U.S. Automakers’ Small-Car Output May Outstrip Demand

September 4, 2009

Big automakers, GM, Ford, and Chrysler are taking advantage of government incentives to design and build more fuel-efficient models, and are prepared to increase small-car production capacity by 63% by 2015, a move that may go well beyond the projected customer demands.

Within six years, American automakers will be able to produce 2.71 million small cars a year in North America alone. This would increase from the current 1.66 million today. The capacity will increase to 7.5 million cars from the current 4 million.

The fact remains that consumers may simply not be ready for such an overflow of small automobiles that will eventually hit the market.

Any projections aimed at small vehicle purchasing indication that sales figures by 2015 would have to increase by almost twice the current annual record to account for the new output.

All of this pushing for smaller vehicles is being driven by the federal mandates that fuel efficiency increase by 40% to an average of 35 mpg by 2016.

The sales of small automobiles currently occupy 18.1% of the total U.S. market as of last year. This rose from 15% back in 2007. One company estimates that the small car’s share of sales may increase to 22.3% in 2015.

At that estimate, the total auto market would have gone beyond 33 million vehicles in order to compensate for an annual production capacity of 7.5 million small cars.

Between now and 2015, small-car production capacity will rise 58% to 1.35 million at GM, 61% to 870,000 at Ford, and 83 % to 495,000 at Chrysler, according to one analyst.

The numbers of compact and subcompact models in the United States should reach 46 by 2013. In 2005, there were 28 models; last year, the total was 36.