Automobile - Gaining popularity: a second chance for compact vehicles
Recently, there's been a reversal in trends on the German car market. The compact class, which experienced declining sales figures in previous years, is now witnessing a revival. The class is currently responsible for 19.6% of the market, a 4.2% increase from overall sales figures in the year 2023. This is also 3.7% higher than its lowest point in 2022.
On the other hand, the giant SUVs are experiencing a setback. These vehicles once took over as the most popular car segment in Germany in 2019 and have been steadily gaining market share up until 2022. However, they've now dropped by 1.4 percentage points. Although their lead is still significant, it appears that the compact class could potentially overtake them.
This change is likely due to supply issues with compact cars. Thomas Peckruhn, Vice President of the German Motor Vehicle Trade Association (ZDK), believes that demand for compact cars is high but was limited by a scarcity in supply. However, this has changed, with companies beginning to offer promotions for these models again.
There's also a catch-up demand since the compact class has been underperforming in recent years. Experts state that this is partly due to the COVID-19 pandemic and the resultant microchip shortage. As these issues ease, manufacturers are able to produce and deliver more compact cars. They're also encouraging people to purchase them by offering deals to fill their factories.
More supply = more choices = more sales. It's that simple. The Federal Motor Transport Authority (KBA) currently lists 32 models in the compact segment, while there were about the same number in 2014.
In addition to the supply issue, the economic situation has been driving people towards more affordable options like compact cars. "People are being thrifty," explains Frank Schwope, an expert in the automotive industry who teaches at the Chamber of Commerce and Industry in Cologne and Hanover. Instead of splurging on a more expensive SUV, some are opting to purchase a more economical compact car.
Interestingly, the trend also seems to be influenced by the hesitance of some buyers to invest in electric vehicles (EVs). The KBA reports a stark contrast between the adoption rates of EVs in the compact and SUV segments—with a much higher percentage of EV sales in SUVs. And with the EU aiming to transition to electric vehicles by 2035, many buyers are currently undecided.
Will this renewed interest in compact cars signal a decline in the SUV segment? Not according to Stefan Bratzel, the director of the Center of Automotive Management (CAM) in Bergisch Gladbach. He anticipates limited growth in the SUV market, but doesn't think it will decline significantly. In fact, he predicts that the compact car trend will continue. "There will be an interim step in this direction, but the trend towards SUVs will not change that much." Schwope agrees, mentioning that the supply of compact cars has been significantly reduced lately. However, despite this, he still expects a strong demand for SUVs in the future.
One major factor contributing to the resurgence of the compact class is none other than the Golf. In the first five months of 2024, the iconic model has accounted for almost half of the increase. But it's not just a Golf story. Comparing the current figures to the low point of 2022, only about a third of the increase can be attributed to the model. The Golf is also far from regaining its former popularity, as it sold over 380,000 units in Germany alone during its peak era. Extrapolating current figures to a full year, even if it reaches close to half, it's still significantly lower than its past peak performance.
So, is there a real trend reversal or is it just a fleeting moment in time? It's too early to tell for sure. But one thing's for certain, suppliers are now producing more compact cars, leading to a surge in demand. As for SUVs, their popularity will likely continue, but may not see the same exponential growth as seen in recent years.
Maybe it's just a temporary change. Or could it be that people are truly looking for something smaller and more affordable due to uncertain times? Only time will tell.
📸 Credit for the featured image goes to fotocommunity.deHeader credit goes to pexels.comListed images credit goes to KBA (www.kba.de)🔗 Credits: DPA, ZDK, CAM, Chamber of Commerce and Industry, and KBA* I Manufacturers Caught Between Chip Shortages and soaring Sales* The End of the SUV Era?* The Comeback of the Compact Car* KBA Marktstudie: Marktanteile der Kleinwagenklasse halbiert sich
