The return of the compact car: Why buyers are shopping smaller

Author

Colin Velez
July 08, 2024

Consumers are increasingly turning to smaller vehicles in 2024, a sudden reversal from pre-pandemic trends which saw pickups and big SUVs dominate car sales.

Why this matters: Although SUVs continue to be the primary choice for car buyers, much like the 2008 recession, the aftermath of the COVID–19 pandemic is forcing a change in consumer preference. Automakers who have long neglected their compact car lineups risk losing market share to competitors if they fail to accommodate this shift in customer demand.

Smaller vehicles, including sedans and subcompact SUVs, saw impressive annual sales growth during the second quarter.

  • Sales of the Chevrolet Trax jumped 152.7% year-over-year in Q2, hitting 52,875 units. This makes it the third fastest growing vehicle across General Motors’ brands, beaten only by the Buick Lyriq and the Hummer EV (which sold a combined total of just 10,233 units).

  • Toyota Corolla sales were 25% higher for the first six months of the year than in 2023. Sales of the Camry hybrid were even more impressive, surging 318.4% in the same period.

  • Honda also benefited from an increase in compact car demand. Sales of the Civic are up 38% from 2023 on a year-to-date basis.

What we saw when interest rates were lower…people just bought big vehicles, and they bought all the bells and whistles, and they were finally able to get what they want. And we’re seeing a bit of a reversal of that now. Even if you look at pickup truck market share in the first quarter it’s down. It’s starting to look a bit like it did in the recession, where there was that move towards cheaper vehicles even though it’s not what we want.

Jessica Caldwell, Head of Insights at Edmunds

In some cases, sales of compact cars and smaller SUVs even outpaced those of bigger models.

  • The Chevrolet Traverse recorded a sales decline of 35% in Q2, while the Suburban and Blazer saw similar drops of around 29%.

  • The Toyota Tacoma saw an even greater sales slump, shedding 40.6% of its prior-year sales in the first six months of 2024.

This shift appears to have caught some automakers off guard. Certain brands, such as GM, discontinued multiple compact car models in the years leading up to 2024, and currently have no offering in the segment, excluding luxury lineups.

Bottom line: Data continues to show a shift toward cheaper, smaller models, as interest rates and monthly payments remain unsustainably high. Accommodating this demand will be critical for as long as affordability remains scarce.

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