• by Karl Greenberg , January 18, 2007

After two decades of large vehicles dominating the market, J.D. Power and Associates is reporting that the tide has turned. The market share of compact cars rose four points from 1999 to 2005; it rose nearly another four points in just one year, from 2005 to 2006.

"Growth in [compacts] is being driven, in part, by an increase in the number of models and the popularity of small crossover vehicles," said Tom Libby, senior director of industry analysis at Power Information Network. "Also, there is more variety among the small cars and many more comfort feature items; they are not as rudimentary."

Take Nissan's Versa, which has made on-board Bluetooth available. Or Ford's new Focus, which will be the first to benefit from a deal with Microsoft for in-car telematics.

At the recent Detroit auto show, there were seven compact intros, including the Focus and Versa: a new compact crossover, Rogue, from Nissan; and Volvo's first compact utility vehicle, the XC60. They join Honda Fit and Toyota Yaris, other compacts that began rolling out last year.

The report also notes that:

Share of mid-size cars dropped from 42.8% in 2005 to 40.4% in 2006.

Large vehicles dropped marginally, from 29.3% to 28.5%.

While most owners of large vehicles stick with the segment, some are having second thoughts. The percentage of midsize and large-vehicle owners trading down to compacts, went from 20.8% to just over 25% percent and from 7.0% to 9.1%, respectively.

Even if gasoline prices stabilize, Libby said he doesn't think consumers will return to bigger vehicles.

Five of seven segments with the fastest turn rates at dealerships were compacts, with premium SUVs like BMW's X3 turn rate at 28 days. The industry turn rate as a whole climbed from 55 days to 67 over the year-long period.

Premium crossovers from Infiniti, Lexus, Cadillac and Audi are also heading to showrooms. The consultancy predicts an increase from 40,000 units in 2006 to 160,000 units by 2008.

"One of the reasons the market will remain strong is that there are even more models coming," said Libby.