by Jeremy Cato

When university administrator Joan Belfry went looking for a new commuter car, she thought about fuel economy, space, reliability, price and ride comfort for her commute — one hour each way, every day.

2005 Toyota Echo sedan. Photo: Bill Petro, Toyota Canada. Click image to enlarge

She made a very Canadian decision. She bought a Toyota Echo subcompact sedan.

It’s not just because the Echo was the fifth best-selling car in this country through the end of October, with 26,865 sold. More to the point, the Echo is a small car, and we Canadians buy small cars in great numbers.

In fact, the top seven of the 10 best selling cars in Canada are little runabouts – and four of those seven are imports. Market researcher DesRosiers Automotive Consultants notes that compact and subcompact cars make up almost one third (29.5 per cent) of all new vehicles sold in Canada.

For Belfry, the Echo she bought brand new four years ago remains a happy grocery getter, doing the job of getting her to work at Kwantlen University, along with all her other commuter chores. She finds the little Echo nimble in traffic, it has cost her nothing beyond the ordinary in terms of maintenance and repairs, and the fuel economy has been astounding.

“I have been very happy. I have nothing bad to say about it,” says Belfry.

“It’s even fun to drive,” adds husband Don Belfry.

The Echo is the most fuel-efficient gasoline car in Canada, a little runabout with a 1.5-litre four-cylinder engine that, according to the Office of Energy Efficiency, will cost Belfry and other Echo owners like her just $828 a year for gas.

Meanwhile, Don has high praise for the Echo’s packaging.

“It’s true that the room inside is so good it’s almost stupid,” he laughs. “If you were a nine-foot giant you’d still be comfortable.”

While not everyone is a cheerleader for the Echo’s narrow, tall design, not to mention the odd placement of its speedometer in the middle of the dashboard, everyone agrees the Echo is a huge success for Toyota Canada thanks to a combination of factors. Many, like the Belfrys, are huge fans of its funky styling and low ownership costs.

But the Echo is by no means the only small car to have a whopping big impact on the Canadian car market. Mazda simply cannot get enough Mazda3 sedans and hatchbacks to meet demand for its red-hot small car, the third best-seller in Canada (38,043 through October 31).

2005 Mazda3 4-door sedan. Photo: Mazda. Click image to enlarge

“Our (Mazda3) factory is running flat out at capacity,” says Mazda’s global sales, service and marketing boss Steve Odell.

It’s easy enough to understand why. The Mazda3 has a racy exterior design, the handling is nimble and the hatchback version makes for a very flexible interior.

Then there is price. With a base sticker of $16,295 and a well-equipped hatchback topping out at $21,485, the Mazda3 lands in the sweet spot of affordable, entry-level cars. It’s a highly potent formula.

The Echo is even less expensive. A bare-bones, two-door base Echo hatchback lists for just $12,995 and the four-door hatchback LE can be had for as little as $14,705.

Canadians are big consumers of small cars. With lower disposable incomes, many of us are looking for new wheels at the entry point in the new car market. According to DesRosiers, entry-level vehicles now account for 39.6 per cent of new car sales, up dramatically from 30.4 per cent in 1996.

The automakers are aware of this and have reacted with new products to meet the growing demand. Mercedes-Benz began selling its tiny Smart car last year in Canada, with Smart brand vehicles next set to go on sale in the U.S.

DesRosiers points out that with the start of the 2004 model year General Motors began targeting the entry-level market with Korean-based products built by the company’s Daewoo acquisition.

The result: GM’s share of the entry market has topped 20 per cent, after slipping below that level in 2003. Small cars such as the Chevrolet Aveo, Optra and Optra5 are pulling new customers into GM of Canada showrooms.

The best news of all for Canadians, however, is that many analysts expect consumers in the United States to return to the small and entry-level market after decades of large vehicles, especially gas-swilling SUVs. According to CSM Worldwide, small vehicles will account for 65 U.S. nameplates by 2009, up from 41 nameplates last year.

If Americans shift their attention to small vehicles, more new and innovative products will become available to Canadians. It all has to do with economies of scale.

Mazda5. Photo: Mazda. Click image to enlarge

Take Mazda. This summer, Mazda Canada will begin selling a small van/wagon, the Mazda5, likely priced in the low- to mid-$20,000s. Mazda Canada’s business case for the Mazda5 was helped enormously by the fact that Mazda dealers in the U.S. will also be selling the new van. Without the U.S. volume, it would have been difficult for Mazda’s Canadian distributor to sell just a few thousand Mazda5s at a profit.

Look for more of these types of developments in the next few years. According to CSM Worldwide Inc., small cars and trucks will generate 22.4 per cent of U.S. light-vehicle sales in 2009, up from 19.7 per cent last year. That’s 3.3 million units — about twice the size of the entire Canadian new-vehicle market.

So what interesting new small vehicles can we expect to see in the next few years? Mercedes-Benz is poised to launch a production version of the Mercedes-Benz Vision B concept wagon shown recently at the Paris and Toronto auto shows. Look for it in showrooms next year.

BMW is expected to introduce a version of its 1-series within 12 to 18 months, and Audi will launch its A3 sometime next year.

Honda is planning to add an entry-level car below the current Civic next year. It will likely be a version of the front-drive Honda Fit, sold in Japan as a four-door sedan and in Europe as the five-door Jazz.

In September, Nissan confirmed plans to introduce a small vehicle below the current Sentra for 2007. Company officials won’t confirm details, but they do say a North American version of the tall and boxy Cube and the March/Micra city runabout are both under consideration. It is possible both could hit Canadian showrooms. Other models from Nissan’s small vehicle portfolio might also become available in Canada.

Volvo officials won’t confirm it, but analysts suggest the Swedish subsidiary of Ford is looking at an entry below the current S40, possibly a Volvo C30/V30. And a Volvo XC50 small SUV has all but been confirmed for next year.

Among North American-based carmakers, Ford is rumoured to be considering a vehicle smaller than the current Focus, possibly one based on a Mazda platform. With the success of the Aveo and Optra, GM can be expected to continue drawing on the resources of its Daewoo operation in Korea for more small offerings. In addition, Chevrolet plans to introduce the retro HHR crossover wagon this summer as a 2006 model.

What is clear from all this is? Automakers see emerging opportunities in selling small vehicles. With the cost of gasoline high and expected to stay there, and with a large number of Generation Y buyers entering the market in the next few years, automakers have now recognized there will be growing demand for stylish, yet relatively inexpensive vehicles with a high level of functionality.

2005 Mini Cooper. Photo: Russell Purcell. Click image to enlarge

Perhaps the poster child for this is BMW’s Mini. This pint-sized two-door runabout has been a solid hit, with worldwide demand exceeding 175,000 units a year. BMW has long insisted the Mini represents not just one model, but an emerging line-up.

To that end, a convertible version went on sale last year. Company officials have hinted at the future possibility of some sort of Mini van or wagon, or perhaps even a Mini SUV of some sort.

“You can still imagine other variables. I can tell you that for the long term we plan to produce a large family of Minis,” said one senior official earlier this year. “With Mini it is possible to develop cars you never can have in the BMW brand.”

BMW has proven with Mini that buyers will pay a premium for a small car, if it has the right mixture of styling, performance and packaging. But there is a limit. Most buyers in Canada and the United States still associate size with price, and it seems likely they will continue to do so for the foreseeable future.

This is forcing automakers to be more creative with their small vehicle strategies. GM is rolling the dice with its all-new Kappa small vehicle architecture. Next year the Pontiac Solstice roadster (expected to be priced in the mid-$20,000s) will hit showrooms as the first — but definitely not the last — Kappa-based product.

Bob Lutz, GM product boss and vice-chairman, says he has great hopes for an extensive range of smaller vehicles, all using the Kappa mechanical bones. Last year at the Detroit auto show, GM showed two Kappa-based prototypes that hint at the possibilities: the sporty Saturn Curve 2+2 and the Chevrolet Nomad, a minicar/sports car/wagon hybrid.

Not surprisingly, both DaimlerChrysler’s Chrysler Group and Ford are aware of GM’s plans and appear to be putting greater energy and resources in future small vehicle development. One example is the Dodge Sling Shot concept, based on a platform borrowed from the Smart line-up for Europe.

Chrysler officials say the Sling Shot concept as it has been shown would be tough to certify for North American safety standards, but new DaimlerChrysler platforms – Smart platforms – under development might solve that problem before the end of this decade.