Honda concept sets off small-crossover buzz
Toyota and others ponder the Fit-based Urban SUV
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DETROIT -- With plans for a crossover based on the Fit subcompact in mid-2014, Honda is primed to have the first entry in a segment with intriguing prospects.
And if the small-crossover category takes off, Honda could dominate it for years, judging by the wait-and-see attitude adopted by other automakers.
Honda threw its hat into the ring with the Urban SUV Concept at the Detroit auto show. At 169.3 inches long it is 9 inches shorter than the Honda CR-V. The subcompact's limited cargo capacity will be addressed by using the Fit's fold-flat "Magic Seats" and by stashing the fuel tank under the front seats, rather than behind the rear suspension.
The production version of the crossover will follow the redesigned Fit in the U.S. introduction cycle. The Fit will go on sale in early 2014, with the crossover arriving later in 2014. Both vehicles will be built at Honda's new plant in Celaya, Mexico, which has an initial capacity of 200,000 units.
Honda is targeting tech-savvy, budget-minded young consumers, meaning the vehicle must be loaded with content and not feel cheap. The challenge will be not to cannibalize CR-V sales, industry executives say.
Honda's move to create a market segment was a major talking point at the auto show. Just months after saying it had no interest in building a crossover beneath the RAV4, Toyota executives say they are now studying the segment.
"We are looking at that market to see if there's a piece of that iceberg that breaks off and turns into a developing segment," said Jim Lentz, CEO of Toyota Motor Sales U.S.A.
A new subcompact segment took hold in the United States six years ago with the introduction of the Fit, Nissan Versa and Toyota Yaris -- a confluence of cars with smart packaging and good fuel economy combined with timely hikes in gasoline prices.
Last year, subcompact sedans and hatchbacks accounted for 655,164 sales, up 12 percent from the previous year.
John Mendel, American Honda Motor Co.'s executive vice president, is bullish on the segment.
"Subcompacts have been functional," he said, "but there really has been no mirroring [the product expansion] of other segments. Our thinking is why not provide the same."
Toyota's Lentz said: "Obviously, Honda has made that bet. That market will evolve. If you create the right package for the Gen Y buyer, five years from now probably there will be a segment that tends to break out smaller, less expensive, higher mileage and similar to what the small SUV was originally."
Jim Farley, Ford Motor Co.'s global head of marketing, sales and service, said Ford will probably not field a competitor anytime soon. But it has a subcompact SUV at the ready, just in case.
"We're just launching our EcoSport," Farley said referring to Ford's subcompact SUV launched in western Europe, Asia and Latin America. "We continue to watch [the segment] carefully ... but the U.S. hasn't come on our radar."
There is plenty of skepticism about the segment. An executive at a competing automaker says small crossovers don't make sense from a packaging or cost standpoint for U.S. buyers.
"Strollers and child seats haven't gotten any smaller," said the executive, who spoke on condition of anonymity. "Who would choose to have less content? So you have the same content as a RAV4 or CR-V but less room? Shaving nine inches off the length of the car saves you, what, 20 bucks in sheet metal? It just doesn't work out."
Next month, General Motors will roll out the Buick Encore small crossover, which is slightly smaller than the CR-V. But GM so far has veered away from sharing the product with Chevrolet's U.S. lineup. And the Encore will start at around $25,000, well above the projected $17,000 starting price for the Fit-based crossover.
Last year, Chevy unveiled a subcompact crossover based on the Sonic subcompact, called Trax, for Europe and other overseas markets but said it would not bring it to the United States. GM believes there isn't enough room for both the Trax and the Equinox.
"You want to make sure that you add new nameplates because there's incremental opportunity," said Alan Batey, GM's vice president of U.S. sales. "The last thing you want to do is to create new nameplates that cannibalize what you have today."
Nissan already has a subcompact crossover, the Juke. But executives say they consider it more a car than an urban utility vehicle.
Volkswagen Group unveiled the Cross Coupe at the Geneva auto show last year and displayed it in Detroit to gauge market reaction. But Jonathan Browning, CEO of Volkswagen Group of America, said the Cross Coupe would likely carry a price premium instead of competing in the sub-$20,000 strata.
While he sees an opportunity for a subcompact crossover, Browning cautioned: "Unless there's a real shift in taxation or fuel price, there doesn't seem to be a motivation for U.S. customers at the moment to downsize below a compact."
Mike Colias, Lindsay Chappell, Bradford Wernle and Gabe Nelson contributed to this report
You can reach Mark Rechtin at mrechtin@crain.com. -- Follow Mark on 
