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Smart fortwo gets 33/41 city/highway

Ford Fiesta gets 29/40 city/highway
Smart global sales to drop below 100K for 2010

A few years ago, drivers across America went into panic mode as gasoline prices soared to nearly $4.00/gallon (or higher in some locales) in 2008. During that time, people started ditching their SUVs/pickups and bought more efficient cars.

As gas prices have started to level out below the $3.00/gallon mark, one car company has been especially hard: Smart. Smart, a division of Daimler AG, has seen U.S. sales free fall since hitting a high mark of 25,000 units for all of 2008 reports Automotive News Europe.

For the first seven months of 2010, sales are down 70 percent compared to the year before. Globally, sales are down over 20 percent and sales will dip to below 100,000 unit for all of 2010 compared to 114,000 in 2009.

There a number of possible reasons for the soft sales in the U.S. The Smart is a cramped two-seater with very little room for cargo. While this might have been acceptable to some U.S. customers when it seemed like the sky was limit with rising gas prices, many likely aren't willing to make that sacrifice today.

Another more likely scenario is that there are plenty of larger (yet still compact) vehicles available on the market for the same money or slightly more than the Smart and seat 5 people plus cargo. A standard Smart fortwo will cost you around $13,200 with A/C. Stepping up to the slightly more opulent Smart fortwo "passion" costs about $14,600.

For that price, you get 33 mpg in the city and 41 mpg on the highway in return (while requiring premium unleaded gasoline). For comparison, the $15,000 Honda Fit returns 28/35 while the $13,000 Toyota Yaris returns 29/36 -- both vehicles can seat five.

Another competitor, the $14,000 Ford Fiesta, achieves 29 mpg in the city and 40 mpg on the highway.

With competitors approaching the mileage of the Smart while offering vastly superior passenger/cargo room for roughly the same money, it shouldn't be too shocking that sales are falling.



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RE: Another reason
By bobsmith1492 on 8/31/2010 12:04:13 PM , Rating: 5
That's a good thing. Anyone buying a brand new car that often is wasting gobs of money. People may just be getting smarter!


RE: Another reason
By geddarkstorm on 8/31/2010 1:06:20 PM , Rating: 5
Which is ironically a bad thing for the Smart.


RE: Another reason
By Reclaimer77 on 8/31/2010 5:14:26 PM , Rating: 1
quote:
That's a good thing.


That's never a good thing. When home and car sales go into the toilet, it creates a very bad snowball effect in our economy. Look what's happening right now! That's not a good thing.


RE: Another reason
By Reclaimer77 on 8/31/2010 6:57:43 PM , Rating: 2
Do people even read my posts before rating? I'm just curious. I defy someone to explain to me how what I said wasn't 100% factually correct, non inflammatory, and non-ill mannered.

The option to save more and spend less has ALWAYS been there. When I see people saying it's a good thing that people "got smart" and started spending less, right at the same time we're in the worst recession in recent history, it perks my ears up. Are we to believe it's just a coincidence, or are they being forced to spend less?

People aren't "getting smart". They simply have no other choice. And that's supposed to be a good thing? We live in a consumer driven economy. Look what happens when people stop consuming, it's NOT good.


RE: Another reason
By Solandri on 8/31/2010 7:34:52 PM , Rating: 1
I didn't downrate it, but I would have because it's wrong. Needless consumer spending does not help the economy. That's the broken window fallacy, where people notice that there's lots of economic activity fixing broken windows after an earthquake. So the suggested solution during a recession is to break all the existing windows to force economic activity. It's a fallacy because of opportunity cost - the money spent on fixing the windows represents money which could've been used to do other more useful things. Instead, it's wasted on needlessly fixing windows.

How does this relate to cars? Like it or not, cars have become more of a fashion statement than a mode of transportation. Every year, millions of perfectly good cars are junked because millions of people want the newest and greatest model to show off to their friends as a status symbol. The influx of those new cars bloats the number of used cars to where they exceed the market demand for used cars. And as a result, millions of fully functional used cars are junked every year.

So in that respect, the current level of new car purchases in this recession is probably much closer to the maximum-efficiency rate of new car production. When times get bad, spending on indulgences gets cut first, and getting a new car to show off is a pretty major indulgence. Spending on indulgences doesn't help economic growth since it doesn't increase economic efficiency. It's simply a byproduct of people being so productive that they can afford to waste money on a few things which don't really make economic sense. So instead of the money being wasted on a new car, it gets spent on something more vital and thus more important to economic growth.

In terms of spending vs. saving, the problem wasn't really spending per se. Saving money and spending it has pretty much the same economic impact. Saved money doesn't sit locked up in a bank vault. When you put money in a savings account, you are in essence loaning the money to the bank at an interest rate. The bank then uses the loan you gave them to buy things which stimulates the economy.

The problem we had was spending beyond your means. People weren't just spending their savings. They were accruing debt by taking out home equity loans and charging stuff on their credit cards way in excess of what they could actually afford to pay, hoping that appreciation in their home values would pay for it.


RE: Another reason
By Reclaimer77 on 8/31/2010 7:48:23 PM , Rating: 2
quote:
Needless consumer spending does not help the economy.


Who determines what's "needless" though? You apparently.

And no, that's not the broken window fallacy. This is like the fourth different topic I've seen you apply that to. You're wearing it out a bit much don't you think? I realize you've learned something new and it's exciting, but it doesn't apply to EVERY situation!

quote:
Like it or not, cars have become more of a fashion statement than a mode of transportation.


That makes no sense. They are ALL modes of transportation. And sorry, I'm not going along with your statement that the majority of car sales are "needless" fashion statements. If you have the data, show it. But I seriously doubt that statement could ever be quantified. It's your OPINION.

quote:
people want the newest and greatest model to show off to their friends as a status symbol


This is SO judgmental and condescending I won't even dignify it. Stop interjecting your opinions and prejudices as if they were facts.

quote:
And as a result, millions of fully functional used cars are junked every year.


Now we have millions of new cars sitting on lots that aren't being bought. I'm not sure how that's any better.

quote:
Saving money and spending it has pretty much the same economic impact.


That's so wrong it's not even funny.

quote:
The bank then uses the loan you gave them to buy things which stimulates the economy.


Ummm, wrong again.


RE: Another reason
By Spuke on 8/31/2010 9:51:14 PM , Rating: 2
quote:
Now we have millions of new cars sitting on lots that aren't being bought. I'm not sure how that's any better.
Actually car sales aren't that bad. Most everyone is up over last year. Not sure where this info is coming from.


RE: Another reason
By Reclaimer77 on 8/31/2010 11:03:25 PM , Rating: 2
Last year was abysmal though, that's not really saying much.

Last I read dealerships had considerable overstock.


RE: Another reason
By Solandri on 9/1/2010 3:26:44 AM , Rating: 4
quote:
Who determines what's "needless" though? You apparently.

No, I'm speaking purely in terms of improving economic efficiency. The primary contribution of a car to the economy is purely functional. Anything beyond that is decorative. While decorative items can cause economic activity (e.g. selling art), they are almost always net economic losses since they don't produce anything which improves economic efficiency. The exceptions I can think of are:

- Entertainment, which is apparently necessary for people to relieve stress and maintain their productivity.
- Marketing, which relies on the irrational behavior of people to cause market movements in directions it would not normally go. (That's not to say marketing is a bad thing, just that its contribution is a net negative compared to the theoretical ideal of completely rational consumers. Thus its real-life contribution to the economy can be either positive or negative.)

Of course like most theoretical ideals, it is unattainable in real life. So I won't condemn such activities as inappropriate or wrong. But I will point out that they are wasteful.
quote:
And no, that's not the broken window fallacy. This is like the fourth different topic I've seen you apply that to. You're wearing it out a bit much don't you think? I realize you've learned something new and it's exciting, but it doesn't apply to EVERY situation!

Actually, I think this is the first time I've mentioned it on this site. And I can only think of a handful of times I've ever mentioned it elsewhere. Maybe you're confusing me with someone else?

quote:
That makes no sense. They are ALL modes of transportation. And sorry, I'm not going along with your statement that the majority of car sales are "needless" fashion statements. If you have the data, show it. But I seriously doubt that statement could ever be quantified. It's your OPINION.

All serve the basic requirement of transportation. The cost of most cars above and beyond that basic role is fashion-related. If you want data, a good example is the SUV trend in the last two decades. The vast majority of people who bought them never used them to go off-road or to tow anything. They bought it simply because it was trendy - it was a fashion statement. Functionally, a sedan or a minivan would've better suited their purposes, in most cases for considerably less cost.

quote:
This is SO judgmental and condescending I won't even dignify it. Stop interjecting your opinions and prejudices as if they were facts.

I think you're misinterpreting what I'm saying as applying to everything people buy and do. I'm simply pointing out that in an ideal market with completely rational actors, such factors wouldn't contribute to purchasing decisions. But in reality, they do partially contribute to such decisions, and degrade economic efficiency from the theoretical optimum.

quote:
Now we have millions of new cars sitting on lots that aren't being bought. I'm not sure how that's any better.

Simple. With reduced demand, fewer cars are built, and the resources which would've been consumed to build them are utilized elsewhere in the economy where they contribute more to improving economic efficiency.

On the bank using your savings thing, if you feel that money deposited in a bank does not contribute to economic velocity, then there's no point arguing further. We fundamentally disagree on the way the economy functions. As I understand it, economic expansion and growth of wealth comes from improving efficiency. You invest money in developing a system or technology so it can produce more for less cost, yielding more in savings than the cost of the development. Economic contraction comes about because you invest money in something which does not produce more for less cost, it just moves money from one place to another, or even worse, yields a net negative ROI. All putting money into a bank does is shift the decision on what to invest the money in from you to the bank.


RE: Another reason
By Reclaimer77 on 9/1/2010 12:06:35 PM , Rating: 2
So your entire argument is basically anything that doesn't promote this theoretical "economic efficiency" is inherently wasteful?

That's an honest question. I'm just trying to get an idea of what you're after here. A lot of what you're saying is very high minded and eloquent, but I'm not sure it reflects the reality of the situation.

quote:
On the bank using your savings thing, if you feel that money deposited in a bank does not contribute to economic velocity, then there's no point arguing further.


No but you were basically saying that a savings account stimulates the economy MORE than if you spent that money in other areas. Which needless to say is oversimplified and most likely false. Banks ALSO use your savings interest money to loan OTHER people money for things that you have already labeled wasteful and needless. How do you feel about that?

quote:
a good example is the SUV trend in the last two decades. The vast majority of people who bought them never used them to go off-road or to tow anything.


But who said SUV's are for off road and towing? As I understand it from parents, SUV's are great for throwing a bunch of kids and equipment in and driving somewhere. What's wrong with that?

In fact, how is it somehow an economic hit if someone buys a big SUV just for themselves? See you still haven't connected the dots on that. There IS no downside to it if he can afford it.

So what's the end game here? People buying only what's economically efficient and putting the rest in a savings account? That's a recipe for complete economic collapse of this country.


"I'm an Internet expert too. It's all right to wire the industrial zone only, but there are many problems if other regions of the North are wired." -- North Korean Supreme Commander Kim Jong-il














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