Demand for small cars, crossovers soar along with gas prices

Small cars are now the largest segment of the U.S. auto market, accounting for 18 percent of new car sales. Last year U.S. consumers bought a record 2.8 million of them, and with sales up 4 percent in the first quarter this year, the record almost surely will be shattered.

In the U.S., gasoline prices are driving the small car boom, but worldwide, it's people in emerging economies gaining wealth, said Mike DiGiovanni, GM's executive director of global markets and industry analysis.

"A middle class is starting to develop, and they're trying to move up scale from smaller cars to the larger compact-size cars," he said.

U.S. buyers, even when they pick larger cars, are going for more fuel-efficient engines.

Six-cylinder engines used to command the lion's share of the market, but 38 percent of buyers sought four-cylinder engines in the first quarter, the highest since Westlake Village, Calif.-based marketing and consulting firm J.D. Power and Associates began collecting such data in 2002.

That directly affects automakers' bottom lines: A large vehicle with a V-8 engine can command $8,000 more than one with a 6-cylinder, in part because additional luxury features are often packaged with the larger engine, according to J.D. Power auto analyst Jason Rothkop. By comparison, there is a discount of $4,000 when a buyer moves down from a 6-cylinder to a 4-cylinder.

Demographics also play a role. Baby boomers are trading in larger vehicles as their nests empty, and their children are now of car-buying age. Half of the next generation will pick small cars for their first set of wheels, said George Pipas, Ford's top sales analyst.

"Gas prices are important because they've accelerated these shifts, but the shifts were going to happen anyway," Pipas said. "SUVs were not going to roam the Earth in this decade as they did in the 90s."

Pickup sales also tumbled with the recent downturn in home construction, since they are often used as work vehicles. The weakened economy and falling home values have played a role in the decline of SUVs and pickups.

"We see our consumers coming into our dealerships and wanting to trade down into a lower monthly payment," said Steven Landry, Chrysler's vice president of sales.