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American Car Buyers Shift to Smaller Vehicles as Affordability Concerns Mount

by Team Lumida
December 23, 2024
in Macro
Reading Time: 3 mins read
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Turkey’s Bold Move: 40% Tariff on Chinese Vehicles to Combat Inflation

Source: The Street

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Key Takeaways:

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  • Small car sales up 23% through November, outpacing industry growth
  • Large pickup and midsize SUV sales declined by 1.9% and 2.3% respectively
  • Average new car price exceeds $45,000, pushing buyers toward cheaper options
  • Models under $25,000 dropped from 45 in 2019 to just 11 in 2023

What Happened?

A significant shift is occurring in U.S. auto buying patterns as consumers increasingly opt for smaller, more affordable vehicles. Sales of compact cars and small SUVs have surged, with models like the Honda Civic and Nissan Sentra seeing 23%+ growth through November. This trend represents a reversal of the long-standing preference for larger vehicles that had previously led many automakers to discontinue their smaller models.

Why It Matters?

This market shift signals a fundamental change in consumer behavior driven by affordability concerns. With average new vehicle prices exceeding $45,000 and higher interest rates, the price gap between large and small vehicles (up to $47,000 difference between small and large SUVs) has become a crucial factor in purchasing decisions. This trend particularly benefits Asian automakers who maintained their small vehicle lineups while competitors exited the segment, and could reshape automakers’ product strategies and profitability models.

What’s Next?

The sustainability of this trend will likely depend on interest rates, fuel prices, and potential trade policies, including Trump’s proposed 25% tariff on Mexican imports. Automakers may need to reconsider their product mix, potentially reintroducing smaller, more affordable models. The industry faces a challenge in balancing profitability with growing demand for affordability. Investors should watch for:

  • Automakers’ responses to shifting demand patterns
  • Impact on profit margins and market share
  • Development of new entry-level models
  • Effects of potential trade policies on vehicle pricing
    This trend could lead to significant strategic adjustments across the auto industry, particularly affecting manufacturers heavily invested in large vehicle segments.
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018