Industry Report Part 2: Canada's Subcompacts are Where the Real Action Lies

Other newcomers putting pressure on the Koreans, are GM's Chevrolet Aveo

Other newcomers putting pressure on the Koreans in the subcompact market are GM's Chevrolet Aveo and Pontiac Wave. (Photo: General Motors of Canada)

and Pontiac Wave, sister cars to Suzuki's Sprint+. These have been solid sellers for their respective retailers, pulling in important first time buyers, many of which would have previously been in the used car market.

The new smart fortwo, DaimlerChrysler's tiny diesel-powered two-seater is expected to be more of a niche player, targeting a new class of "premium compact" buyer willing to spend more for a whole lot less, in size anyway. BMW's MINI brand has seen great success in this market, but smart is not expected to sell as well, and there is much talk coming from within the German automaker's parent about dumping the brand altogether, as sales are poor in

The tiny diesel-powered two-seater smart fortwo is expected to be more of a niche player, targeting a new class of "premium compact" buyer. (Photo: Shawn Pisio, Canadian Auto Press)

Europe, where its success is critical, and DCX is looking to cut costs in order to stop the bleeding of continued losses, plus have more capital to invest into its Mercedes-Benz luxury division.

No matter what happens to smart, expect this subcompact segment to increase in size in the years to come, with new entries arriving from Nissan, Honda and, if it continues a recent trend of putting together solid business deals, Mitsubishi, among others.

Note: Come back tomorrow for all the upcoming compact SUVs.