The Mitsubishi Mirage is going to Car Heaven soon, but at least it won’t be lonely up there. Soon it will be joined by the Kia Rio, a relative steal these days at $16,750 for the sedan and $17,690 for the five-door hatch. It’s now due to be canceled, and the dwindling affordable subcompact car market in America seems likely to go with it.
That leads off today’s morning news roundup. Also on tap: an unexpected way to score a cheap car deal right now, the latest on a potential United Auto Workers strike and somehow, VinFast’s stock price is popping off—but we’ll dive into why that’s the case. Let’s do this thing.
Adios, Rio
Photo: KIa
The affordable subcompact is perhaps the most noble of all the cars. It does its job without glory—even pickup trucks get some of that—yet it’s no less necessary to countless people who just need to get around. Because sometimes you just need a cheap, small car. Maybe it’s for your kid in high school; maybe it’s a post-college ride when you’re still working for that thing you really want; or maybe you live in a city and need a car sometimes, but need easy parking even more.
Sadly for all involved, America’s cheap subcompact market is vanishing rapidly. In recent years we’ve seen the death of the Mazda 2, Honda Fit, Chevy Spark and Sonic, Ford Fiesta, Toyota Yaris and Yaris Hatchback, the aforementioned Mirage and the Hyundai Accent.
Now the Accent’s platform-mate, the Kia Rio, is on the way out too, taking with it one of the very few sub-$20,000 new car options America had left. From Automotive News:
Kia America’s Rio subcompact car will not return for the 2024 model year, the company confirmed. It follows the demise of its small Hyundai counterpart, the Accent, discontinued after the 2022 model year.
Though Kia said it will remain in the sedan business, Americans are leaning toward larger, higher-riding crossovers. Light trucks, a category that includes minivans, crossovers, SUVs and pickups, accounted for 79 percent of all new U.S. vehicle sales for the first six months of 2023 .
That trend was reflected in Rio sales. The Rio ended 2022 with sales of just 26,996, a 14-percent decline, according to the Automotive News Data & Research Center. Through July of this year, Rio sales are down 2 percent.
Buyer trends are partly responsible, for sure. (As is cheaper gas in the fracking era.) But the automakers are also all too happy to push you into bigger, more expensive cars at longer loan and lease terms, and the way new car technology is evolving makes “cheap” harder than ever to do. I can’t mourn the Kia Rio as some great icon of motoring, but the lack of choices in the market—as well as the many negative effects of upsizing—is disappointing to see.
At least Kia still makes the Forte, which is a good little sedan option. For now, anyway.
Want A Cheap Car? Lease An EV, Apparently
Photo: Tesla
But if you do want to find “the most affordable way to get a new car of any kind,” the best way to do so is leasing an electric vehicle right now, also according to Automotive News. The publication cites a study from Energy Innovation, a nonpartisan energy and environmental policy firm. Its data reveals that between price cuts from dealers themselves, aggressive tax subsidies, and using no gas and lower maintenance, an EV lease could save you a ton of money all around.
Here are some charts:
And here’s a summary from the study itself:
Our analysis shows that while EVs are cost competitive even without federal incentives, the IRA federal EV tax credit makes EVs significantly cheaper than gasoline-powered vehicles. The federal EV tax credit makes average monthly lease prices 12 percent cheaper for leased vehicles that pass the incentive along to lessees, making almost every EV model cheaper to lease than gasoline-powered alternatives in most states.
Increasing competition among EV dealers with new incentives and growing inventories is creating significant price declines; last month’s average transaction price for EVs was 20 percent lower than the same time last year. EV ownership savings could also expand further if oil prices increase again to anything close to 2022 levels, about 40 cents per gallon more than their current level.
This dynamic is most apparent for leases, but is also significant for new vehicles financed to own. For new car buyers uninterested in leasing, financing new EVs is often cheaper than financing equivalent gasoline vehicles, an important angle considering nearly 80 percent of Americans finance new car purchases.1 While higher interest rates make financing any car more expensive than it was a year ago, many EVs in many states are still cheaper to finance and own per month than an equivalent gasoline vehicle.
Altogether, EVs are cheaper to lease than their gas counterpart in every state but one for all the models we evaluated, except for the Ford F-150 Lightning. On average, leased EVs were $220 cheaper than their ICE alternatives on a monthly basis.
EV ownership isn’t for everyone, and charging is still a pain in the ass (unless you drive a Tesla, in which it’s generally pretty fine these days.) But if you take the leap, it might be easier and cheaper than you might think. Get the full report here, I’m still parsing all of it myself.
Ford Votes ‘Yes’ On Strike Authorization, Stellantis Gets Hit Hard By UAW
Now, for the latest on the ongoing union contract negotiations between the UAW and the Big Three automakers. Workers are currently holding a strike authorization vote, which doesn’t mean they’ll go on strike but that they’re giving leadership the go-ahead to do that later if negotiations don’t go the way they want. It sends a powerful message to management, too. Ford workers in Louisville have already voted 99% “yes” to authorize a strike.
Meanwhile, Stellantis finds itself perhaps the biggest target for the UAW this time around—an unusual turn for the Chrysler brands, usually the “smallest” of the Big Three. But this isn’t Chrysler or even Fiat Chrysler anymore, it’s a massive global company. And the union wants to send a message there, too. From The Detroit News:
The automaker, now known as Stellantis NV, is in a different position than it was during the previous talks in 2019. Since the 2021 merger between Fiat Chrysler Automobiles NV and French competitor Groupe PSA, Stellantis has become the fourth-largest automaker in the world by volume. CEO Carlos Tavares has emphasized execution, and Stellantis’ $8.88 billion adjusted operating income in the first half of 2023 makes it more profitable than either General Motors Co. or Ford Motor Co. in North America. It’s the automaker yielding the fattest profit-sharing checks — at $14,760 for 2022 — for the autoworkers.
[…] “Stellantis has emerged as an economic powerhouse and is producing really record profits, and as a result, it is very prominent in these negotiations,” said Harley Shaiken, a professor at the University of California, Berkeley, specializing in labor and the global economy. “They have record profits, and (Stellantis CEO Carlos Tavares) is talking about how do we reduce costs. It makes it more possible for them to be a target.”
Now with Stellantis surpassing its neighbors in money-making, the UAW’s public messaging has proved relentless. Fain has made personal attacks on the automaker’s top executives and thrown a proposal from the automaker into his office trash can during a Facebook livestream. The UAW Twitter account has shared memes and information scrutinizing the “lifestyles of the rich and famous.”
Tavares, whose total compensation was $26 million last year, is urging the company and its workers to find cost savings everywhere they can with the electric-vehicle transition underway.
Bloomberg said that the spectacular first-day pop “added $39bn to the net worth of the chairman Pham Nhat Vuong.” The stock has since snapped back, but with a $36bn market cap, the sugar-high from the listing still hasn’t worn off.
The press articles all mention that the chair controls 99 per cent of newly listed VinFast. But that’s not just an aside: it is the story. This is no conventional de-Spac; rather it resembles a backdoor listing into an empty listed shell. And the stock price is just an arbitrary number on a screen, not the market’s judgment of the company’s worth.
This is all complicated Wall Street Black Magic stuff, but without going into SPACs, de-SPACs and reverse mergers, here’s the important part:
The worry here is that retail investors might buy VinFast shares in the mistaken belief that the stock price reflects the collective market judgment. In fact, almost no market players have validated the valuation. After filing with the SEC, VinFast withdrew its IPO and so never tested investor appetite. And nearly all Spac shareholders redeemed for cash instead of taking VinFast shares. In June VinFast tried to raise $250mn via a PIPE (private investment in public equity), which is a common feature in de-Spacs, but dropped the idea.
In short, this is kind of all bullshit. The FT calls it a “spac oddity,” because maybe someone was listening to Bowie that morning. But if you’re expecting this to turn into the next Tesla, I have a bridge to sell you.
Your Turn
Is the death of the small, cheap car market really a bad thing? Or will it ultimately be no great loss to consumers?
149 thoughts on “America Is Witnessing The Death Of The Subcompact Car”
I hate the death of the small, cheap car. Some people just need basic transportation, and being able to get a new car—no worries about previous owners—complete with a warranty is huge in terms of peace of mind. The fuel costs are usually pretty reasonable on these, too, and we’ll miss having this end of the market if fuel costs shoot up again. Plus, parkable small cars are great if you live in a city.
If my estimation is right, a $10 an hour raise for Stellantis’ UAW members would equal about $1 billion. It sounds like a lot, but not really if they stretch it over the life of the next contract and considering they made about $8 billion just over the last year.
I was toying with the idea of buying some old reliable & boring Toyotas, freshening them up and leasing them. With loaner cars in case the leased car breaks down or needs a service. Some sort of car that people can *actually* afford kind of thing. But I don’t have starting capital, or an attorney to shore up all the potential liability issues.
I feel that people would rent a regular car for $200/mo for say 24 months instead of the financial doom of $800/mo car loans for 6/7 years.
I get the feeling that VinFast will go the way of Enron, Evergrande, NFTs and cryptocurrency. Their cars are spectacularly bad and are going to sell like Edsels.
Grab some popcorn, sit back and watch the show.
“Is the death of the small, cheap car market really a bad thing? “
Yes.
Some people live in the city (a REAL city… the kind with 24 hour transit that includes stuff like subways) and being forced into a larger vehicle can be a negative in that it makes parking/driving harder.
This describes my life exactly. Parking is available on my street precisely because most of my neighbors chose to drive small cars, including my GF who actually likes her 2023 Kia Rio wagon. (It’s 167″ long, she can park it anywhere.) This will become a lot more challenging in a few years as the supply of small used cars evaporates.
In a few months, the (unsurprising) headlines will be all about the VinFast stock listing, crash, and investigation into who broke what law and how much money disappeared overseas.
When a CEO makes $26 Mill, it sets a huge target on the company for passing more on to its employees. He has asked for a strike of he’s not willing to massively share
I managed to afford my first brand new car ever due to the Rio. 2001 Rio, it was something like $13,000. It was a good car that lasted until a mechanic dropped it off the lift replacing the clutch at 100k miles. Would have kept going other than that.
The market is making it impossible for entry level buyers. The average transaction price nearing $50k is simply not sustainable.
Same here. The 2001 Kia Rio was the first brand new car I had ever owned. 5-speed manual,I was getting 33-34 mpg with that car and it last me 93K miles until I traded it in.
With the discontinuation of the Mirage and the Rio that just leaves the Nissan Versa.
I remember the feeling I had picking up my first new car at the dealer. It was fairly inexpensive, but it was speced to my taste. It was a good feeling. Having said that, it’s a LOT harder to spec cars to people’s exact tastes these days, but I still think it’s a good feeling to be able to get a new car. I think it’s a big loss to not have inexpensive new cars. You know that 60K bumper to bumper (and 100K powertrain) Kia had provided some nice peace of mind you won’t get with a good used car. I know the certified pre-owned is supposed to fill that gap, but it’s not the same (I’ve gone that route too).
I’m usually on top of this stuff, but I just assumed the Rio was axed with the Accent. Well here we are I guess.
I know we all claim no one wants a Rio, but we often forget that no one knew the Rio was still around, or that one could even be purchased. I spent a lot of the past three years obsessively looking at car inventories and considered this segment a couple of times, and I can assure you, my local Kia dealer NEVER had a Rio in stock. Not once. Not even a sad, rental white base model. Kia and especially Kia dealers did not want you to buy a Rio.
How does the public buy a car that effectively doesn’t exist?
I think people who say “the market doesn’t want this” haven’t actually gone to a dealer in a long time. Or ever? Possibly ever.
For example, manual transmission take rates. I’ve been to dealerships where staff doesn’t know the manual models exist. The Honda Fit? My local dealer would typically have one and a breathless man in a branded polo pushing you towards a Civic. Back when the Matrix was on its way out my local dealer was trying to sell me on the significantly more expensive RAV4.
It’s a bit of a chicken and egg situation, but dealers have a very clear idea of what they want to sell and get very annoyed when you step outside of those lanes.
The typical buyer that needs a cheap car is probably not concerned with the specific type of car as much as if it hits certain parameters like payments or finance approval.
The Honda dealer had one Fit in the back because that’s probably what Honda allocated. If it’s not the color or trim the buyer wants, neither party is happy – they have less shot at a sale, and the customer mad because it’s like they wasted your time. But the dealer also has 10 Civics they could sell you for the same price as a Fit, because there’s more margin and more incentives and Honda planned to sell 8x as many Civics as Fits that year.
I remember when Chrysler dropped short-length vans for 2008, they cited research that found most buyers didn’t care about the shorter size, just that the van was cheaper, so they reasoned they could just sell one van size with a cheaper base model (and anyone wanting something smaller could get a Journey). Probably could argue that Chrysler couldn’t afford to build two different body styles at the time too, but the vans are also a key product they couldn’t afford to mess up.
Not saying I like it or endorse it, and I know more people that seek out and buy the car they want too, like you and I. But I don’t think that bubble overlaps much with the average buyer either.
Seriously. It’s as if “the market” they’re talking about is the dealership network, not the end consumer. Of course they don’t want less expensive cars with smaller margins.
Yet another reason why we should upend the way we buy cars. Make the small stuff available. Normalize ordering whatever the hell we want, not what the dealer wants to sell. Don’t push us into more expensive cars. Something’s gotta give with the unsustainable loans they’re pushing folks into nowadays.
The only way to buy one was to fill out a form on the Kia website to have them email the dealer, tell the dealer that no I do not want to test drive anything else, give them a $1000 refundable deposit, and then wait for it to be built and delivered. The reason your dealership never had any was because they did not want to sell them, and would only do so only if required to by the manufacturer.
The Kia Rio she’s the cheapest in the land,
You’ll get the keys for way less than twenty grand,
And when she drives, she really shows you all she can,
Oh Rio, Rio still available across the Rio Grande
One of my favorite headlines of theirs was: her name is Rio and she’s crap. They were talking about an earlier generation than the one I had the misfortune to have one as a rental in 2016, so I can’t imagine how bad that must have been. My rental had 27 miles on it and it was a worse POS than cars I’d driven that were headed to the junkyard with doors that would fly open in turns. Truly horrid little monstrosity that laughed in the face of the “no bad cars anymore” cliche. The Japanese built better economy cars in the ’80s. Hell, even give them the 30 years’ of decrepitude and bad smells and I’d still pick them.
What sucks about all the compact cars dying is that small cars have always been more popular in Canada, but because we’re America’s hat we (mostly) just get given what you get…..I WANT a compact car, NOT an SUV, but because of the bigger numbers down there, it means we likely won’t have any anymore either up here…
Genuinely surprised Canada hasn’t opened its doors to EU standards given the Canada-EU free trade agreement.
It would open the possibility for brands like VW, and Fiat to simply carry over their EU models without much more than ensuring that it can fit the license plate.
Would be funny to see a Fiat Panda next to an Expedition on the roads; less funny to hear of one colliding with the other.
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And here’s a summary from the study itself:
Now, for the latest on the ongoing union contract negotiations between the UAW and the Big Three automakers. Workers are currently holding a strike authorization vote, which doesn’t mean they’ll go on strike but that they’re giving leadership the go-ahead to do that later if negotiations don’t go the way they want. It sends a powerful message to management, too. Ford workers in Louisville have already voted 99% “yes” to authorize a strike.
Meanwhile, Stellantis finds itself perhaps the biggest target for the UAW this time around—an unusual turn for the Chrysler brands, usually the “smallest” of the Big Three. But this isn’t Chrysler or even Fiat Chrysler anymore, it’s a massive global company. And the union wants to send a message there, too. From The Detroit News:
I hate the death of the small, cheap car. Some people just need basic transportation, and being able to get a new car—no worries about previous owners—complete with a warranty is huge in terms of peace of mind. The fuel costs are usually pretty reasonable on these, too, and we’ll miss having this end of the market if fuel costs shoot up again. Plus, parkable small cars are great if you live in a city.
If my estimation is right, a $10 an hour raise for Stellantis’ UAW members would equal about $1 billion. It sounds like a lot, but not really if they stretch it over the life of the next contract and considering they made about $8 billion just over the last year.
I was toying with the idea of buying some old reliable & boring Toyotas, freshening them up and leasing them. With loaner cars in case the leased car breaks down or needs a service. Some sort of car that people can *actually* afford kind of thing. But I don’t have starting capital, or an attorney to shore up all the potential liability issues.
I feel that people would rent a regular car for $200/mo for say 24 months instead of the financial doom of $800/mo car loans for 6/7 years.
What ever happened to Rent-a-Wreck? Is it still, genuinely, around or just in hold-out pockets of the universe?
I get the feeling that VinFast will go the way of Enron, Evergrande, NFTs and cryptocurrency. Their cars are spectacularly bad and are going to sell like Edsels.
Grab some popcorn, sit back and watch the show.
“Is the death of the small, cheap car market really a bad thing? “
Yes.
Some people live in the city (a REAL city… the kind with 24 hour transit that includes stuff like subways) and being forced into a larger vehicle can be a negative in that it makes parking/driving harder.
Worse, those who live in REAL cities that have poor transit infrastructure that forces you to be independently mobile.
I call those ‘suburbs pretending to be cities’.
I live in Baltimore. It’s most definitely not a suburb and also happens to have pretty crummy public transit.
This describes my life exactly. Parking is available on my street precisely because most of my neighbors chose to drive small cars, including my GF who actually likes her 2023 Kia Rio wagon. (It’s 167″ long, she can park it anywhere.) This will become a lot more challenging in a few years as the supply of small used cars evaporates.
In a few months, the (unsurprising) headlines will be all about the VinFast stock listing, crash, and investigation into who broke what law and how much money disappeared overseas.
If I were a gambling man, I would short VinFast stock. But then you’d have to find potential buyers for it…
When a CEO makes $26 Mill, it sets a huge target on the company for passing more on to its employees. He has asked for a strike of he’s not willing to massively share
“Where can we cut costs?” Is a bold question for someone who took home $26MM last year to ask
This is nuts.
I managed to afford my first brand new car ever due to the Rio. 2001 Rio, it was something like $13,000. It was a good car that lasted until a mechanic dropped it off the lift replacing the clutch at 100k miles. Would have kept going other than that.
The market is making it impossible for entry level buyers. The average transaction price nearing $50k is simply not sustainable.
Same here. The 2001 Kia Rio was the first brand new car I had ever owned. 5-speed manual,I was getting 33-34 mpg with that car and it last me 93K miles until I traded it in.
With the discontinuation of the Mirage and the Rio that just leaves the Nissan Versa.
I remember the feeling I had picking up my first new car at the dealer. It was fairly inexpensive, but it was speced to my taste. It was a good feeling. Having said that, it’s a LOT harder to spec cars to people’s exact tastes these days, but I still think it’s a good feeling to be able to get a new car. I think it’s a big loss to not have inexpensive new cars. You know that 60K bumper to bumper (and 100K powertrain) Kia had provided some nice peace of mind you won’t get with a good used car. I know the certified pre-owned is supposed to fill that gap, but it’s not the same (I’ve gone that route too).
Certified Pre-Owned just means Used. No more, no less.
Almost. Someone has certified that it is used.
If Tavares is looking for cost savings I can find $10-$15 million right away and he’ll still be doing better than 99.9% of the world.
I’m usually on top of this stuff, but I just assumed the Rio was axed with the Accent. Well here we are I guess.
I know we all claim no one wants a Rio, but we often forget that no one knew the Rio was still around, or that one could even be purchased. I spent a lot of the past three years obsessively looking at car inventories and considered this segment a couple of times, and I can assure you, my local Kia dealer NEVER had a Rio in stock. Not once. Not even a sad, rental white base model. Kia and especially Kia dealers did not want you to buy a Rio.
How does the public buy a car that effectively doesn’t exist?
I think people who say “the market doesn’t want this” haven’t actually gone to a dealer in a long time. Or ever? Possibly ever.
For example, manual transmission take rates. I’ve been to dealerships where staff doesn’t know the manual models exist. The Honda Fit? My local dealer would typically have one and a breathless man in a branded polo pushing you towards a Civic. Back when the Matrix was on its way out my local dealer was trying to sell me on the significantly more expensive RAV4.
It’s a bit of a chicken and egg situation, but dealers have a very clear idea of what they want to sell and get very annoyed when you step outside of those lanes.
The typical buyer that needs a cheap car is probably not concerned with the specific type of car as much as if it hits certain parameters like payments or finance approval.
The Honda dealer had one Fit in the back because that’s probably what Honda allocated. If it’s not the color or trim the buyer wants, neither party is happy – they have less shot at a sale, and the customer mad because it’s like they wasted your time. But the dealer also has 10 Civics they could sell you for the same price as a Fit, because there’s more margin and more incentives and Honda planned to sell 8x as many Civics as Fits that year.
I remember when Chrysler dropped short-length vans for 2008, they cited research that found most buyers didn’t care about the shorter size, just that the van was cheaper, so they reasoned they could just sell one van size with a cheaper base model (and anyone wanting something smaller could get a Journey). Probably could argue that Chrysler couldn’t afford to build two different body styles at the time too, but the vans are also a key product they couldn’t afford to mess up.
Not saying I like it or endorse it, and I know more people that seek out and buy the car they want too, like you and I. But I don’t think that bubble overlaps much with the average buyer either.
Seriously. It’s as if “the market” they’re talking about is the dealership network, not the end consumer. Of course they don’t want less expensive cars with smaller margins.
Yet another reason why we should upend the way we buy cars. Make the small stuff available. Normalize ordering whatever the hell we want, not what the dealer wants to sell. Don’t push us into more expensive cars. Something’s gotta give with the unsustainable loans they’re pushing folks into nowadays.
The only way to buy one was to fill out a form on the Kia website to have them email the dealer, tell the dealer that no I do not want to test drive anything else, give them a $1000 refundable deposit, and then wait for it to be built and delivered. The reason your dealership never had any was because they did not want to sell them, and would only do so only if required to by the manufacturer.
The Kia Rio she’s the cheapest in the land,
You’ll get the keys for way less than twenty grand,
And when she drives, she really shows you all she can,
Oh Rio, Rio still available across the Rio Grande
CAR magazine used to always feature a version of this ditty in their GBU buyers’ guide section
One of my favorite headlines of theirs was: her name is Rio and she’s crap. They were talking about an earlier generation than the one I had the misfortune to have one as a rental in 2016, so I can’t imagine how bad that must have been. My rental had 27 miles on it and it was a worse POS than cars I’d driven that were headed to the junkyard with doors that would fly open in turns. Truly horrid little monstrosity that laughed in the face of the “no bad cars anymore” cliche. The Japanese built better economy cars in the ’80s. Hell, even give them the 30 years’ of decrepitude and bad smells and I’d still pick them.
The early Rio was one of the most underpowered, floppy turds I’ve ever driven. It’s really incredible how much Hyundai/Kia’s turned itself around.
Is this a rewriting of the Indian Pacific?
If so hats off to you sir
It was an attempt at Rio by Duran Duran lol
What sucks about all the compact cars dying is that small cars have always been more popular in Canada, but because we’re America’s hat we (mostly) just get given what you get…..I WANT a compact car, NOT an SUV, but because of the bigger numbers down there, it means we likely won’t have any anymore either up here…
Genuinely surprised Canada hasn’t opened its doors to EU standards given the Canada-EU free trade agreement.
It would open the possibility for brands like VW, and Fiat to simply carry over their EU models without much more than ensuring that it can fit the license plate.
Would be funny to see a Fiat Panda next to an Expedition on the roads; less funny to hear of one colliding with the other.