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Is the writing on the wall for city cars?

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Is the writing on the wall for city cars?

Little cars have a big problem in Australia.

Not small cars like the Mazda3 and Toyota Corolla – they still sit near the top of the sales charts – but light hatchbacks, the sort of machines eligible for a Best City Car trophy in Drive’s Car of the year awards.

Sales of cars such as the Toyota Yaris, Mazda2 and Honda Jazz have dropped by 11.9, 18.2 and 27.3 per cent in the first quarter of 2017. Ford’s Fiesta, Holden’s Barina and Volkswagen’s Polo are also down by a decent margin, part of a 20.7 per cent reduction for the segment.

Is the writing on the wall for city cars?

Some of that can be attributed to the rise of baby SUVs.

The Holden Barina, Mazda2 and Honda Jazz are now outsold by high-riding baby SUV siblings in the Trax, CX-3 and HR-V which have attracted new buyers to the compact segment.

Car companies will also point out that facelifted versions of the Mazda2 and Yaris are just around the corner, and that they are likely to boost sales.

But that doesn’t change the fact that buyers are turning away from that genre of cars. Australians bought just short of 28,000 examples of the Toyota Yaris and its rivals in the first quarter of 2015, a number that has dropped to a little less than 19,000 for the same period this year. And those buyers haven’t all switched to baby SUVs, as industry statistics show that fewer people bought compact crossovers such as the Mazda CX-3 and its rivals in the first three months of 2017 than they did in 2015 or 2016.

There may be other factors at play discouraging people from buying some of the cheapest cars on the road.

Renowned economist Saul Eslake told Drive he “wouldn’t be surprised if the combination of weak overall growth in employment, an ongoing shift from full-time to part-time and casual employment, and very soft growth in wages, might be eroding the willingness of people who would be the major market for cheap cars to be buying until some of these factors start to change”.

Housing affordability and rising interest rates may also have an effect on buyers, and there are questions surrounding the number of young people who choose to become motorists.

Young drivers are among those most likely to buy entry-level cars such as the Mazda2, and UK data shows that the number of drivers aged under 25 dropped by 6.2 per cent between 2012 and 2016, while the percentage of US high school students with driver’s licences declined by nearly by 13.8 per cent between 1996 and 2015, according to the University of Michigan.

That sort of trend is unlikely to have a significant effect on Australian roads in the short term, as we registered 1.37 million additional passenger vehicles on the road between 2010 and 2016, for a total of 13.7 million registered passenger vehicles across the nation.

But it may change the way we think about cars in the long run.

Several car companies including Toyota, Ford, BMW and Mercedes-Benz have invested in ride-sharing services, believing that a significant proportion of the population may choose not to buy cars in the future.

Vehicle sales across the board for the year to date are down by nearly 6000 cars, 2.1 per cent less than 2016. While SUVs continue to do well, passenger car sales have dropped by 8.3 per cent.

Toyota remains on top of the market as a whole and is likely to stay there for some time, as it is still on an upward growth curve while Mazda and Hyundai have flattened or dropped sales this year.

The latter pair will soon benefit from significant boosts as new-generation Mazda CX-5 and Hyundai i30 vehicles hit the road, giving the brands a much-needed uptick in customer interest.

On the luxury front, Mercedes-Benz continues to grow its lead over key rivals, while sales of BMW and Audi models are both down by around 15 per cent.

Top 10 manufacturers – March 2017

1 – Toyota – 19,652

2 – Mazda – 10,472

3 – Hyundai – 8700

4 – Mitsubishi – 7583

5 – Holden – 7211

6 – Ford – 6852

7 – Nissan – 5620

8 – Volkswagen – 5122

9 – Subaru – 5006

10 – Kia – 4684

Top 10 cars – March 2017

1 – Toyota HiLux – 4245

2 – Ford Ranger – 3845

3- Toyota Corolla – 3574

4 – Mazda3 – 3039

5 – Mitsubishi Triton – 2670

6 – Hyundai i30 – 2383

7 – Toyota Camry – 2336

8 – Hyundai Tucson – 2156

9 – Mazda CX-5 – 2116

10 – Holden Commodore – 2081

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