Retooling the Auto Industry for a Smaller (Yet Profitable) Future

So if we had heard about cost-cutting to make small cars more profitable in those days, we could've been sure that it would be the kind of cost-cutting that makes some small cars less attractive to buyers. Cheap interior, shoddy assembly, low-tech engines, few features, etc.

Toyota Ractis. Photo: Toyota
New Auto Industry Paradigm: Fuel-Efficient or Bust
With rising oil prices, set to climb even faster when the recession ends, upcoming CO2 regulations, new fuel economy standards, a severely depressed car market, and a recession that makes most people try to cut expenses, car makers will have to compete against each other on a new playing field.

People are going to become more and more interested in smaller, more fuel efficient vehicles, so car makers need to have something good to offer. If they increase the profit margins on small cars by reducing their quality and features, they won't be able to compete against others who didn't.

Instead, they should do two things: Cut costs by sharing parts, platforms, software and intellectual property between cars as much as possible. This can seriously reduce expenses without reducing the quality of the final product. But they should also stop seeing small, fuel efficient cars as entry level vehicles and offer them with a broad range of features and packages, from bare bones to well-equipped and luxurious (this can also increase profits, while making people who would not consider smaller cars take a second look).

Not the Destination, But a Step in the Right Direction...
This would only be a stop-gap until plug-in hybrids and electric cars are more affordable, but it would certainly be an improvement over the past decades. Hopefully it would also buy us some time so that we can re-imagine our cities and transform them into walkable & bikeable places with green public transit.

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