In 2010 the compact “B Car” segment will see new entries such as the Mazda2 and the Ford Fiesta. Both cars are expected to infuse energy into their brand portfolios and provide a much needed appealing small car to their respective lineups and echo similar launches from Toyota, Nissan, and Honda. These are global models so their launch in the US will also help spread their development costs over a wider geographic area as long as sales meet expectations.

In advance of these launches, Compete analyzed B Car demand to get a better understanding of the market in which these vehicles will be entering and who among current segment competitors are winning the battle for consumer shopping interest, and how market trends influence results.
Economic and marketplace factors play a big role in determining shopping of B Cars.  The recent Cash for Clunkers program provides a good example of how small car interest peaks when the market steers consumer in that direction.  The program was designed to get people out of their older gas guzzling cars and trucks and into smaller more fuel efficient vehicles.  Compact cars were the primary beneficiary as consumer demand improved (blue bars in graph below) as did sales, not shown, during July and August 2009.

Another factor that drives consumer interest in smaller cars is gas prices.  When gas prices hit all-time highs in summer 2008, there was an almost immediate increase in the number of shoppers.  But the gains were fleeting: as soon as gas prices stabilized, shoppers moved away from B Cars.  The same thing happened as soon as Cash for Clunkers ended: B-Car demand and sales, both of which were pulled forward during the program, have fallen significantly in the two months since the program ended.

So what’s in store for Mazda2 and Fiesta in 2010?  First of all, expect stiff competition from segment leaders Yaris, Fit and Versa.  Yaris and Fit especially rode the gas price hike wave of 2008 to new demand highs and all three saw shopping interest trend higher during Cash for Clunkers in July and August of this year. But when that incentive goes away, well you get the picture. Without that incentive, compact cars just don’t get the same kind of love from in market shoppers.

Success for the new B Segment models may require that newcomers look beyond the obvious rivals.  When Yaris, Fit and Versa entered the market they not only defined a revitalized B segment, they also redefined what a small car is.  C shoppers (Civic, Corolla, Focus) show significant interest in these smaller small cars (about 1 in 5 C Car segment shoppers also shopped a B Car) as they provided much of the same functionality but at a much more attractive price.  That means the competition for these new compact cars extends beyond just B Car segment rivals.  And in fact about 4 in 10 B Car segment shoppers are already shopping C Cars.

Targeting C Car shoppers as well as key B Car rivals will expand the competitive reach of Mazda2 and Fiesta by providing a wider range of conquest opportunities. Key to their success will be thinking outside the box when it comes to their competition. Without a doubt, Yaris, Fit and Versa should be at the top of the list. But thinking of it as a small car instead of a B or C car will expand their competitive horizons and open up new ideas on how to position these important models and help drive their ultimate success.

Copyright Compete Blog – What’s in store for the B Car segment in 2010?