Why are car brands killing off their small, cheap cars

Monday, 13 February 2023

The popular Kia Rio appears set to be phased out of the New Zealand market by the end of the year.

Yet another affordable small car nameplate appears set for the scrapheap in New Zealand, as part of a growing trend within the motoring industry.

Kia’s Australian arm has announced that its Rio hatchback – a direct rival to the likes of the Suzuki Swift and Toyota Yaris – is set to be phased out once the current model reaches the end of its life cycle.

When first introduced in the early 2000s, the Rio was offered as either a sedan or as a wagon.

This, it said in a statement issued to Drive, is because the next-generation Rio is not going to be made in right-hand drive. This effectively means that the Rio has reached the end of the line for all right-hook markets, most likely including New Zealand.

A Kia New Zealand spokesperson couldn’t confirm or deny this update, issuing the brief statement of “we don't have any announcements to make regarding future plans”.

The Rio’s fabulous third-gen model was a hit on both sides of the ditch.

The Mitsubishi Mirage has already been axed in Australia, with New Zealand likely to follow suit.

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The Rio has been on offer in New Zealand since its first generation debuted at the turn of the new millennium, making the nameplate more than two decades old.Should it leave, Kia will still have two hatchbacks in its line-up; the Picanto and Cerato.

The EV revolution could give small hatchbacks a reprieve down the line. Emphasis on ‘could’.

The Rio is the latest in a string of affordable small cars to have been carved from selected markets.

The Ford Fiesta was recently culled from New Zealand sale, with questions around the future of its Focus big brother. Barring its hot hatch N variant, Hyundai no longer stocks the i20. Volkswagen culled the Polo last year. And the Mitsubishi Mirage is tipped to also be on its way out.

This is in spite of the presence of a so-called cost of living crisis – a political situation that surely suits the sale of diminutive, frugal hatchbacks like the aforementioned Rio, Mirage, Polo, and others.

So, even when the socioeconomic cards are in their favour, why are small cars getting culled from the market so rapidly?

A large part of the reason stems from the industry shift to electric vehicles. As manufacturers size up just how expensive it is to develop all the EVs that they’ve inevitably committed to produce before the end of the decade, the question becomes ‘what models can we cull to save costs’.

Small cars are vulnerable in this circumstance because their sales have declined in recent years. A surge in popularity of larger SUVs is partially to blame for this, as is the availability of a steady supply of more affordable used alternatives in grey-market-friendly countries like New Zealand.

It’s also worth noting that, in most circumstances, the more popular small and medium SUVs contain better profit margins for car brands than their most affordable hatchback fare. These days, many crossovers share the same platforms as their hatch brethren, prompting brands to prioritise most marketing spend on those models.

The cheap and cheerful entry-level hatchback market isn’t quite dead, thankfully. The Toyota Yaris, Suzuki Swift and Ignis, MG3, Mazda2, Honda Jazz, and Kia’s aforementioned Picanto are all still on sale.

There’s a small chance that the segment could see a reprieve in the near future, too. As customers ask when car companies are going to make some truly affordable EVs, it’s likely that some will release them in compact and subcompact forms.

The likes of the Opel Corsa-e and Peugeot e208 are already on sale, and BYD is set to launch its Dolphin EV hatch [pictured] later this year.

That said, there are those that think the advent of electric vehicles is effectively going to kill off the ‘cheap car’ entirely. Amongst them, BMW chief executive Oliver Zipse.

“BMW offers electric cars in all segments, and of course, if we scale things up, there will be a tendency that things will become cheaper – but electromobility will never be cheap,” he told CNBC in an interview earlier this year.