Will the U.S. Follow Europe’s Latest Auto Trend?

Greetings from Barcelona, which is rapidly becoming my new favorite city. Everything here is beautiful, and works as it should, and the food is astounding.

The city is clean, clean, clean. Most streets are much wider than in other cities and boulevards that are 10 lanes wide crisscross every few blocks once you are outside of the charming medieval old town. Instead of being an impediment to pedestrians, these boulevards have vast park-like walkways in the center.

Everything seems oriented to pedestrians, but autos get their way too. I’m especially impressed with how the streets that have 10 lanes that are one-way still carve out a single lane going the other way so autos always have a choice. Drivers here seem to be more courteous than in many other European cities, partly because a new point system for traffic violations has been established and no one wants to lose his driving privileges.

I stood at the corner of Las Ramblas, a popular shopping street, and the Grand Via, which is one of those multi-multi-lane through-city roads and tried to spot any cars that were 10 years old. About 99% of autos here appear to be less than four years old, and they are far larger than the common image of tiny European city cars. Smart cars are few and far between.

The car culture in Spain has a lot to do with what’s happening in the States and especially with the VW scandal.

The most obvious commercial trend I’m seeing here is an explosion of one that I saw last year in travels across Europe and is just emerging in the United States — a move toward small SUVs. In Europe, every little hatchback seems suddenly to have been stretched into a tiny SUV or van. It’s actually hard to spot a sedan. Almost every car is either a bulbous hatchback, a small SUV or a station wagon.

In the U.S., station wagons are simply not part of most native manufacturers’ marques. Outside of Cadillac, the few station wagons for sale come from Europe and Japan: Mercedes, BMW, Subaru, Audi and VW offer one each. Toyota and Volvo offer two. All but the VW are expensive. So consumers who want a little room are forced into SUVs, which despite record sales, many buyers dislike because maintenance items like tires are outrageously expensive and gas mileage is pitiful. New small SUVs are far more car-like and efficient and are thus exploding as a trend. Audi’s Q3, VW’s Tiguan and Mazda’s CX-3 are practically sold out.

Just before travelling here, I went to several VW dealers to try buy a dark blue Tiguan, the company’s small SUV. Several sales managers told me I’d have to wait at least three months if I wanted to pick the color of the exterior and interior.

There’s a reason why: Small SUVs tend to get far better gas mileage than the next step up in size, cost less to maintain yet provide far more room than the actual car platform on which they are based.

Although Europeans love diesel engines in their cars and were as horrified as Americans to learn of VW’s emissions betrayal, the company’s stock price, which tumbled after its announcement of cheating, has rebounded sharply, up 40% on the Frankfurt exchange since early October, yet still at least 25% off its highs from last summer. The diesel fiasco seems not to be having a lot of effect on VW in the U.S. Three VW dealers I visited in the Washington, D.C., area told me they would exceed their sales of 2014 in 2015 despite a huge inventory of diesel autos that are parked in nearby lots collecting dust.

VW’s diesels were popular for both longevity and mileage. My Passat diesel regularly gets 53 mpg on the highway. The diesel was a lot of VW’s strategy to the dominant car manufacturer in the world. In Spain, as in all of Europe, its reach is omnipresent. Every fifth auto or so seems to be a VW, and all the SEAT autos here are actually VWs. SEAT, which used to build rebranded Fiats, is now owned entirely by VW. Very little of the old SEAT personality is left. The inside of a SEAT looks remarkably similar to the VW Golf, and the exterior is headed that way.

Globalization of design makes a VW in the U.S. or Spain or Britain or Sri Lanka look pretty much the same. And that, in the end, makes the world less interesting.

To your health and wealth,

Stephen Petranek
for The Daily Reckoning

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