s Rapid and Citroen’s C4 are up by 191.5 and 62.9 per cent to 172 and 57 units respectively.

There is little doubt that the allure of high-riding light SUVs and crossovers – such as the Honda HR-V, Mazda’s CX-3, the Mitsubishi ASX and Holden Trax – has drawn buyers away from traditional small hatchbacks and sedans in recent years.

However, VFACTS figures also show that consumers are returning to the light-car segment.

To the end of May, sales in the sub-$40,000 small-car segment have dropped by 10.7 per cent, while over the same five-month timeframe sub-$25,000 light cars have grown by 10.5 per cent.

Over time, the dimensions of previously diminutive light hatches and their sedan siblings have grown considerably, broadening their appeal to a potentially larger buyer base than before.

Interior packaging has also improved, with the likes of Honda’s flexible Jazz offering its Magic Seats that can be configured 18 different ways, including a completely flat cargo floor if required.

Recent upgrades or full model changes to light cars in the past two years have seen a lift in ride quality, safety and standard equipment for a number of key models, notably the Mazda2, Jazz, Toyota’s Yaris, Ford’s Fiesta and the Volkswagen Polo.

And buyers have clearly taken notice with sales in the segment up to 44,232 to the end of May, led by Hyundai’s ageing i20 – up 3.3 per cent to 6100 sales – followed by Yaris, up 16.7 per cent to 6057 units, and the Mazda2, which has climbed 7.9 per cent to 6045 sales after a bumper May that saw sales jump 22.4 per cent over the same month last year.

Other strong performers in the segment include the Jazz, which has been steadily climbing since the introduction of the new-generation version last year, with sales up by 103.9 per cent to 3700 – its City sedan is also up 57.1 per cent – while the refreshed Volkswagen Polo has lifted by 49.6 per cent to 3703, and the Suzuki Swift is still popular, up 44.1 per cent to 4862.