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Why small cars like the Kia Cerato, Hyundai i30, Volkswagen Golf and others have a future - and its electric

Another generation of the Kia Cerato has been confirmed, and it will likely be electrified.

It’s not news that small car sales are in decline. Australians have been buying less and less hatchbacks and small sedans for more than five years.

But that doesn’t mean the biggest names in the market are going to give up. Instead, the small car market is just likely to look very different by the end of the decade.

Back in 2015, Australians bought more than 250,000 small cars, in 2020 that number was just over 164,000. The obvious reason for this decline is the rise and rise of compact SUVs, with more brands offering increasing numbers of alternatives that still have a small car footprint but a higher view of the road.

Which has raised questions about the future of small cars for many brands, as they cut back on hatchback options. Ford has trimmed its Focus range, while Mazda has tried to reposition the 3 as a more premium alternative rather than chasing volume.

That has left those that have stuck around with affordable small cars to reap the benefits.

No brand has exemplified this better than Kia, which has seen its Cerato rise to become the third best-selling small car in 2020 with a 16.4 per cent share of the small car market, up from just 4.7 per cent in 2015.

However, while the Cerato market share has more than tripled, its total sales haven’t even doubled, due to the overall drop in small car sales. Which only leads to more questions about the long-term viability of small cars for big names brands such as the Cerato, Hyundai i30, Toyota Corolla and Volkswagen Golf.

Despite the steady decline in sales, small cars do appear to have a strong future. Kia Australia chief operating officer, Damien Meredith, recently confirmed the Cerato will get a new-generation model this decade.

Crucially though, this new model is almost certain to offer both fully-electric and hybrid powertrains to cater to changing market demands.

Given the shared underpinnings between the Cerato and i30, it seems likely the second best-selling small car will remain for the foreseeable future.

Mr Meredith explained to CarsGuide that he believes by 2030 the small car market will be split approximately 60:40 between EVs and other powertrains, as consumer tastes and government regulations impact what type of vehicles we buy.

One of the biggest factors in this transition will be the implementation of Euro 7 emissions standards coming in 2026. They are likely to drive European carmakers towards electrified powertrains, with hybrids expected to replace international combustion engines.

News of the Cerato/i30 future comes at the same time Volkswagen Australia announced the future of the Golf beyond its newly-introduced eighth-generation model is uncertain, thanks to the new ID.3 electric hatch in position to replace it.

Volkswagen Australia product and services manager Jeff Shafer told CarsGuide recently: “It’s fair to assume this [Golf] will live out its entire life cycle, including an update, but beyond then it’s hard to say. It’s true, there’s a lot of brand value in Golf, and I’d say it’s likely to continue beyond this generation, if not in Europe then globally.”

This is in large part due to the current success of the ID.3 in Europe, with the Golf-sized EV selling strongly. Whether two similar small cars can coexist in the long-term, especially with the Golf likely to adopt more hybrid powertrains and expand its e-Golf options remains to be seen. Given Australia’s slower adoption of EVs, it’s highly likely that, as Mr Shafer suggests, the Golf nameplate could survive longer outside of Europe.

What is likely, according to Mr Meredith, is that sales of small cars will continue to decline over the next five years but should remain strong enough for big brands to remain committed to offering hatchbacks and compact sedans into the next decade.