The rise and fall of Small Cars

What happened to Small Cars? For decades, compact sedans and hatchbacks dominated the North American auto market. In 1980, small cars made up more than 80% of vehicles sold in the United States. Today, they account for less than 17%, and most American automakers don’t even build them anymore. This business breakdown explores the rise and fall of Small Cars and how an entire category of vehicles nearly disappeared. Looking to become a channel member to support our production and receive exclusive content? Sign up here:    / @michael-girdley   Get the 2-minute cheat sheet for this video → https://girdley.com/youtube 👇 SUBSCRIBE for more business breakdowns    / @michael-girdley   ------------------------------------------------------------------ ► Get my weekly letter to business owners: essential insights to run, grow, and stay ahead in your business → https://links.girdley.com/newsletter-yt ► For sponsorships or inquiries please reach out to: [email protected] ► Do you have a hat I should wear in a video? Send it to us: [email protected] ► Free events on all things small business: https://links.girdley.com/lectures-yt ► Deep dives on businesses for sale:    / @acquisitionsanonymouspodcast   ► Follow me on Twitter/X: https://x.com/girdley ------------------------------------------------------------------ In this Small Cars documentary, we examine the economic, political, and technological forces that reshaped the auto industry. The story begins with the 1973 oil crisis, when skyrocketing fuel prices made fuel-efficient vehicles like the Honda Civic incredibly popular. Japanese automakers rapidly gained market share by building reliable, efficient compact cars while Detroit struggled to adapt. But the shift away from small cars wasn’t just about consumer demand. Government policy played a massive role. Fuel economy regulations like CAFE standards pushed automakers to rethink their lineups, while a little-known trade policy called the “Chicken Tax” imposed a 25% tariff on imported light trucks. These policies unintentionally created enormous incentives for manufacturers to build SUVs and pickup trucks instead of sedans. Automakers quickly discovered that trucks and SUVs were dramatically more profitable. A full-size pickup could generate over $11,000 in profit per vehicle compared to just a few thousand for a sedan. As a result, companies like Ford, General Motors, and Chrysler gradually shifted their focus away from compact cars and toward larger vehicles. At the same time, consumer preferences were changing. Crossovers and SUVs exploded in popularity during the 2000s and 2010s, offering more space, a higher driving position, and a perception of safety. Cheap gasoline from the fracking boom removed one of the last advantages small cars had. By the late 2010s, the trend was clear. Ford eliminated nearly all of its sedans. General Motors killed models like the Cruze, Impala, and Volt. Chrysler discontinued the 300. Even the last remaining American sedan, the Chevy Malibu, was ultimately discontinued. Then the COVID-19 pandemic and semiconductor shortage accelerated the shift even further. Automakers prioritized producing their most profitable vehicles—SUVs and pickup trucks—while entry-level cars disappeared. Today, the average car price has climbed to around $46,000, and the number of vehicles under $20,000 has nearly vanished. The rise and fall of Small Cars reveals how regulation, globalization, consumer behavior, and corporate incentives can reshape an entire industry. This business documentary breaks down the key events, policies, and market dynamics that led to the decline of compact cars—and what it teaches founders, operators, and investors about how industries evolve.