WSJ What’s News - Why American Car Buyers Are Downsizing

Episode Date: December 27, 2024

Dec. 27 Edition. WSJ reporter Ben Glickman explains how affordability concerns are leading U.S. drivers to pivot away from the larger, roomier vehicles in vogue over the last decade. Plus, Finland gets tough after the latest apparent act of sabotage targeting its undersea cables. And Netflix scores big on its NFL debut. Luke Vargas hosts. Sign up for the WSJ’s free What’s News newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Courage. I learned it from my adoptive mom. Hold my hand. You hold my hand. Learn about adopting a teen from foster care at adoptUSkids.org. You can't imagine the reward. Brought to you by AdoptUSkids, the U.S. Department of Health and Human Services, and the Ad Council. Finland gets tough after the latest apparent act of sabotage targeting undersea cables. This really turns a new page in the way NATO countries are handling this. And obviously in the future, any captain of a ship that might cut a cable deliberately or otherwise

will know that they can contend with helicopters full of heavily armed fins dropping onto the deck. Plus, American car buyers start thinking smaller and Netflix scores big on its NFL debut. It's Friday, December 27th. I'm Luke Vargas for The Wall Street Journal and here is today's edition of What's News, the top headlines and business stories moving your world today. Elite Finnish border units and police raided a tanker carrying Russian oil in the Baltic Sea overnight, a vessel that Finland says may have severed undersea power and data cables on Christmas Day. Finland's prime minister defended the unusual move, saying it aimed to end a recent wave

of incidents targeting critical undersea infrastructure belonging to countries in the NATO alliance. Bojan Panchewski is the journal's chief European political correspondent in Berlin. Bojan, this raid overnight sounds pretty dramatic and a far cry from the quite patient, can we say, response that we've seen to past incidents. What might that tell us? Absolutely. It is unprecedented in the

context of the past couple of years since the war in Ukraine started and this kind of wave of sabotage was initiated. Basically the message coming out from Finland is no more Mr. Nice Guy. They've had Finnish cables cut twice now in over a month and they've decided enough is enough. They deployed special units from from border guard which has a kind of a paramilitary special force and they deployed the special force of the police known as the bear squad. They were heavily armed with sub machine guns. They didn't encounter any resistance but had they encountered they would have shot at

people. So it's a pretty serious thing that happened. Nat. You said earlier, no more Mr. Nice Guy was the message here. Just remind us sort of what Nice Guy looked like because typically ships like this aren't typically boarded in this fashion, to say the least. Jens. Oh, absolutely. First of all, when the ship is in international waters, it's considered territory of the countries registered in. In this particular case, they guided the ship into Finnish territorial waters before they raided it. But just to compare, last month there was another ship that actually cut one of the cables that connects Finland with Germany and that

cable was cut last month by a Chinese ship. The ship was kind of detained by the Danish Coast Guard with the explicit permission of China, but nobody dared board the ship until China gave its permission and even then China was leading the investigation. So it was handled very diplomatically, unlike this particular case. This really turns a new page in the way NATO countries are handling this. I guess the bigger question here is, is there any way to truly stop these incidents? You can't patrol every bit of ocean where there's a critical cable underneath. Indeed, this wave of sabotage and weird accidents and incidents that was triggered by the war in Ukraine and by the Western aid to Ukraine has basically exposed how vulnerable critical infrastructure

really is, especially in the West. And now after this latest incidents, the NATO chief Mark Rytte has pledged to provide more patrol ships from NATO countries for the Baltic. They're talking about drone surveillance. They are definitely stepping up efforts, but to secure all that infrastructure is pretty much impossible. Bojan Pacevski is The Wall Street Journal's chief European political correspondent in Berlin. Bojan, thanks so much for the update. Thanks for having me on. Missiles are now the leading cause of commercial aviation deaths, a trend that runs counter

to an otherwise improving safety picture in air travel. That is according to a tally by the Flight Safety Foundation's Aviation Safety Network. Those findings come as a preliminary Azeri investigation into Wednesday's crash of an Azerbaijan Airways jetliner in Kazakhstan indicated that it was hit by a Russian anti-aircraft missile or shrapnel from it. It confirmed it would be the third fatal downing of a passenger jet in the last decade. That risk has led to recent clashes between pilots and airlines. According to letters reviewed by the Wall Street Journal, crews have expressed concerns about being asked to fly to

destinations in the Middle East and use flight routes over areas like Iraq. Pilots have also requested an update to life insurance policies, many of which don't pay out in the case of accidental downing while operating over war zones. Less than two weeks after the impeachment of South Korea's president, the country's legislature voted today to impeach his replacement, acting President Han Deok-soo. Han had declined to make judicial appointments needed to advance the impeachment of his predecessor, Yoon Seok-yul, who had imposed a short-lived martial law that kicked off South Korea's political upheaval.

After today's move, the role of acting president has been handed to Minister of Economy and Finance Choi Song-mak, who'd earlier warned that impeaching Han would increase political uncertainty and damage South Korea's economy. The country's KOSPI stock index fell 1% today, taking its year-to-date losses above 9%. And in markets news, with the exception of South Korea's KOSPI index, stocks in Asia ended the day mostly higher, European stocks, which had been closed yesterday gained modestly, and U.S. indexes are slipping, putting stocks on course to end the Christmas week on a downbeat note. Coming up after going big for years, American car buyers are downsizing.

We've got that story and more after the break. Netflix's NFL streaming debut saw an average of around 24 million people in the U.S. tune in for each of its two Christmas Day games, according to preliminary Nielsen data. The games, in which Netflix avoided technical glitches that marred its coverage of a prominent boxing match last month marked an important step in the company's bid to establish itself as a live event platform and boost its ad business. Throughout the year, we've talked repeatedly about struggles facing a number of carmakers that doubled down on EVs, only to be met with weak demand in many markets.

Hybrid cars have also proven unexpectedly popular, a trend that has rewarded the likes of Toyota at the expense of others left trying to play catch-up. And as we close out the year, U.S. car shoppers appear to be dealing yet another surprise as they opt for smaller car models after years of gravitating toward larger, roomier vehicles. According to research firm Motor Intelligence, entry-level models such as the Honda Civic and Nissan Sentra have taken off this year, rising 23% or more through November, while sales of large pickup trucks and mid-sized SUVs have fallen. Our Kate Bulevin spoke to journal reporter Ben Glickman about what's causing Americans

to downsize. Ben Glickman, Journal Reporter Well, to start, a lot of these smaller offerings are just cheaper overall. And it's been an ongoing trend in the car industry over the last year or so that consumers are really under pressure for affordability. So during the pandemic, car prices went up significantly, there were a lot of supply chain shortages that led to limited supply prices skyrocketed. And that hasn't really come down. Other expenses like repair costs, insurance, those have also gone

up significantly. So overall, people I think are looking to save and these models tend to be cheaper. Ben, Americans have gravitated towards bigger cars for years. What does this shift mean for automakers? It puts a lot of pressure on this model that they've developed in the last couple of years where car makers like GM, Ford, they've really put focus on their larger vehicles, which tend to be much more profitable. So discontinuing some of their smaller car lines hasn't really had a significant effect on the bottom line.

What we're seeing now is that that clearly has some drawbacks in times when Americans want those kinds of offerings So with that in mind, which car makers are set to benefit from what's going on? So the likes of Toyota Honda Nissan these companies have really had their small car offerings throughout and That's now proving to be quite beneficial just in the sales numbers. I would say the other major beneficiary would be companies who have really pivoted into this kind of new-ish segment of subcompact SUV. So these are like relatively small cars that have some of these SUV-like features of four-wheel drive. So that segment, the Chevy Traxin in particular, which is a relatively new revamp

from Chevy, it's been selling super well this year. It's a very clear payoff of investing in those super compact but still SUV vehicles. So the automakers that were a little bit more hedging their bets with keeping those small offerings around, I think, are the ones who are standing to gain right now. Does this play into the wider challenges automakers are facing when it comes to the production of EVs? These larger trucks and SUVs that are doing relatively poorly this year compared to some of these small offerings were largely for the Detroit automakers at the very least seen as sort of the funding for some of these big EV pushes. And if those super profitable cars aren't selling as well with Americans, it puts even

more pressure on these companies as they've got to invest retooling plants, bringing new EV lines to market. All these things tend to be extremely expensive. So the less profit they're raking in from big cars and trucks, the less they're going to be able to comfortably support these new EV efforts, especially as sales and demand for those EVs is not exactly what they had hoped it would be. This last year has not been a kind one for the EV market. And I would say that this is just a little bit like insult to injury for car makers like

GM and Ford. That was Journal Reporter Ben Glickman. Ben, thanks so much. Thanks for having me. And that's What's News for this week. Tomorrow there will be no episode of our weekly markets wrap up, What's News in Markets. On Sunday though, we will be discussing what crypto fans and executives are hoping for from the next U.S. administration. That's in What's New Sunday and we'll be back with our regular show on Monday morning. Today's show was produced by Charlotte Gartenberg with supervising producer Michael Kosmides. Michael Laval wrote our theme music, Aisha Al-Muslim is our development producer, Scott

Salloway and Chris Zinsley are our deputy editors and Philana Patterson is the Wall Street Journal's head of news audio. And I'm Luke Vargas for the Wall Street Journal. Have a great weekend. Thanks for listening.