Small cars grow in stature

Willy Tompkins likes the way the Mazda3 has been rolling off his lot in the San Gabriel Valley.

“That car is hotter than a $2 pistol,” Tompkins says of the sporty compact, which starts at around $14,000 and boasts a combined 29 miles per gallon.

Big sport utility vehicles? Not so much.

“It used to be people would look at the sticker and say, ‘Why is it so expensive?,’ ” said Tompkins, general sales manager of Sierra Mazda of Monrovia. “Now they look at the fuel economy number and say, ‘Is that all it gets?’ ”

Welcome to the downshifting California auto market. New-vehicle registrations in the Golden State plunged 7% during the first three months of the year compared with the first quarter of 2006, far outpacing the 1.2% drop in registrations nationwide, the California Auto Outlook says.

That follows a decline of 5.1% last year in California, according to the quarterly report issued last week by the California Motor Car Dealers Assn. The figures include fleet and retail sales.

The state’s slumping housing market is a main factor in the slowdown in new-vehicle sales. (Registrations correlate closely with sales, although they tend to lag behind by two weeks or so.) With home prices falling, owners are less likely to take out home equity lines of credit, do cash-out refinancings or sell outright.

“The cash machine that was people’s homes is no longer working that way,” Auto Outlook Editor Jeffrey A. Foltz said. “And how it’s affecting people’s net worth is more pronounced in California than it is nationally.”

The slowdown in home building is also weighing on the job market, says Mark Zandi, chief economist with Moody’s Economy.com. “Job growth is starting to slow” in California, he said.

Pain at the pump is having an effect too. In March, gas prices topped $3 a gallon for the third time in three years and have shown little sign of retreating.

That is crimping pocketbooks and strengthening the trend away from pickup trucks and big SUVs toward more fuel-efficient vehicles. Passenger cars have increased their share of the California market this year to 52.6% from 50.7% a year ago, according to the Auto Outlook.

Not that buyers are always happy about downsizing.

“When people are used to the space and convenience of one of those large vehicles, it’s a shock” when they test-drive a compact car, said Dave Conant, who owns nine Southern California dealerships, including Norm Reeves Honda in Cerritos and Cerritos Ford. “People are trying to find an alternative that reconciles their wants with their needs.”

Conant says sales at his dealerships are down 12% to 15% from a year ago.

Saturn and Jeep were the only two domestic nameplates to notch gains in first-quarter sales in California. Hummer and Chrysler brought up the rear with drops of more than 30%.

Among Asian brands, Mazda, Isuzu, Lexus and Toyota/Scion all scored gains, as did Mercedes, Audi and BMW among European brands.

Most of the winners benefited from the rollout of new models that helped bring buyers into showrooms.

Conant expects the sales slump to last at least through the rest of this year. Outlook’s Foltz is more optimistic. He thinks sales will rebound later in the year and will actually show improvement over 2006, ending the year down 3.9% in California.

In the meantime, car buyers are getting a payoff from the auto industry’s woes. Compared with a year ago, dealer and manufacturer incentives increased by almost 7% in April to an average of $2,453 per vehicle, according to auto data firm Edmunds.com.

Conant has gotten some relief from his parts and service departments, which had a record first quarter. “If people aren’t buying cars,” he said, “they’re more likely to service” the ones they have.

martin.zimmerman-

@latimes.com