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Most of the costs of manufacture are fixed or at most scale linear with mass, so the range of costs to mfgr the smallest commuter car vs the hugest truck are, at most, perhaps 3 to 1 but more realistically 2 to 1.

"The market will bear" a consumer paying 5 to 10 times as much for the largest fanciest SUV or pickup truck vs the smallest cheapest commuter car. Therefore the profit is VASTLY higher on larger cars and there's an immense motivation to get as many customers as possible into the biggest cars. If you can get a customer to pay 6 times as much for a SUV that costs 3 times as much to make, that's a huge profit lost if the customer is permitted to buy the commuter car.

Another way to phrase it is if almost all your profit comes from selling giant cars, then the customer experience of buying a small car is always going to be awful.

The people buying the largest vehicles are not concerned by cost, so increasing the cost of large vehicles via taxes or fees or regulation only makes the situation worse. You'd like to think that a 20% surcharge on large cars would result in fewer large cars sold, but the guy buying them is a general contractor and he needs the pickup truck to make money so he's just going to pass the cost on to real estate inflation and the extra 20% is going to motivate the dealership even harder to only sell expensive cars.

"The automotive press uncritically reports that American consumers are crazy about huge vehicles but what I've observed is that dealers are crazy about selling huge vehicles."

Very true. Same for houses. A lot of people probably would prefer a small house over not being able to afford a big house and renting eternally. But big houses are more profitable, so that's what's being built. That's why in a lot of markets supply and demand don't really work if the supply can be restricted.

In both scenarios there are laws encouraging these outcomes. Minimum lot sizes and CAFE standards, respectively, lead to bigger cars and houses. There are also small utility trucks and electric vehicles in other countries, but they’re unfortunately illegal in the land of the free, ostensibly for crash test performance opposite the giant trucks that are considered safe. Indeed, distorted markets are worse.

Always seems bizarre to me I can ride an ATV around or even a motorcycle on the highway, but a cheap 1980s style Honda CRV is apparently to unsafe to sell anymore because it doesn't meet crash test standards.

Theoretically CAFE standards should be work for encourage small cars. Regulators shouldn't give bad fuel bonus for big cars.

Your dealer doesn't know what they're talking about, which is par for the course. You couldn't find a Fit because Honda stopped importing them. They were discontinued in the US due to poor sales.

Not in my neighborhood. The Blue Honda Fit is the ideal getaway car in Tompkins County because you could do donuts in somebody's yard and they tell the cops and then they'd have to flag down every 20th car.

They're great cars, but (unfortunately) compact SUVs are far outselling them. Compare the Fit and HRV sales figures and it's clear why Honda did it.

That assumes that sales figures are entirely controlled by demand. The OP points out a perfectly plausible mechanism by which demand is not the only factor affecting sales volume. It's almost certainly true that dealerships will stock what's profitable, customer preferences be damned.

This would assume that either the only game in town is Honda or that all the other manufacturers are colluding with Honda. Absent significant evidence, it is safer to assume people’s preferences are causing the lower sales.

Where I live, all of the major new car dealerships are owned by the same company.

No I'm not making this up: https://www.news-leader.com/story/news/business/2014/10/02/w...

This is true in my town. Believe it or not some customers and employees really love some car dealers and speak reverently about them and that was true of the last Toyota dealer but it is not true of the current one.

It's not hard in a small market. Often, large dealership chains don't put all their eggs in one brand basket. It works the same way in other cities, but larger cities can support multiple dealers of the same brand.

HRV sales have consistently blown away even the all-time peak year of US Fit sales.