Car buyers looking for efficiency

If you're like many buyers, you're gravitating toward reliable, fuel-efficient vehicles. That trend is boosting sales of Toyota's Prius hybrid, the subcompact Honda Fit, the Nissan Versa and Toyota Yaris, and the ever-popular Honda Civic, Mazda3 and Toyota Corolla.

Midsize and large sedans took a hit amid the lull in sales last year. But midsize sedans are still attractive to pump-price-conscious buyers because the vast majority come with thrifty four-cylinder engines. Result: The Toyota Camry still tops the best-seller list, and the Honda Accord, redesigned for 2008, is still in second.

So it's no surprise that the Asian auto juggernaut continues to take market share from the domestic carmakers. Toyota now ranks second in U.S. sales (behind GM) and is on track to overtake GM in both U.S. and global sales.

Now Detroit is fighting back. Witness the Malibu's extreme makeover, with a head-turning design and European-derived architecture. "The new Malibu is probably the first really good Chevy since the 1960s," says Erich Merkle, director of forecasting for IRN, an automotive-industry consulting firm. Merkle says that although he had not owned a U.S.-made vehicle since 1995, he bought a Ford Fusion last year because it rates well for dependability — and he liked the styling.

But Motor City carmakers won't revive and thrive, says Merkle, until they figure out that "they're not in the transportation business — they're making a fashion statement." Buyers may never look under the hood, but they'll inspect the cabin, so interior designs have to improve. GM and Ford have been making strides, but Chrysler still has a ways to go, says Merkle.

Crossovers are gnawing at the market share of truck-based SUVs and minivans because many buyers prefer their racier designs.

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Mark Solheim is a senior editor at Kiplinger's Personal Finance magazine. Send your questions and comments to moneypower@kiplinger.com.