Are cheap cars going extinct?

Automotive companies forced by supply chain woes to alter strategies, resulting in the departure of many budget models.

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Mitsubishi Mirage will soon be discontinued. Photo: Mitsubishi.

According to Motor1, by the end of 2025, the new car market in the US will no longer have any models with a sticker price below 20,000 USD. Mitsubishi Mirage and Kia Rio will soon be discontinued, and Nissan Versa will likely be phased out by the Japanese automaker within the next two years.

Focus on larger cars, luxury vehicles

The list of cheapest cars in the US in 2024 compiled by Motor Trend no longer includes the Kia Rio. Instead, the Nissan Versa (starting at 17,405 USD) and the Mitsubishi Mirage (from 18,110 USD) are at the top of the list.

Industry publication Motor1 says the disappearance of low-priced vehicles in the US is largely due to the impact of the pandemic. Prior to 2019, the average cost of a new car in the US market was recorded at around 38,000 USD.

However, supply chain issues throughout 2020 and beyond have pushed up production costs. This has supposedly given automakers a convenient excuse to quietly phase out their low-priced products, but no replacements have been offered.

In the US, the Ford Fiesta and Chevrolet Cruze were both discontinued at the end of 2019, and the Smart brand completely withdrew from the US car market in the same year. Since then, the US car market has witnessed the departure of the Hyundai Accent, Ford EcoSport, Volkswagen Beetle, and Chevrolet Spark.

Tyson Jominy, Vice President of Data and Analytics at J.D. Power, says the shortage of microchips is partly to blame for the disappearance of low-cost vehicles.

“Automakers were already discontinuing low-priced models before the pandemic. After the supply chain issues, many automakers are prioritizing the sale of higher-priced vehicles. Even within each model line, there are more features added to push transaction prices higher. The chip shortage has forced automakers to pick and choose where they put their limited resources,” Jominy said.

The Nissan Versa, commonly known as the Nissan Almera in Vietnam, will likely be phased out by the Japanese automaker soon. Photo: Nissan.

Meanwhile, news site Energy Post cites an analysis by T&E showing that in the electric vehicle segment, European automakers are also focusing on electric SUVs and premium cars, which have the potential to yield greater profits.

T&E’s report shows that the average sales price of all-electric cars in Europe has increased by 39% since 2015, while in China, the average cost of owning an electric car has decreased by 53%. T&E’s research also indicates that between 2018 and 2023, only 40 unique electric vehicles were introduced in segments A and B, while the number of electric cars in segments D and E reached 66.

A-segment cars accounted for only 6% of electric car sales in Europe in 2023. The situation is even worse for cars with internal combustion engines, as A-segment cars only held a 4% market share last year.

“European automakers are holding back the mass adoption of electric vehicles by failing to introduce affordable models. Their disproportionate focus on large SUVs and luxury cars means that consumers have too little choice in the mass market and that prices are too high,” said Anna Krajinska, Manager at T&E.

T&E’s analysis shows that in the European market, it is estimated that only around 42,000 electric cars priced below 25,000 EUR (equivalent to 27,350 USD) will be produced this year. However, the organization says the lack of affordable options is not stopping the market share of electric vehicles from growing, with an expected increase of 2.5 percentage points compared to last year.

Situation of the low-cost car segment in Vietnam

In the Vietnamese car market today, the A-segment car segment consists of only three models: the Hyundai Grand i10, Toyota Wigo, and Kia Morning. Last year, the Hyundai Grand i10 achieved sales of 7,974 units, the best performance in the segment, but not enough to put the low-priced car in the top 10 best-selling cars of the year.

The Toyota Wigo returned to the Vietnamese market in the middle of last year and ended 2023 with total sales of 1,748 units, surpassing the Kia Morning with sales that stopped at 1,467 units.

Entering the first month of the year, sales of the entire A-segment car segment declined significantly, similar to the overall situation in the Vietnamese automotive market. Hyundai Grand i10 recorded sales of 480 units, Toyota sold 84 units to Vietnamese consumers in the first month of the year, while Kia Morning’s sales performance in the same period was 68 units.

A-segment car segment is increasingly losing its appeal
Sales structure of car models in the low-priced small car segment in Vietnam in the first month of the year (Data: VAMA, TC Motor)
Label Hyundai Grand i10 Toyota Wigo Kia Morning
units 480 84 68

As such, the low-cost car segment in the Vietnamese market is currently both lacking in quantity and not very competitive. The declining sales of A-segment cars are thought to be influenced by neighboring segments such as B-segment sedans, urban SUVs, or MPVs, which have advantages in terms of space and are quite competitive in price.

Currently, the urban electric car segment has only recorded the presence of the Wuling Hongguang MiniEV, a mini electric car from the SAIC-GM-Wuling joint venture. In the near future, the VinFast VF 3 is likely to be introduced to the Vietnamese market, providing an additional option for customers who prefer low-cost urban cars.

It is not yet clear how Vietnamese consumer behavior will continue to affect the sales of the low-cost car segment in the future, but one thing is for sure: the Vietnamese car market is unlikely to see another sales phenomenon like the VinFast Fadil in 2021.

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