Casper Shows There Is a Market for Smaller Cars

Hyundai has sold 3,000 to 4,000 Caspers a month since the affordable subcompact SUV was released in September last year. That pushed up sales of subcompacts in Korea 47 percent on-year in the first nine months of this year to 98,520 cars.

Subcompacts had been unpopular amid a trend to ever bigger SUVs, making automakers reluctant to develop new ones.

Before the Casper came out, there were only three domestic subcompacts -- Kia's Morning and Ray and GM Korea's Spark -- and they have not been revamped for the last five or six years. What's worse is that GM Korea is considering halting production of the Spark due to low profitability.

Automakers have long complained about weak demand, but the Casper has proven them wrong. There is also a limited selection of compact cars. Hyundai stopped producing the compact Accent in 2019 and only makes compact SUVs.

Instead, carmakers have focused on big sedans and SUVs which guarantee higher margins. That is how Mercedes-Benz, BMW, Hyundai and others have managed to achieve record profits despite falling sales volumes over the last two years.

Park Jeong-gyu at Hanyang University said, "Japanese automakers like Daihatsu and Suzuki specialize in making subcompacts and know how to cut costs, and Toyota is studying their know-how. Korean automakers need to research and develop ways to make subcompacts and compacts profitable."

According to the Ministry of Land, Infrastructure and Transport, there are 6.38 million midsize and large cars with over 2-liter engines registered in Korea as of October this year, up 44.5 percent from 2015.

But over the same period, the number of smaller cars with 1.6 to 2-liter engines increased only eight percent and those with less than 1-liter engines 20.2 percent. Yet six out of 10 passenger cars or 58.8 percent carry only one passenger, and 27 percent two.

And 78.8 percent of owners have opted out of a scheme to leave their cars at home on certain days of the week to reduce pollution.

A country typically consumes more energy as its economy develops, but at a certain stage that needs to stop, and Korea will have to promote smaller cars to minimize energy usage save the environment. Kim Cheon-wook at Yonsei University said, "Korea has been unable to shed its addiction to big cars partly because automakers have been reluctant to release small ones."