How do automakers plan on returning to profitability when their sales are going down the tubes? You know those smaller, more fuel-efficient cars we keep hearing about? Automakers know the demand is high and therefore, they will bump up the price to give us what we want and make a profit at the same time.
Sales of big trucks and SUVs, once the automakers’ bread and butter for profit, are way down and aren’t going up any time soon. The typical profit on a big SUV before the bottom fell out was about $10,000, while on a subcompact, it’s about $100.
Automakers have to find another way to make money. Their solution is to pack small cars with plenty of upgrades and features.
Drivers will have an abundance of fuel-friendly small cars to choose from the next few years, but they’ll have "sticker shock" prices, reports USA Today.
Automakers will hide some of the price increases with fancy, high-margin features such as navigation and leather seats. The idea is to attract buyers who want to downgrade to get better mileage but won’t give up features and luxuries.
"We’ll see average transaction prices creep up to the mid-$20,000s in the next four years, from the high teens now," forecasts Aaron Bragman, analyst at consultant Global Insight.
Honda, Ford and GM will add or have already added high-end versions of their compact and subcompact models. New future fuel efficiency standards will also make the prices on vehicles go up as automakers have to add new technology to meet the mpg standards.