Small cars have long been a staple of Australian roads, offering practicality, affordability, and a compact size perfect for city driving. But something has shifted in the market. As of 2025, small car sales are in freefall, and it seems Australians just can’t get enough of small SUVs. The writing’s on the wall for the small car class—so what’s driving this change?
The Decline of Small Cars
Let’s start with the numbers. As of November 2025, sales of small cars under $40,000 have dropped by a dramatic 23.6% compared to the previous year, reports Drive. Meanwhile, the premium small car segment has also suffered, down 18.9%. Big-name models like the Toyota Corolla and Hyundai i30 saw noticeable declines—Corolla sales were down 22.8%, and Hyundai’s i30 dropped by 13.2%. And if that’s not enough to make you raise an eyebrow, Kia switched from its Cerato model to the new K4, which has seen a staggering 47.5% sales decline compared to Cerato’s 2024 figures.
Interestingly, the only bright spot in the small car market has been the BYD Dolphin EV, which has surged by 58.2%. Despite this impressive growth, though, it’s still far behind traditional favorites in sales, with only 2,983 units sold compared to over 10,000 for the Corolla.
What’s Driving the Shift to SUVs?
While small cars are in decline, the small SUV market is booming. Sales in this category have soared, with small SUVs under $45,000 surpassing 149,000 units sold by November 2025—compared to just 97,229 in 2020. It’s clear that Aussies are trading their small hatchbacks and sedans for the higher driving position, extra cargo space, and rugged appeal of small SUVs. These vehicles give the same compact footprint but with added versatility, making them an attractive choice for families and city dwellers alike.
It’s not just about size. The appeal of an elevated driving position seems to be a major factor in this shift. Many drivers are drawn to the sense of safety and visibility that comes with sitting higher off the ground, even if they’re only in a small SUV. Plus, many of these vehicles now offer similar fuel efficiency and price points to traditional small cars, making them a no-brainer for many.
Premium Small Cars: A Slow Burn
In the premium small car segment, sales have been steadier, though not without their own challenges. While the overall market for small premium cars shrank, some brands, like Cupra and MG, have entered the fray, while others like Renault have exited entirely. Hyundai even announced that its regular i30 hatch would no longer be available in Australia, leaving only the sportier i30 N and i30 Sedan in the market. The Mazda 3, meanwhile, has held steady in sales with only a slight drop of 1.4% from last year.
The Future of Small Cars in Australia
So, what does the future hold for small cars in Australia? The numbers suggest that, for now at least, they’re fading into the background. But let’s be clear—the decline of the small car doesn’t mean the end of compact cars altogether. The popularity of small SUVs proves that there’s still a love for compact-sized vehicles; it’s just that the SUV format has won the day.
As Australians continue to opt for taller, more versatile cars, it will be interesting to see if small car manufacturers can find a way to reinvent themselves. Perhaps in the future, there will be a blend of the best features from both worlds—compact size and elevated ride height—capturing the spirit of the small car while delivering the practicality and comfort of an SUV.
