Mazda has announced that the Mazda2 will no longer be sold in Canada.Hand-out
The subcompact car market in Canada has collapsed amid the growing popularity of crossovers, prompting Mazda Canada Inc. to stop selling its Mazda2.
"The opportunity for success in the subcompact market is rapidly shrinking as the segment has lost considerable share of the market this year," the auto maker said in a statement. "Consumers have indicated a strong shift in their preferences toward crossover segments."
Low gas prices and demographic trends have hurt sales of subcompacts, while also fuelling sales of crossovers – which have a sport-utility body on a car chassis – and traditional SUVs. Low-interest loans are also driving sales of crossovers.
The two big vehicle-buying cohorts are millennials and baby boomers, industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., said Tuesday.
"Millennials are reaching family formation age and want SUVs and bigger vehicles, and the boomers are moving into retirement in record numbers and looking for a vehicle that fits a lifestyle where they can be more active," Mr. DesRosiers said.
In the five years since the Mazda2 was introduced in 2010, gas prices have fallen. They now stand at about $1 a litre, compared with about $1.40 in the summer of 2014 when oil prices began collapsing.
Mazda2 sales peaked at 9,020 in 2011 and have fallen every year since. The auto maker sold 10 last month and just 746 in the first 10 months of the year.
Mazda was scheduled to introduce a redesigned, made-in-Mexico model of the subcompact this year along with the CX-3, a new crossover smaller than the CX-5.
"We took the decision not to introduce the two vehicles at the same time and instead concentrate our resources on the CX-3, as this is the vehicle with the largest sales volume opportunity," Mazda spokesman Greg Young said. The CX-3 is already Mazda's third best-selling vehicle in Canada.
Sales of subcompacts offered by other auto makers have also plunged, including the Fiat 500 sold by FCA Canada Inc., the Ford Fiesta, Honda Fit, Hyundai Accent, Chevrolet Sonic and Toyota Yaris. The exception is Nissan Canada Inc., whose Micra and Versa combined were up 2 per cent in the first 10 months of 2015 from year-earlier levels.
Sales of compact crossovers and SUVs rose 7 per cent through September, while subcompact sport-utility vehicle sales rose 48 per cent, data compiled by DesRosiers Consultants show. The subcompact segment fell 19 per cent.
Crossovers and SUVs cost more than subcompact cars, but the prevalence of loans exceeding six years and the rebound of leasing mean monthly payments seem more affordable, so consumers are purchasing more expensive vehicles, Mr. DesRosiers said.
Data from consulting firm J.D. Power and Associates show that 74 per cent of car loans are six years or longer. Leasing, meanwhile, has bounced back to 27 per cent of the market from 13 per cent in 2010.
The plunge in subcompact sales shows that Canadian consumers decide what sells in the marketplace, not government mandates on fuel economy or environmentally friendly vehicles, Mr. DesRosiers said.
"There's not a politician in Canada with a backbone to tell a consumer, i.e. a voter, to buy a vehicle they don't want," he said. "They put all of the responsibility on the vehicle companies, instead of doing the right thing and targeting consumers."
Ford Motor Co. said Tuesday that crossovers and SUVs now represent about one-third of all U.S. auto sales and are projected to grow to 40 per cent of the market by 2020.