DETROIT — The starting price of a 2019 Cadillac Escalade is more than $75,000.
A 2019 Ford Fiesta starts at $14,260.
Neither price necessarily reflects what a new buyer might pay after accounting for options and extras, but even the top trim Fiesta ST, starting at $21,340, is a fraction of the Escalade’s sticker.
It’s not surprising the Cadillac costs so much more. It’s a luxury SUV after all — 12-way power adjustable front seats! — and isn’t meant to compete with the Fiesta in any direct way.
What’s telling, however, is that the Fiesta is one of the casualties of the shift by automakers and consumers away from passenger cars. It’s being eliminated from Ford’s North American lineup, and with it, another option for entry-level buyers.
There’s a simple reason. Automakers love to sell larger and more luxurious vehicles because they can make more money on them, and U.S. consumers have been largely accommodating.
The question is, are entry-level buyers being left behind, and if so, what does that mean for the market?
It’s not that consumers have no choices for less expensive vehicles – Kelley Blue Book lists the 2019 Honda Fit, Hyundai Accent and Chevrolet Spark as the year’s most affordable. But the number of possibilities is shrinking. Small cars are not always less expensive than larger vehicles, but they dominate the affordability list.
Jeremy Acevedo, manager of industry analysis for Edmunds, said affordability has clearly become an issue.
“In terms of affordability, there’s just so many less options for people who are in this space,” Acevedo said. “When you look at the industry when it emerged from the recession, definitely small cars were the priority, and it was foundational to the business model. … We’ve seen that dry up.”
In 2009, U.S. consumers could choose from 24 compact car models and 17 subcompact models. In 2019, there are 17 compact car models and 18 subcompact car models (that’s after the number of subcompacts had risen to 26 as recently as 2016), according to data from Edmunds.
And the numbers are slated to drop even further.
Consumers shopping for a less expensive new vehicle might turn to a subcompact SUV, such as the Nissan Kicks or Jeep Renegade, but it could be thousands of dollars more than a subcompact car, such as a Spark or Kia Rio.
It’s understandable that some automakers have shifted away from cars. The Chevy Cruze (discontinued this year with the closure of GM's Lordstown plant in Northeast Ohio) and Ford Focus, for instance, were not profitable at the volumes at which they were selling, Acevedo said.
As the shift to SUVs has happened, transaction prices have been increasing on many vehicles, according to Sam Abuelsamid, an analyst for Navigant Research.
“With the shift of [a lot of] manufacturers away from cars to SUVs and trucks, that’s likely to increase,” Abuelsamid said, noting that with fewer cars available at lower prices, “it’s probably going to be even more of a challenge going forward.”
Those price increases have played out over a number of years.
In 2012, 54% of vehicles sold cost less than $30,000. Six years later, only about a third of new vehicles were under $30,000. During that time, the number of vehicles sold above $50,000 jumped from 6% to 23%, according to data from Cox Automotive, which called it a mind-boggling statistic.
Kelley Blue Book put the average transaction price in May at $37,185, an increase of about 4% from the same month in 2018.
Such increases are likely to affect consumer behavior in coming years.
“In the next two or three years, we’ll probably start to see a shift away from higher prices. A lot of consumers will start to see a limit in what they can afford,” Abuelsamid said.