Policy Update: Energy. Bringing Fuel-Efficient Vehicles to the U.S. Market

As the troubled U.S. auto industry begins to take seriously the challenge of “going green,” American car-buyers stand to benefit from Latin America’s achievements in promoting and marketing fuel-efficient transportation. Affordable subcompacts like the Ford Fiesta and General Motor’s (GM) Chevrolet Corsa and Spark are popular with drivers across the region.

Subcompacts are a success story for U.S. auto manufacturers’ Latin American operations. The Fiesta has helped make Ford’s subsidiary in Brazil the multinational’s third-largest producer, with 280,000 units sold worldwide last year, and in Argentina, Ford is one of the 15 largest exporters. GM’s Brazilian subsidiary is its third largest and one of its most profitable.

The U.S. auto industry may at last be paying attention to the potential in its own backyard. U.S. consumers, who continue to be wary of fluctuating gasoline prices (more than a $10 per barrel increase in petroleum prices in May 2009 alone), seem increasingly interested in smaller, more affordable and fuel-efficient cars. And, significantly, federal standards announced in May that mandate average fuel consumption of new U.S.-sold passenger vehicles to reach 35 miles per gallon by 2016—up from 21 miles per gallon for the average car today—are bound to help subcompacts gain a larger market share in the United States.

General Motors and Ford have in fact announced plans to manufacture what they term “new” subcompacts in North America. The Spark and Fiesta will go on sale to U.S. consumers in the 2011 model year.

These are not the only subcompacts that GM and Ford produce and sell around the world. Chevrolet manufactures the Corsa in Argentina and the Corsa and Celta in Brazil for distribution across Latin America. Cars also are assembled in Colombia and Venezuela for sale throughout the Andean region.

The failure of GM and Ford to successfully market subcompacts in the United States has been compounded by competition from foreign carmakers. As of May 2009, six Japanese, two Korean and two German subcompact brands were offered in the U.S. market, raising the question of why the auto giants are waiting to introduce their models...

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