Gas prices.  Armageddon.  Peak oil.  We all hear about it in the newspapers, on the Internet, and on the radio.  And America has been addicted to cheap oil and sizeable cars for as long as the automobile has been around.  However, thanks to recent events across the globe, that’s about to change.

For years, the compact car market was usually a market dominated by cheap, dependable cars (usually ones made in Japan) with just enough equipment to feel comfortable enough for a medium-length commute.  However, as gas prices have shot through the roof and the Japan earthquake disrupts supply of other automobiles, compacts are becoming much more popular.  Just last month, the Chevrolet Cruze overtook the Toyota Camry for the best-selling passenger car in America.  While this may not look like something all that important (as they aren’t in the same market), it signals somewhat of a shift in tastes, especially considering the supporting acts under it.

Most USA-spec Camrys are built on these shores and contain amongst the highest amount of American parts of any car sold here, which (to some extent) rules out the earthquake argument–and the fact that the Cruze also outsold the Corolla points to a shift in what buyers expect from compacts, as well.  While the Cruze has been one of GM’s most successful cars this calendar year, there are other forces at work.  Almost every other brand reported higher sales for its compact car than its midsize, whether it was by a few hundred, or by a few thousand units, with Toyota being one of the few who announced the opposite.

For one thing, compacts are becoming more expensive, but their equipment levels have changed to reflect this.  For example, a loaded Ford Focus Titanium will cost you over 27K, but it still includes leather upholstery, a navigation system, the Powershift DCT, a high-end Sony audio system, heated front seats, and 18-inch rims with sport suspension and a full-sized spare tire.  To have a Ford Fusion at that equipment level would cost over 30K, a sizeable difference.  In addition, compacts are becoming much more fun to drive and have gotten a lot more appealing visually–just a few years ago, I would look at a fleet of compact cars and say, “They’re all just sort of the same car.”  Now, I think to myself, “Wow.  Someone’s been working overtime at the design desk.”  It really does show, inside and out–people are discovering a huge amount of appeal in smaller cars.

Gas mileage is obviously a concern as well, which also explains why smaller cars are becoming more popular.  In fact the Fiesta has become a big hit for Ford, and the Focus has gotten off to a good start despite its slow rollout in April and May.  Meanwhile, the bigger news is that with fuel economy increasing for each of these newer compacts, buyers have definitely been taking notice.  Hyundai’s Elantra easily achieves 40MPG, as does the Cruze Eco (which has accounted for a noticeable chunk of sales of the Cruze) and the Ford Focus SFE.  Overall, the change is evident, and I believe that the taste in compacts has shifted in a very positive direction.  I think it’s going to stay like this for quite some time.

-Al