Friday, August 25, 2006

GM improves fuel efficiency with new Aveo

GM improves fuel efficiency with new Aveo
Posted 8/17/2006 10:51 PM ET
By Sharon Silke Carty, USA TODAY

DETROIT — Weary of its image as an automaker that pushes only gas-guzzling pickups and SUVs, General Motors on Thursday launched a redesigned iteration of the gas-friendly Chevrolet Aveo sedan just 2½ years after the original one arrived.

In some ways, the timing of the new Aveo couldn't be better. Consumers, facing the reality that high gas prices may be here for the long run, are increasingly turning to more-fuel-efficient cars and eschewing pickups and SUVs. Car sales are up 2.2% this year through July, while truck sales are down 10.6%, according to Autodata.

"Certainly with the price of gas being what it is, people are looking for" better gas mileage in their cars, said Ed Peper, general manager of the Chevrolet brand.

To satisfy that demand, GM worked to improve the fuel economy of the redesigned Aveo. The manual transmission version gets up to 37 miles per gallon on the highway. That's competitive with other small cars, including Toyota Yaris, which gets 39 mpg on the highway, and Kia Rio and Honda Fit, which get 38 mpg.

Subcompacts are the fastest-growing segment in the auto industry, said Jesse Toprak, director of pricing and industry analysis for consumer website Subcompacts were 19.4% of sales in July, up from 15% in July 2004.

"That may not seem like a big deal, but it is tremendous growth for any given category," Toprak said.

With that growth has come a number of new models, including Yaris, Fit and Nissan Versa. While rebates and incentives in the subcompact market have been on the decline, they could go back up this fall as customers shop around.

Subcompacts are "going to have to compete really hard, because now there are a lot of options," Toprak said.

The small-car market is notoriously difficult to make money in. The Aveo sedan will start at $12,995, and incentives could eat away at already thin profit margins.

And while Aveo may be as fuel-efficient as its competitors, Chevrolet doesn't yet have a reputation for building lean cars. Kevin Reale, an analyst at AMR Research, said Toyota and Honda worked on developing their images of providing gas-sipping cars long before it became trendy.

"Right now, reputation is overcoming reality," he said. "GM may have 30 cars that get over 30 miles to the gallon, but the perception is that they build gas-guzzling vehicles."

Chevy plans to hype the new Aveo as a well-stocked, well-priced option for young, trendy drivers. About 50% of its advertising budget will be spent online, said Cheryl Catton, Chevy car marketing director, with the rest of the "tongue-in-cheek" ads running in print and on TV.

Buyers 18 to 34 "spend a lot of time on the Internet," Catton said. "We want to be where they are."

Posted 8/17/2006 10:51 PM ET
Copyright 2006 USA TODAY, a division of Gannett Co. Inc.


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