Ryann Dekat felt like a petite in a Big and Tall store. Shopping for a new car, she wanted something small, cheap and fuel efficient--the last thing most carmakers want to sell, since the big profits are in gas-guzzling SUVs and sedans with large engines. Test-driving drab cars like the Nissan Sentra left her underwhelmed. Then she spotted the Mazda3, a sporty four-cylinder hatchback launched in 2003. You might think of hatchbacks as wheezy econoboxes from the 1970s. But Dekat, 22, a loan processor from Dallas, liked the Mazda's svelte style and pep; she pictured herself blasting U2 out the windows and impressing her friends. "I fell in love with it at first sight," she says.
A small car selling on sex appeal? Call it the return of pipsqueak chic. Small cars were supposed to have been bullied off the road by now, and to some extent they have been, with sales falling over the past few years as Americans traded up to SUVs and roomier, performance-enhanced sedans and minivans. With gas prices up nearly 70% since 2002, however, and a crackdown on tailpipe emissions looming in California, automakers are preparing a blitz of downsized models, from hatchbacks to wagons and minivans; even a pint-size Jeep is in the works. "There's a lot of activity in the segment," says analyst Jeff Schuster of J.D. Power & Associates. He forecasts that small-vehicle sales, far from disappearing, will hold their own, rising from 13.7% of the market today to 15% by 2008.
When the Detroit auto show opens this week, horsepower gains will take center stage as usual, with a parade of bulked-up cars, crossovers and light trucks. But some of the most interesting vehicles on display will be small, even tiny. Audi will showcase a model called the A3, a 200-h.p. hatchback sold in Europe and coming to U.S. dealers in May. Mercedes will unveil its smallest import, a wagonlike "sport tourer" dubbed the Baby Benz, expected to start around $25,000. And get this: DaimlerChrysler will officially launch in the U.S. the Smart brand that has been such a hit on Europe's narrow roads--showing off models like the Fortwo, a two-seat runt you could practically stuff into a Hummer. Mercedes-Benz, which has sold Smart cars for DaimlerChrysler in Canada since last fall, aims to have a model at U.S. dealerships by 2006, marketed to parking-challenged urban drivers.
All this signals a U-turn for a stalled and much maligned part of the auto business. Detroit has traditionally viewed small cars as money losers, the province of low-cost Japanese and Korean brands; retirees and budget shoppers are considered the core customers, not the most desirable clientele. Sure, you need an economy car for first-time buyers, and small cars offset the lousy mileage of SUVs and pickups, enabling automakers to meet federal regulations for corporate average fuel economy--which, thanks to industry lobbying, have barely budged in more than a decade. Given a choice, however, most Americans opt for luggage space, leg room, horsepower and the perceived safety of large vehicles--making small cars an inherently tough sell. "Americans have a hard time with small," says Clotaire Rapaille, an automotive consultant who psychoanalyzes consumer behavior and theorizes that deep down what we all really want is to wrap ourselves in a Hummer (a brand also downsizing with a new model, the H3).