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Ford (Joe Raedle/2008 Getty Images)
Ford (Joe Raedle/2008 Getty Images)

Demand for small cars rising Add to ...

Just as soaring gas prices push North American drivers toward smaller vehicles, the two Japanese auto markets that traditionally dominate that segment face a shortage of compact cars.

The run-up in gas prices to almost $4 (U.S.) a gallon across the United States - higher than that in many areas - has Americans scrambling to buy fuel sippers or downsize their engines, auto makers said Tuesday as they released their April sales figures.

Among sales to American consumers, compact cars led the way last month, grabbing about 18 per cent of the market, Tom Johnson, GM's vice-president of U.S. sales operations, told reporters and analysts on a conference call. "We didn't really see a big impact in January and February, but March is when we started to see that turn" toward smaller, more efficient vehicles, he said.

This would normally be good news for Honda Motor Co. Ltd. and Toyota Motor Corp. But both Japan-based auto makers are slashing production at their Canadian and U.S. plants this month - including those that crank out Honda Civic and Toyota Corolla models - meaning they will have fewer compacts available to meet the rising demand. That's because damage from the March 11 earthquake and tsunami in Japan will constrict supplies of parts for most Honda and Toyota vehicles for the next several months.

And in another reversal of what happened during previous gas price spikes, the shift to smaller cars benefits Ford Motor Co. and General Motors Co. because they have new compact car offerings that are competitive with the Honda and Toyota products for the first time in decades.

There could be some substantial gains in market share for some of the Detroit-based companies, said Jeff Schuster, executive director of global forecasting at consulting firm J.D. Power and Associates.

That was evident in U.S. sales in April, when GM's new Chevrolet Cruze posted its best month and jumped into second spot in compact sales, ahead of the Corolla. Civic led that segment in both the Canadian and U.S. markets, but Honda said earlier this week that supplies of the redesigned Civic, which went on sale April 20, will be severely restricted through the summer because of the parts shortage.

George Pipas, Ford's chief of sales analysis, said subcompact and compact cars represented about 25 per cent of total industry sales in the United States and Ford is reaping big gains in California - a market that in recent years has been a desert for Detroit auto companies and dominated by foreign manufacturers.

Vehicle manufacturers reported solid sales gains in both the U.S. and Canadian markets last month. Canadian sales jumped 7 per cent, while U.S. sales surpassed 13 million on a seasonally adjusted annual rate basis.

Ford Motor Co. of Canada Ltd. jumped back into first place with a 9-per-cent gain, while Hyundai Auto Canada reported the best month in its history. The 17th straight month of sales growth for Chrysler Canada Inc. vaulted it ahead of General Motors of Canada Ltd. into second spot. GM's sales fell 4 per cent.

Passenger car sales outperformed truck sales as auto makers in Canada scaled back incentives on trucks and sport utility vehicles, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont.

"Higher gas prices also pushed the consumer back into passenger cars and away from light trucks," Mr. DesRosiers noted.

Toyota Canada Inc. posted a 9-per-cent sales jump, led in part by the best month on record for its Lexus luxury brand.

But dealers said they are beginning to experience shortages of some vehicles and have been told by Toyota that sales are expected to fall dramatically in Canada during the next few months.

One Toyota dealer said he thought early in April that he would run out of vehicles by the end of July, but now believes he will scrape through until full production resumes at Toyota plants later this year.

But Toyota will stop sending used vehicles to vehicle auctions in Canada until the supply of new vehicles recovers, which means they will be kept for Toyota dealers to sell. The auto maker is also offering new incentives on used cars, dealers said.

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