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General Motors Corp. (NYSE: GM) has said its new global small car that will compete with Japanese automakers like Honda Motor Ltd. (NYSE: HMC) and Toyota Motor Co. (NYSE: TM) will be able to sell for more than the competition, as it will have better gas mileage than small cars do now. The new Chevrolet Cruze was announced Monday as GM prepared to celebrate its 100th anniversary, and at a precarious time for the storied automaker.

The new Cruze, set to be unveiled for sale in the summer of 2010, will be a much larger car than what it replaces -- the Chevy Cobalt -- but will have up to 40 miles per gallon, beating almost all the fuel efficiency figures of cars much smaller like the Honda Civic and Toyota Corolla. Therefore, GM believes it will be able to charge more for the Cruze. It's a risky but calculated move made necessary as the profit margins from SUVs and large trucks are evaporating as consumers move away from those products and into smaller vehicles. At some point, automakers will have to up the prices on smaller and mid-size vehicles to ensure they remain profitable. That is, unless gas prices fall back down and the more profitable, gas-guzzling SUVs fall back into style.

It's no secret that GM needs to make more money per vehicle than its Japanese competition, and GM general manager Ep Peper said as much yesterday. Peper pointed out that more features in newer cars will justify higher prices, but consumers won't really care or be swayed by the argument. When prices rise, everyone gripes. When they fall, shopping sprees happen. Note to GM: consumers are very fickle -- get used to it.

GM's new Cruze set to fetch higher price than the competition originally appeared on BloggingStocks on Tue, 16 Sep 2008 10:58:00 EST. Please see our terms for use of feeds.

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