One thing is clear about the bailout: congress intends to use it to push GM et. al. into manufacturing more fuel efficient cars. This means cars that are either a) smaller, b) more expensive, or both.
When gas prices were high, a lot of people blamed Detroit's troubles on the fact that they hadn't learned to make awesome small cars. But Toyota isn't so successful in the US because of the Yaris and the Corolla; its core business, like Honda's, is American-sized sedans, station wagons, luxury cars, and so on. The Japanese and Germans have not, it's true, been as successful as Detroit in the SUV and Minivan markets, though Toyota has a sizeable truck business, and Honda makes some fairly successful minivans. But they're not making their money on gas-sipping hybrids and compacts, either. They, like Detroit, are making their money by selling cars that will need a pretty big refit to pass the new CAFE standards. The top selling cars in the US last January (midway through the price spike in oil, before the financial crisis):
1. Toyota Camry: 31,601
2. Honda Accord: 23,957
3. Nissan Altima: 21,635
4. Honda Civic: 20,993
5. Toyota Corolla: 20,736
6. Chevrolet Impala: 17,544
7. Chevrolet Cobalt: 17,310
8. Chevrolet Malibu: 14,105
9. Pontiac G6: 13,942
10. Ford Focus: 11,600
The Impala gets about the same MPG as the Camry, the Accord, and the Altima--actually, slightly better (32 rather than 31 highway).
It is true that when gas prices rose, there was a temporary surge in the prices companies could charge for hybrids and small cars, but though I think that the memory of recent price spikes will offer some support to the smaller car market, I also think we'll see that market head back down along with oil prices. In short, the small, fuel efficient car market is still not some sort of gold mine that the Big Three have stupidly overlooked.
The question is, when the desire to make the companies refocus on fuel efficiency conflicts with the desire to make them profitable, which way does the Car Czar go? Because those goals are only reconcileable if oil prices shoot back up and stay there.
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
Hmmmm..... so, GM doesn't make any cars that people want to buy? It looks to me like they have 4 of the top 10 best selling cars according to Megan's chart.
I'm betting on the fuel efficiency side. The car czar has little to loose by not making the companies profitable, it can be blamed on previous trouble just being too great, but he has everything to gain by producing "hip" cars that voters want to be produced, even if they aren't actually willing to buy them.
Absolutely true. The european manufacturers (BMW, Mercedes, VW/Audi) are not profit kings in the US and certainly not on small econoboxes.
Bottom line is most people need comfortable space for at least four people plus luggage/dog for road trips of reasonable length in the US. That means a good sized sedan/minivan/SUV. The problem with Detroit is they made good money on trucks/SUVs, no money on sedans and lost money on small cars. I think only the Koreans make money on small cars.
Detroit must be able to make money on sedans and we should can CAFE
The big problem is that Congress is unwilling to do the one thing that will decrease gasoline consumption, tax the hell out it. People will not drive less and drive more efficient vehicles as long as gas is dirt cheap.
Owning a large inefficient car does not necesarily mean using a lot of gas. My van only gets 18 MPG city, but I put 4K miles per year on it, about a quarter the US average. The prius drivers that drive 20K miles per year use much more fuel than I do.
i am far too lazy to check, but i'm assuming those numbers are skewed by purchases from various governmental and other organizations that get them at major discounts, for example rental car companies.
Until recently, ALL the US car companies indeed made smaller and/or midsize sedans, but they were, to be blunt, shitty cars that nobody in their right mind would buy at a price that would create a profit. I mean come on, the Impala? Cobalt? The G6 is a decent car but still a Pontiac, which 89 percent of americans would not be caught dead in, and while the Euro Focus is a decent car, its American counterpart is no competitor to any of the offerings from Toyota, Nissan or Honda.
The US carmakers instead made all their profit on the SUVs and Pickups, demand for which is far more elastic than they evidently expected, and the rest of their lineup suffered for it.
Libertarians take heart, perhaps part of the problem is in US regulation?
Might the problem be in car seat requirements, safety requirements, and the like, vs. the requirements of other nations? Don't know, just asking. Might be a good time for the remnants of print journalism to undertake a review of safety standards and how it impacts US car size and weight before the print industry fails in its attempts to get a bailout of its very own.
My son is a fan of the VW Golf; which is still made in South Africa. It can't be imported into this country because of the safety standards, or so he tells me. If we want to get back to no-frills, basic affordable cars, we might want to look at our regulatory environment as part of the bailout.
but you're right in your argument that it makes no sense for the government to force companies to make cars to satisfy a demand that doesn't exist, rather than creating that demand by implementing a gas tax and letting the market do the rest.
You can't sell every car at a loss and make it up on volume. It's an open question how much of those cars they would have sold at a higher, profitable price.
For the Detroit Three, small cars have been loss leaders designed to prevent CAFE penalties. They lose money on them, but in good times make enough on bigger cars and especially trucks and SUVs to do okay.
The US carmakers instead made all their profit on the SUVs and Pickups ...
I have seen it said that the Big 3 sold the econoboxes at cost or a slight loss in order to get their CAFE numbers up. If true, won't a push to small econoboxes hurt their long term prospects?
Stupid question: why not replace CAFE standards with a rebated fuel tax? That is, increase fuel taxes, but rebate them equally to all adults net of administration costs.
That would:
1) Provide the fuel-economizing incentives
2) but without any car company having to sell cars no one wans
3) and without increasing many people's net taxes
4) or hooking the government on a new revenue stream.
Many of those 'top sellers' are not the small cars of 20 years ago.
With pickups and such, GM, Ford, Dodge, simply gave into short term thinking under the guise of "give the customer what they want." There was no long term look, no strategic position to stake out and effort to shift the buyer towards the new product. Just take the money now and run.
The re-birth of the Chevy effort is paying off, but has been years too long getting going. The Impala etc are great cars and receive top marks. But all that is dampened by lingering negative impression in the market. Too many buyers are buying symbolism over substance. To whit "The G6 is a decent car but still a Pontiac, which 89 percent of americans would not be caught dead in"
I thought buyers wanted quality? Turns out 89 percent of them apparently are more worried about what the neighbors might think. Pity.
The apparently conflicting business goal of profitability and political goal of fuel efficiency nirvana is not the only, or even biggest problem, with the bailout.
By far the biggest problem is that the Big 3 have way too much capacity, i.e., too many workers. The "car czar" is never going to be able to get everyone to agree to a plan that restores profitability without very serious reductions in the workforce. And there's NO WAY IN HELL the UAW, or the Democrats in Congress, will agree to those kinds of cuts unless the taxpayer picks up the tab in terms of UAW pensions, health care, etc.
Something will have to give--either the goal of profitability will go out the window, in which case the taxpayer will continue to fund zombie companies that turn out politically-produced cars few people want; or there will be massive layoffs meliorated by generous taxpayer support--i.e., the taxpayer will essentially buy out the UAW contracts with the Big 3.
Either way, whole thing is doomed to failure, and the $14 billion is only the start of the taxpayer's pain.
You can trust a libertarian to suggest it's a regulations fault that some of the business's in an industry can't make money.
I thought is was the all powerful market's job to pick the winners and losers.
There are credible libertarian arguements to be made, but this isn't one.
A tax or regulation never creates a demand for anything other than accountants and auditors.
Maybe lawyers and lobbyist too.
Clearly, the solution to the problem is a $4 / gallon gas tax. This will drive up demand for small, efficient cars, so that Detroit can be profitable *and* we can save the ecosystem. The tax funds can go towards Obama's green jobs initiative, which, a la FDR, will create gov't jobs on a massive scale and pull us out of The Great Depression II. Everybody wins!
For a lot of people SUVs are mobile offices. Truck are usually used for work. They both have the benefit of helping people make purchases and work on home improvements (for carry materials and equipment) outside of work. My main concern is that CAFE might further hurt this market.
The American auto manufacturers will go the way of Amtrak - government subsidies through the indefinite future to provide a politically designed product that nobody wants.
I think the point is, that instead of simply bailing out the big 3, we need a STRATEGY which will involve gas taxes, investment in technology, science and infrastructure. I believe that Obama is planning to give us such a strategy. In the context of that, its worth it to bail out the big 3 for the moment (its chump change compared to what we are blowing in Iraq). Once the strategy is in place lets look at the results. Keep your eyes on the big picture kiddies.
Megan,
According to Polk registration data, in the second half of the year (data-to-date), GM has a single model in the top 10. The Corolla, Prius, Civic, Focus, Mazda 3, and Hyundai Sonata which are all small/small engine cars make up the bulk of the list. There has been a seismic shift towards these vehicles since June. By all dealer accounts (I work in advertising) the SUV is dead, and they hope they can keep medium to large pick-up sales afloat.
The horse has left this auto barn, and I firmly believe people will want cars that are safer, smaller, and more energy efficient no matter the price of gas.
Kenneth Parker, one would hardly call me a libertarian, more a bleeding heart liberal who has too often seen industry use regulation to stiff the little guy.
But I do think that layer upon layer of safety regulation might need to be reviewed in light of fuel standards, material and manufacturing changes, standards in other countries, etc. because they have contributed to the path of heavier vehicles and increased manufacturing expense. It's time to question those things. If that's libertarian, it's the good part of libertarian. The good part of liberal is the ability to embrace what's right about regulation.
But the best part about change is getting rid of what sucks about it.
When a car company has spent the past 20 years doing everything in its power to destroy its reputation, as Pontiac has admirably done, it's hard to expect consumers to overcome their skepticism and consider/research/test-drive probably the only good car they make that's worth buying.
Aaron, are you disputing that a tax on gas would not create demand for smaller and/or more fuel efficient automobiles? Because there's a big 'ol Continent of people who beg to differ.
Something to consider when looking at the cost and quality of auto makes is that while the actual quality of US cars has improved dramatically from the junk years, the perceived quality has not improved. This shows in the depreciation numbers and affects the actual cost of ownership people have to consider when buying a car. This gives the Hondas and Toyotas of the world a price advantage that they can exploit to improve their profits.
There's nothing wrong with that. Exclusivity and perception of quality are great, and I appreciate companies that recognize the value of higher quality products even if it hurts the short-term bottom line. In contrast, the big 3 skimped on quality for years while relying on the residual "buy American" sentiment and their own perceived quality to pad their bottom lines, which is why they had money to throw at retirees to get union contracts signed.
The trouble is that the lag time in perceptions is long, so once you lose the reputation for quality, it's hard to get it back. After an improvement in quality there is time lag for the improvement to even be seen in the resale market, let alone positively affect it.
Hmmmm..... so, GM doesn't make any cars that people want to buy? It looks to me like they have 4 of the top 10 best selling cars according to Megan's chart.
Beyond what John Thacker already said, note that those bottom 5 (let's include Ford so it's not just GM) sell about as many units, combined, as the top 3.
And does that include fleet sales?
Jameswn: But note that YTD second half of the year includes a great big economic downturn. When people are worried about money and jobs, they buy cheap cars. This does not mean, however, that they have made a "seismic shift" towards wanting them permanently.
Also, given that the price of unleaded has fallen by about half since October, according to EIA, it seems very likely that the latter-half YTD as of today includes an awful lot of buying that was not expecting current fuel prices, but was rather expecting fuel at $3.50 and higher indefinitely.
Price per mile matters, but so do all the comforts and utility of a larger car, at least for those of us that aren't Deep Urban Dwellers.
When fuel drops in price, a lot of people start thinking they'd rather have a Camry or a Highlander than a Yaris - and I think the history of fuel prices vs. vehicle size supports that.
It doesn't create demand for cars, it destroys demand for large comfy cars. Some of that demand shifts to more fuel efficienct cars, but overall demands is destroyed.
re: gas tax - so a $4 gas tax would penalise drivers and trucking companies,force them to but beter fuel efficient cars? this is INSANE. worse,its collective punishment! because it also raises prices for food and all transported goods = ie. every consumer product. which might be okay if everyone actually drove cars, however, what about the people who dont drive cars at all? people who use buses and trains? they would be paying the price of higher fuel in higher food prices ect.... and they are the only ones who are really saving money on gas, by not consuming it. so you punich the people who are behaving the best? a gas tax would be taxation without representation for those who households who do not own a car.
additionally, if you want people to drive hybrids, its very easy - give people incentives... wow - what a simple idea - just give goverment rebates of many thousands of dollars for hybrids, and people will buy them. just like they are buying solar/wind power systems in Colorado and California - and saving megawatts of power in the process. reward good behavior and beware of collective punishment.
a gas tax would be taxation without representation for those who households who do not own a car.
You need a car to vote these days?
Both JamesWN and jay have very excellent points. Gas tax is insane. CAFE is probably also a bad idea, but likely much better than a gas tax, since the earlier efficiency boost acts as economic stimulus. A gas tax reduces consumption more, but primarily by destroying economic growth.
Do those numbers distinguish between Camry and Camry Hybrid? If not, your comparison with the Impala is obviously invalid (I get 40 mpg with mine).
The obvious things a $4/gallon tax on gas would create demand for are politicians who would repeal the tax.
Someone mentioned regulations as a factor; I concur. I used to drive a Subaru wagon - an economical family car, until my third child arrived and we discovered you cannot fit an infant seat and two toddler seats in one. My choices were limited -- minivan or SUV, and since we didn't have much money we went with a used Ford Explorer, which was much cheaper than a used Honda Odyssey or Toyota Sienna. Ford makes terrible cars, but their trucks and SUVs are pretty good quality-wise.
It gets terrible mileage, which I compensate for by not driving much. I had hoped that as my children got older and out of car seats, I could purchase a smaller car -- but Massachusetts recently passed legislation making booster seats mandatory for children up to 4'9" tall. My kids are small for their ages so they'll probably be riding to their senior proms in boosters.
So, I'm stuck driving the Ultimate Behemoth, which is very un-P.C., because I am obeying the very P.C. car-seat/booster seat law.
the people calling a gas tax insane are clearly insane. jay's rant is particularly obtuse.
have you all been on another planet for the past 5 years? For serious. Is it not insane to allow oil prices to fall precipitously with no floor, and continue on the gasoline- and oil-dependent path energy-wise the country had been previously on? And then get to go through this same BS again when oil prices inevitably - INEVITABLY - skyrocket again? Or did you forget where most of the world's oil comes from? Or did you forget that there is a finite supply of it? Or did you forget about a little thing we call "climate change"?
Get some brains, morans.
Get some brains, morans.
A gross insult to the Irish!
Opps! I said CAFE lead to an earlier efficiency boost. I actually have not idea whether it's fast, slower, or the same as a gas tax (I believe it is the same). The economic stimulus comes from lower gas prices.
SigiVald: that was sort of the point I was getting to. The chatter we hear from the car dealers in our markets is that the price in gas spiked in the biggest selling season of the year, summer, plus the credit crunch hit when car cos. were rolling out new models, PLUS many used car lots are REFUSING SUVs and trucks adds up to = wow, do I really want to own a $35k SUV that cost me $100+ to fill up when (not if) the price of gas goes up.
I stand by my seismic shift comment, b/c it'll be a long time before people can a) get cheap credit to buy more car and b) trust gas prices to be cheap enough to fill up their land yachts.
I think a gas tax to keep gas around $3/gallon is not a bad idea, as long as every single dollar of that went into mass transit and other people-mover infrastructure and technologies.
The Camry and Accord #s both will include hybrid sales.
Salamander: I agree completely. I'm a small car guy, but I can barely fit an infant seat in in the back of my compact. When regulations collide, it's the consumer that's the victim.
Megan: Is there not an option c? You can have a car which has the same internal volume, but is less massive. Of course, then you might have to revisit the safety standards...
Every single dollar? That would waste a lot of energy. There aren't enough places in the country where mass transit would be efficient enough to save energy, if enough people switched to compact hybrids. (Check out the BTS data on energy intensity of passenger modes. Amtrak isn't more efficient than a Prius.)
No matter the price of gas? I'm not convinced. I'm eagerly awaiting the October Traffic">http://www.fhwa.dot.gov/ohim/tvtw/tvtpage.cfm">Traffic Volume Trends numbers to see if the historic decrease in miles driven by Americans has started reversing with lower gas prices.
Anyone favoring special rebates for hybrids or CAFE over a gas tax either likes the idea that the costs are hidden, or else doesn't realize that the costs are hidden. (Or perhaps believes that they'll be able to shift the costs on someone else.) Rebates for hybrids? It's fundamentally no different from a tax on cars that use a lot of gas (except that you can end up subsidizing a hybrid SUV that uses more gas than a traditional compact.) The money has to come from somewhere to provide the rebates, after all, and so it'll lead to other higher taxes.
Profitability doesn't matter anymore, so don't take it into account when trying to predict what is going to happen. The only considerations now are political ones.
Silas Barta,
The combination of "net of administration costs" and "[without] hooking the government on a new revenue stream" does not compute. Can you explain this further?
You should have gone with a Japanese minivan. The milage (19/24 for the Sienna) is fractionally worse than a Subaru wagon, better than an SUV. The ride and handling is better than a truck too. And you don't even have to take the kids seat out to fool around in the back!
Kenneth Parker,
Can you briefly run down the evidence that we have a free market?
Here is the best gas tax plan that the vast majority will support. A $3 a gallon tax on gas. All the money from the tax goes into a fund and at the end of the year the fund is divided by the number of taxpayers and a check is sent out.
So if we use 250,000,000 gallons a day in the US x $3 a gallon x 365 days a year / 100 million tax payers would give everyone a check for $2500 at the end of the year.
The key would be someon who drives a Suburban would pay $5000 extra on gas but only get $2500 back. Someone who lives close to work and drives a civic would only pay $500 extra but would get the full $2500.
jamiet,
I'd love to see a short summary of how Pontiac has done so. I had a '92 Bonneville that I drove until 2001 (and only replaced because it was totaled when an old lady turned left in front of me). I put 150k miles on and it performed admirably. I see no problem with the brand. What evidence/anecdotes do you have?
Jay@1:45
Don't apply the tax to diesel- Problem solved for trucks, trains, buses and a small number of personal vehicles.
thomasblair,
Dude - seriously? I have two words for you Pontiac Aztek.
And 9 years and 150k miles is hardly some sort of accomplishment in this day and age. The fact that you think it means something indicates that you drank the Big-3 coolaid.
JMO,
Will people ever quit thinking of ways to tax (steal from) some and give it to another. Net wealth is actually destroyed here because you have the (inevitably large) admin costs of collection and disbursement of the tax.
An object of weight X requires Y amount of energy to move it Z distance at a desired speed. I'm not a physicist, but I'm pretty sure you can't change this. You can make the weight slightly less-significant through aerodynamics, and you can reduce friction by reducing the number/size/material of the tires. However, changing the method of generating the energy doesn't change the amount of energy required when all other things are equal. So when faced with a given weight, the engineers have to come up with a method of propulsion capable of conforming to Federal safety regulations and capable of meeting the speed and utility requirements of the average American while still being fuel efficient.
When I was into building and driving hotrod Volkswagen Beetles, I remember a sign hanging on the wall of my favorite race mechanic. It read "Speed costs money. How fast do you want to go?" This is true for everything, not just race cars. Energy isn't free. One way or another, you pay for it.
If we got rid of all the gasoline vehicles today and replaced them with electric ones, we'd need to burn *something* to get the required electricity to fuel them. Whatever we burn produces a by-product of some sort. For coal and petroleum products, it's carbon dioxide, carbon monoxide, and other compounds. For nuclear, it's radioactive material.
Elecric engines just aren't efficient enough to run with today's vehicular requirements and on whole, they require more fuel to produce the same energy - and that means more waste.
The best bang for the buck is the gasoline or diesel engine. No amount of whining, no amount of arm-twisting, no amount of taxing to create or change demand, and no amount of legislation is going to change that.
Taxing the crap out of gasoline to try to "create" demand for more fuel efficient cars has to be one of the stupidest ideas I've ever heard. The demand already exists - in spades. Do those of you who propose this honestly believe that there aren't already armies of engineers pouring a collective millions of man-hours of thought and hard work into coming up with new and innovative ways of squeezing more out of less when it comes to automotive propulsion? Seriously, the person or persons that finally come up with a way to either double the MPG output of a 300 HP engine or invent a different method entirely will be rich beyond the dreams of avarice.
The unvarnished truth is that there probably isn't a way to do it. The most efficient air/fuel ratio on an internal combustion gasoline engine is the same as it's been since the beginning: 14.7 to 1, IIRC. Carburetion was the least effective method because it was difficult to hit that ratio across the power band. You had to settle for having it as close as possible. Computers changed all that and today's engines run at the proper ratio all the way through the power band becuase the air and fuel are constantly monitored and regulated. In addition, the engineers do everything they can to make sure that when the engine isn't actually propelling the car, it's using the least amount of fuel possible.
At this point, the only changes that can be made are likely to the weight of the vehicle or the tires and all of that's hampered in the US by safety regulations.
JMO,
9 yrs and 16-7k mi/y isn't anything to sneeze at. I haven't drank the Kool-Aid. I have a '01 Mercury Sable now (w/ 120k mi) that I hate. I've replaced more parts on that car than I care to list at the moment. The goddamn "check engine" light has been on for more than half of those miles.
And you're right - the Aztek was an ugly effing car.
What the 'car czar' needs to order GM (and others) to do is very simple -- GM must make a car as good a Camry or Accord and sell it for $1,000 to $2,000 less than the Camry or Accord (because GM's reputation is worse, so the resale value is lower and people won't pay as much). Further, it must earn a healthy profit while doing so (even while continuing to carry higher labor and legacy costs than its competitors). It must perform this miracle continuously for a number of years (throughout what will probably be the worst recession in half a century) until it has restored its reputation, quality, and fiscal health.
And that's all.
Of course obviously engineers would love to create a more fuel efficient car with the same performance, and I completely agree with you that it's extremely difficult and not happening. But that has little to nothing to do with the idea that people will buy more fuel efficient cars if gas costs more. It also certainly doesn't argue for things like CAFE, as it implies that higher CAFE standards will not result in magically better cars, since engineers would be working on that anyway, but will result in either people buying cars they otherwise don't want at a normal, profitable price, perhaps because of enormous discounts necessary to meet the standards and avoid fines, or cars not being bought.
But people obviously did choose to give up performance, size, and what have you for smaller cars when gas prices went up. They also just as obviously drove less. I don't think that they were happy about it, certainly, and it didn't result in magically more efficient cars with the same performance, but people did make tradeoffs.
I own an after-market car parts business -- we design, produce and market original products that cater to a niche hobbyist market as well as produce some reproduction parts for the collector market.
Here is a point that is never mentioned in discussions of this sort; the overwhelming bulk of cars sold in the US each year are used, not new. In fact, new car sales make up a surprisingly small part of overall US yearly car sales, and new cars sales to individuals an even smaller part. Not only have new car sales, as a proportion of overall vehicle sales, been in decline for decades in this country, BUT, the greater number of new car sales nowadays are fleet sales, not sales to individual buyers. Frankly, a majority of Americans can't afford new cars -- domestic or foreign -- and that means they can't afford the newest technology, no matter what or how amazingly fuel efficient it is. (The fact that fleet sales make up so much of yearly new car sales is something to keep in mind when you think about American's supposed "addiction" to light trucks and other "gas guzzlers," and Detroit's consistent catering to that market. Also, the individuals who are most likely to be new car buyers are also likely to be the most affluent, and therefore least cost concerned part of the car market -- and therefore likely to be those buyers who are the least concerned with fuel efficiency.)
I don't know, perhaps the readers here belong to an unusually affluent group that regularly purchases new cars, but my husband and I are certainly above average as earners, and we have only purchased one new vehicle in our entire lives -- a truck for business purposes. Most of my friends and relatives are professionals or managers and executives in high tech, advertising, and media etc. -- and I can't think of one who purchases new cars on a regular basis -- or even one who has purchased a new car in the last 4-5 years (in fact I'm not sure I know anyone who has bought new in the last 8 or 9 years. One friend bought her first new car 16 years ago -- and is still driving it).
I don't see how we address issues like energy use reduction without taking this incredibly important fact -- that most Americans can't afford the newest automotive technology, or don't see it as the best investment of their transportation dollars -- into consideration.
In fact, given the realities of the automotive marketplace, the real innovation we need is probably something Detroit is (understandably) very unlikely to embrace -- a cost effective way to convert older vehicles, the vehicles most Americans are driving and can afford, to greater fuel efficiency.
Nick,
There are numerous mistakes in your post, even if I do agree with the overall gist.
The inefficiencies of a typical gasoline engines are numerous. more than half of the energy contained in the gasoline goes to heat up the exhaust and the radiator. As most gearheads should know, the tranny eats up another 15%-20%. Traveling at a constant speed, your typical gasoline powered car is around 30% efficient. Now consider that the same car is 0% efficient when idling. Add to that that all the potential energy the car builds up accelerating is wasted on heating up your brake pads when you press that pedal. Hybrids offset those loses by not idling the gasoline engine, and conserving some potential energy when braking. Basically, it makes a car driving in the real world about as efficient as one that is driving at a straight line, at a constant speed in a physics problem.
Electric motors on the other hand are over 80% efficient. They have broader power bands, due to near constant torque, and thus can operate without a transmission. On top of all that, the electric motor is actually considerably cheaper than a gasoline one. The problem is how to store electricity, you can't just pour it in a tank, and todays batteries are expensive and cannot store enough. But the motors are great.
But, you say, we have to burn something to make all that electricity. Well yes, we do, but we can get much higher efficiencies when we can do all that burning in an industrial environment. Your typical power plant uses multiple steps to generate power, where the waste head of one turbine is used to drive another, that is optimized to operate at slower speeds. So your typical power plant is around 80-90% efficient. The gains are even better with nuclear technology. Fuel can be reprocessed to run again, and again, and again, so that there is very little dangerous radioactive products left over. Except of course, that US has decided not to reprocess any of our nuclear fuel, because the process can be used to make weapons.
First, CAFE is just plain crazy; it incentivizes all sorts of silly things in order to pretend not to cost anything. (Let's kill public transit by subsidizing tiny city cars by overcharging on the large vehicles suburbanites want! Um, yay?)
The lower energy bound on moving a car is based on drag (shape, size) and friction (wheel design, to a limited extent weight, etc). Weight is also really bad for accelleration, which people also want and matters in city driving...
And electric motors are much more efficient than IC engines (even once you factor in the losses in transmission and at the power plant); the problem is that hydrocarbons have a really high energy/weight ratio, so it's really hard to get decent range and acceleration in an electric vehicle...
It's amazing, isn't it? I thought the problem we were trying to solve here is that the automakers aren't profitable. I mean, isn't that the whole reason they're asking for a bailout in the first place? But no, it seems that the Democrats think the problem is that they aren't making "green" enough cars.
I think this reflects how much environmentalism functions as a quasi-religion on the left. Surely if we appease Mother Nature (blessed and generous is she) with eco-friendly cars, she will reward us with untold profits!
In fact, given the realities of the automotive marketplace, the real innovation we need is probably something Detroit is (understandably) very unlikely to embrace -- a cost effective way to convert older vehicles...
I find this most implausible. Cars don't last forever. Converting new cars, on the other hand, could soon become big business: http://www.autobloggreen.com/2008/05/23/amp-vehicles-to-convert-saturn-sky-roadsters-to-electric-power/
...but my husband and I are certainly above average as earners, and we have only purchased one new vehicle in our entire lives -- a truck for business purposes. Most of my friends and relatives are professionals or managers and executives in high tech, advertising, and media etc. -- and I can't think of one who purchases new cars on a regular basis -- or even one who has purchased a new car in the last 4-5 years (in fact I'm not sure I know anyone who has bought new in the last 8 or 9 years.
Where do you live? Manhattan? San Francisco? Denmark? Sure, you lose that pile of cash driving it off the lot, but life's too short to go without that new car smell every once and a while.
All used cars were new cars at one point. If the fraction of total car sales that are new is decreasing, that actually means the opposite of your anecdote about your friend-- it means that the same car is being sold more often rather than being driven for its entire lifespan by one person. If every car is driven only by the original owner, then 100% of car sales will be new. If every car is sold used once, 50% of sales will be new. If every car is sold used four times, then 20% of sales will be new. And so on. Partially this is a function of cars lasting longer now, but people still getting tired of cars and wanting different ones sooner.
Incidentally, I don't know what you consider a "surprising" amount of new cars sales as fleet sales. Is 15.4% of subcompacts "surprising?" What about 38.8% of compacts or 27.7% of intermediates? (The numbers for "full size" cars are misleading, because there's only a handful of models, and the largest sales by far are Crown Victorias to police.) Note that Detroit cars are much more likely to be fleet sales than others-- 39.7% of Cobalts are fleet compared to 2.2% of Civics.
Also note that luxury cars, sports cars, trucks and SUVs are much less likely to be fleet purchases than compacts and intermediates. However, minivans (30.6%) and especially full size vans (61.5%) have very high fleet purchases.
These are first half of 2007 numbers. YMMV. Past numbers are no guarantee of future numbers.
esmense,
I have a question about your used car buying friends who you claim can't afford new cars. Can they not afford a new car, or can they not afford the car they want when it's new. I have a buddy that just bought a 4 yo Toyota 4-Runner. Now for the 4-runner he might have bought a new Camry and he certainly could have bought a new Corolla.
At least the middle class people I know who buy used usally buy a bigger, more prestigious, more powerful car that those who buy new. I know someone right now trying to decide between a used Lexus and a new Camry.
High gas prices might push a lot of people who are thinking about spending 20k for a used Tahoe and push them to go with a new Accord.
This is incorrect, as the data posted above shows. "The greater number" of new car sales are not fleet sales, unless "the greater number" is around 15-25%. Light trucks, SUVs, luxury cars, and sports cars are more likely to be bought by individuals than subcompacts and intermediates, which are heavily bought by fleets. Now, fleets also heavily buy minivans and fullsize vans-- but this is also because commercial purchases by business are lumped into fleet, and most full size vans are for business. So the idea that its fleet purchases that cause Americans to buy gas guzzlers seems off. Fleets appear to buy, on average, cars with better fuel economy (but not many Priuses or subcompacts) than individual purchases, except for vans used for work.
I’ve seen this so often I am past the point of being furious. Liberals try to use the government tax power to do some good (like a gas tax) but conservatives have conditioned the public to reject taxes as always bad. So the liberals compromise and come up with a law that tries to legislate the same objective (like CAFÉ). But conservative businessmen find ways to satisfy the letter of the law without accomplishing its real objective. Then the same conservatives blame the liberals for passing counterproductive laws.
lots of opinions, very few, or at best cherry picked facts to support preconceived notions.
the fact is
> Toyota is now the world’s largest automaker in terms of net worth, revenue, and profits. So they must be doing something, no - LOTS of things, better than GM. The idea that making crap cars with a lower FLEET EPA Rating (stop picking only the token lowest MPG on offer) will make you more profitable is proved WRONG - so stop repeating it.
> Everyone I have read on this topic acts like the Europeans and Asians don't have businesses, don't have contractor/construction companies, don't have kids, don't play sports, and don't drive many miles. that's hogwash - they do and they get by just fine with smaller, fuel efficient vehicles because gas taxes are prohibitive.
> The idea that most Americans who own SUVs/Lt Trucks NEED them is complete and utter malarkey. a) the avg US family is 3.14 ppl while in the UK its 2.85, so where's the need for EIGHT seats?
b) How many times a day do you see an SUV with one person behind the wheel? How many times do you see one overflowing with kids and camping equipment? Try keeping count next time you spend a few hours driving. I rest my case.
> While Detroit was building inefficient vehicles in the US: VW, Benz, Renault and others were developing clean Turbo Direct Injection (TDI) and other very efficient diesel engines that are now getting TESTED up around 50 MPG. Now TDI is efficient - not 32 Hwy EPA estimates - and its real miles on a 4 door VW Jetta which seats 4 adults comfortably. (see http://www.nytimes.com/2008/11/23/automobiles/autoreviews/23-vw-jetta.html)
> the fact is that Megan presents a false choice. It is not either expensive fuel economy OR cheaper car. 100s of millions of people are driving quality, affordable, fun (above Jetta is about $20K new) AND fuel-efficient cars.
She just chooses to stick her head - next to the Big 3's - in the sand while the American people buy Toyotas.
Megan writes: But they're not making their money on gas-sipping hybrids and compacts, either. They, like Detroit, are making their money by selling cars that will need a pretty big refit to pass the new CAFE standards.
Toyota and Honda ARE certainly making money selling hybrids and compacts -- just look at your list, Megan. Three of the five bestselling cars have hybrid models and two of the five cars are compacts. And they're all imports. No one is suggesting that GM, Ford, and Chrysler stop selling sedans. Most of us, in fact, would be quite happy if 30 mpg sedans made up a much larger percentage of their sales. The reality is, however, that trucks, vans, and SUVs make up a much larger percentage of domestic automakers domestic sales than do the same models for Japanese manufacturers. Moreover, I'm not sure how stringent the new CAFE standards are, but I have a hard time believing that a car fleet composed predominately of 30+ mpg sedans and 35-40+ mpg compacts is going to have any problem meeting those standards.
ken magalnik wrote: so your typical power plant is around 80-90% efficient.
I daresay Carnot laughs at you, and irony ("there are numerous mistakes in your post") is mildly amused.
The best figures I've found so far on the net fuel and process efficiency for a modern coal-fired power plant are on the order of 60%. Figure on losing 3% in each stage of the transmission and distribution process, of which there can be several, and efficiency at the residential end-user might be more like 40-45%.
Factor in the imperfect efficiency of battery chargers (some converted energy lost as heat), the batteries themselves (some energy lost as battery heating both during charging and discharging), and the imperfect efficiency of the electric motor as already noted, and that electric car is likely at 35% or less. It's still a modest improvement over the gasoline alternative, IF you can tolerate an uptime/downtime ratio that sheds rosy light on a Yugo. Rapid charging, even if you overcome the problems this can present to the battery, is a chicken-and-egg problem in that a typical North American residential power system does not have the proper power capacity to provide it to a battery system that can support the propulsion system of a modest-size vehicle.
Now as for hybrids, sure -- the trade-offs associated with one half of the propulsion system are reasonably well balanced by the strengths of the other, and vice versa. But all-electric? An ongoing pipedream that still has several practical obstacles. Petroleum equals highly concentrated energy storage in a readily dispensable and transportable form, and that's why the gasoline engine refuses to die.
One thing that people just don't seem to understand is that Europeans and other foreigners drive the cars they do for reasons...a lot of which has nothing to do with relatively higher gasoline prices Over There.
I've driven in Europe, and lived in Asia. Both places have narrow, twisty streets and roads, and a severe shortage of parking in a lot of areas, so there's a big premium on small, efficient cars. They also usually have a lot less far to drive than we do, so comfort is less of an issue (they won't be in their cars as long).
Mouse:
I'm not saying that all electric vehicle are ready to tackle are transportation needs. They aren't, and won't be until someone figures out a way to make really good capacitors. Hybrids are a nice gap measure that allows some EV technology to be tried on a mass scale, but are of little use by themselves, due to the expanse of building both drive trains into a single vehicle. After all, it will be a long a while before the added real cost of a hybrid justifies the fuel savings.
What I was trying to point out is the idea of "efficiency cannot be improved since we can already regulate fuel ratios very well" is balderdash.
RH Omega wrote: lots of opinions, very few, or at best cherry picked facts to support preconceived notions.
...of which you appear to have contributed a few more. I take issue with the following points:
The idea that making crap cars with a lower FLEET EPA Rating (stop picking only the token lowest MPG on offer) will make you more profitable is proved WRONG - so stop repeating it.
Who, specifically, is repeating this?
Everyone I have read on this topic acts like the Europeans and Asians don't have businesses, don't have contractor/construction companies, don't have kids, don't play sports, and don't drive many miles. that's hogwash - they do and they get by just fine with smaller, fuel efficient vehicles because gas taxes are prohibitive.
Correction: they get by. A long and nuance-filled discussion awaits on what choices and trade-offs they make to compensate, complicated by their naturally dense infrastructure that enables efficient and convenient public transportation on a scale that the US cannot realize outside of two or three of its largest cities.
The idea that most Americans who own SUVs/Lt Trucks NEED them is complete and utter malarkey. a) the avg US family is 3.14 ppl while in the UK its 2.85, so where's the need for EIGHT seats?
Possibly we can find it in the fact that in the US, 3.14 children under the age of four years or forty pounds require 4.71 federally mandated seating positions, plus driver and possibly another adult passenger, plus standard childcare accessories and cargo? Not to mention the increasing trend to mandate booster seats for children under 5 foot or so, an unanticipated fruit of the regulation that has produced mandatory shoulder belts at all/most seating positions. Also, since you oppose "cherry-picked" data, why not look into the overall European replacement rates and child seating requirements?
How many times a day do you see an SUV with one person behind the wheel? How many times do you see one overflowing with kids and camping equipment? Try keeping count next time you spend a few hours driving. I rest my case.
No, don't, it won't rest easy. Specifically, how many times do you see people buying a compact car for their daily commute AND a large vehicle for their evenings/weekends? What would the total cost be in resources for this option as compared to just buying the larger vehicle and using it as a daily commuter?
The idea that most Americans who own SUVs/Lt Trucks NEED them is complete and utter malarkey. a) the avg US family is 3.14 ppl while in the UK its 2.85, so where's the need for EIGHT seats?
That's the average number per family, which includes all the families who don't have any children. What you really want is the average family size for families with children under 18 years old, which is 4.17 people. Most families have two children, but enough of them have three or more kids to drag the average up.
Like Salamander, I have three children (actually, three under 2.5 years old). Our family vehicle will be a minivan or an SUV with a third row for the foreseeable future, because you just can't fit three car seats in a car's backseat. Three children is common enough, and if you have those three kids in less than seven years, they will all be in car seats or booster seats at the same time. I have a large SUV because the gas mileage isn't much worse than a minivan, and because the quality of the vehicle for the money is much better than all the minivans we test-drove.
Emma, my daughter's mother drives an '05 Honda Odyssey. The Odyssey gets fantastic reviews (barring a transmission problem, corrected in 2005), and is much better for transporting kids around than any SUV we looked at. We've carried six teens up to Chicago and back for cheerleader competitions, and they seemed to have no problems with the room or the conveniences.
It's been reiterated too many times to count, but SUV's really are not very good quality machines, especially not if you're going to be comparing them to minivans in the kid moving department. The fact of the matter is, SUV's are just considered cooler right now than minivans.
Petroleum equals highly concentrated energy storage in a readily dispensable and transportable form, and that's why the gasoline engine refuses to die.
It's just cheaper, Mouse, that's the only advantage, and it's only cheaper because we subsidize it. We subsidize the oil companies, we subsidize the roads, we're about to subsidize the automakers, and most of all we subsidize the enormous negative externalities associated with fossil fuels.
Sure, there's practical hurdles to adoption of electric cars. But it's where we'll have to go. Independent generation of power per vehicle is a redundant waste no matter how you slice it. Not having regenerative breaking is a waste of all that kinetic energy. Sure, there's hurdles. There were substantial hurdles to the adoption of the gasoline automobile, too, and we overcame them partly by ingenuity and partly by subsidizing the hell out of the entire process.
The most substantial obstacle to the adoption of the electric car is that they don't exist, and everybody already has a gasoline car. Quibbles about efficiency - and that's not even getting into your best-to-worst case comparisons - are basically irrelevant to that.
Car czar? If we're going to use Russian, why not go all the way and call the position the Commissar of Production?
What would be so bad about letting the market decide? Having never owned one of their products, I would not lose sleep if the Big 3 joined the railroads in transportation history.
Chet, "it's just cheaper" is usually a sign of the sum energy input required to make something work, especially if the dichotomy persists for over a hundred years.
If runaway subsidy were all that were required to make a technology flower into an irrevocable public commodity, mass transit in the US would be the envy of the world. Subsidy isn't enough. A technology must offer something that is a clear net benefit to its users while being economic to provide, or it will languish.
The most substantial obstacle to the adoption of the electric car is that they don't exist
They do and they've been tried repeatedly, with plenty of subsidy. Even with modern Lithium Ion cells available, the energy storage problem is still proving a difficult nut to crack. Mere LPG/LNG vehicles have never gotten past the novelty stage and those have been subsidized, been available for years, required far fewer modifications to technology or infrastructure, and been subject to far fewer tradeoffs.
Gasoline and diesel have not maintained the petroleum status quo for over a century on land, water, and air because of some dearth in competing technologies and fuels. Oil distillates just work because a very large quantity of releaseable energy can be stored in a simple, manageable form while the technology to release that energy is subject to continual improvements. (For example, gasoline direct-injection engines -- essentially a compression-engine design that burns gasoline at very high efficiencies without destructive preignition or knock -- are entering the advanced stages of development right now.)
Incidentally, I work in the electrical power industry, and that an area that does substantial work in wind power, so reduced fossil fuels in any area would be nothing but good news for my cash flow. I'm just not seeing a practical side of it materializing in electric cars, and idealism isn't going to change facts. If you want an alternative, be prepared to defend the energy storage question with something better than "it will get there, I'm sure of it."
Now I'm wondering. We've heard that Detroit only made money on SUV's and minivans. And we all know that business hires lobbyists because it's profitable. So just how much of our auto safety laws, like child safety seat laws, are to force the purchase of profitable vehicles for Detroit, instead of vehicles like the Subaru the mother spoke of above?
I traded in a car for an American made SUV because of car seats. I know lots of parents who did the same thing.
Really gets you wondering, doesn't it? Not saying the kids shouldn't be safe, just wondering if there might be other approaches more in keeping with smaller vehicles?
I'm sorry, Chet, but for fundamental physical reasons, the IC engine running on gasoline is superior to an electric motor running on batteries by any of a number of relevant criteria.
The problem with batteries, roughly, is just this: the phenomena upon which they are based is essentially a two-dimensional one. The electrochemical reactions themselves are to a fair approximation about as energetic as the reactions used to power an automobile. But the reactions in a battery take place along a 'surface', albeit a convoluted one (and the more convoluted the better in terms of energy density.) By contrast, the reactions involving oxygen and light- to mid-weight hydrocarbons occur in a volume, that is, finely vaporized gasoline reacts in a volume of air (oxygen.)
Batteries - unless they fundamentally change in their basic design - simply can't compete against this advantage. Note, btw, that the heavier hydrocarbons suffer in this regard as well; paraffin has just about as much energy per weight as gasoline, but it can only react in tiny quantities along a surface, such as in a candle wick. Note also that finely ground coal dust suspended in air is violently reactive, for the same reasons gasoline is reactive, and in fact, there have been a few attempts to run an IC engine on coal dust to exploit this principle.
That's the problem. That's what 'batteries' are up against in terms of bettering their performance to the point that they can compete with gasoline.
Doesn't this post undermine Megan's emphasis on the union?
The Camry, Altima and Accord, Civic and Corolla are top sellers in the US. What are the American models that compete head to head with these models?
I suspect that the primary reasons buyers choose Honda and Toyota have to do with factors that are out of the union's control--design, engineering and marketing.
The unions are a problem--primarily because of the legacy costs and the culture they maintain. But, make no mistake, the unions and big 3 management deserve each other.
One of the unheralded engineering achievements of the past few decades is the improvement in IC engine technology. I have a Honda minivan that gets almost the same mileage as my 94 Honda Accord wagon got, even though the minivan weighs about 1000 lbs more, has more aerodynamic resistance, and has close to double the horsepower (as well as two more cylinders). My Civic gets over twice the mileage as my old Volvo on virtually the same horsepower and engine size (admittedly it's a bit lighter).
Cars could be getting a lot better mileage than they currently do if manufacturers had put those improvements into efficiency rather than performance. Contemporary cars are startlingly overpowered compared to cars 30 years ago. Efficiency increases, at this point, are simply a design choice - not a cost burden.
Robert,
It's funny that a 2008 Toyota Camry V-6 goes from 0-60 in 5.7 seconds and a 1971 Pontiac GTO with a 455ci V8 does it in 6.1, a 1968 Mustang Shelby Cobra does it in 6.0.
A 2008 Camry can blow the doors off nearly any stock muscle. A little overpowered - um... yeh.
And not to rank on Toyota a V-6 Altima goes 0-60 in 6.2 and a V-6 Accord does it in 6.1
A 2008 Camry can blow the doors off nearly any stock muscle. A little overpowered - um... yeh.
But, but safety standards are what prevent us from making smaller more efficient engines. Those damn government regulations. I'm sure there's a safety regulation that says we must go 0-60 in under 6.5 seconds in a mid-size sedan.
As I said before, the Big 3 whine and moan about any new change or regulation. From Seatbelts to catalytic converters to air bags. While Honda and Toyota adapt and figure out how to make money. Every time they are thrown a curveball, they figure out a way to do it. When the Big 3 is thrown a curveball they look at it and whine about how curveballs are unfair.
On the V6 family sedan discussion, most people buy the more sensible 4-cylinder versions of these cars, probably because the V6 versions are so overpowered.
And yes, the safety laws do matter -- you can't get a new car for $12,000 that gets over 40MPG like you could in the 1990s (e.g. the Geo Metro) because a 1600lb car would never pass today's safety laws unless it was made out of some exotic material (thus making cost > $12,000).
Forget mileage, forget union wages... The problem with Detroit is that we simply do not buy their cars. Go to the dealerships, sit in a Honda, sit in a Chevy. It's a quality that can't be compared using 0-60 or interior space numbers. Accord drivers aren't crazy.
Regarding my admittedly somewhat-hyperbolic anti-Pontiac rant: I have owned a pontiac, it was a 1990 quad-four grand am and is second only to my 92 plymouth grand voyageur in awfulness. my uncle was an engineer for GM when he was given either a 94 or 96 bonneville, which he claimed was the worst car he'd ever driven - he shortly left GM for greener pastures at a well-known chip manufacturer.
otherwise, pontiacs are obviously some of the ugliest cars on the road; the aztec being the most outlandish and cartoonish example of this, and more often than not had poor reviews in the auto magazines i read growing up.
and Technomad:
I would dispute this assertion. I lived for a few years in various European countries, and I can tell you that gas prices have far more to do with what cars people are buying than road-size or parking. Most of the car-owners I knew didn't live in the city anyways, and most vans and larger sedans and kombis are diesel, and get mileage that would embarrass an accord hybrid.
Anecdote alert: I once drove a VW diesel Sharon van from Vienna to Salzburg Land and back (three hours each way) without stopping for gas.
The Yen. It's impossible to know what the 'free market' exchange rate of the Yen would have been since their bubble collapsed in the early 90's but it is certain that it would have been much higher most of the time if they had not massively intervened in the Forex market and their own credit markets.
The always weak Yen was a competitive tailwind for the Japanese auto companies and a headwind for the US ones. I think it's fair to say that the pay differential between Japanese and US autoworkers was no greater a cause of the low margins the Big 3 had on cars then was the weak Yen.
The zero interest rate policy which was causal in Yen weakness however provided a huge gift to the financial world and it leveraged speculative model. The Yen carry trade was born. Borrow billions from Japanese banks at 1% and lend here at 5% and pocket the dif was one common strategy. Then of course tell US auto workers they are overpaid and lazy, and don't understand the meaning of competition or real work.
A lion of the "Market for the Next Centruy" has admitted to running a Ponzi scheme amounting to tens of billions of dollars. Now there is man who knows the real meaning of competition and work. Preen and strut for the already rich, compliment them. Promise them even more riches, for nothing, for now work, only for 'investing' while we can be certain when the occasion arose, bashing the pathetic lazy auto workers. Live was good.
It's been a couple of years since I last checked, but my impression is that if gas goes to approximately $5/gal, the Fischer-Tropsch process becomes competitive; all the more so if nuclear energy is utilized. It's very plausible to project a future of $5/gal gas running vehicles getting 60 miles/gal. Unless there are radical improvements in electrical energy storage, this would seem to be the way to bet.
That's not to say that I wouldn't like to see more electric buggies on the market, going perhaps 40 mph and running 40 miles between recharges. Where I live, in my circumstances, that would take care of at least 90% of my driving needs. And if you're going to be a two car family anyway, maybe something like this as a second vehicle would make sense.
aMfaS, electricity isn't as efficient for transportation as liquid fuel, but we have better access to a whole lot of coal. It might be economical, the dollars and cents should tell if it is.
John Thacker --
Different sources, different statistics. I am trying to get people to look at the car market in total. MY point; new cars make up a relatively small number of the vehicles sold in this country each year, and, secondarily and less important, fleet sales make up a relatively large part of that number. Among the huge amount of marketing material I read, as someone who produces parts for the automotive after-market, I have seen numbers as high as 40% quoted. It may depend on how "fleet" is being defined. Dueling statistics aside, if you read what I wrote you will see that I did not say that individual new car drivers are only buying light trucks and SUVs, or anything close to that. I said individual new car buyers are likely the most affluent and therefore least cost concious (in terms of fuel efficiency as well as car price) buyers in the market place (a market place in which the AVERAGE buyer is buying used, leasing, etc.). They (individual new car buyers) are quite likely to be those buyers buying on the basis of qualities other than cost efficiency, among them; luxury, status (including peer and class expectations), size and comfort, etc. Whether they are buying trucks and SUVS or sedans and luxury vehicles, these buyers are the part of the market least likely to be making their choice largely based on cost factors -- including the cost of fuel. What I did not say in my earlier post but implied is this; they are therefore the least likely part of the market to respond to sticks like higher gas taxes. (They have, of course, consistently demonstrated that they are not, except under very exceptional circumstances, very responsive to the carrot of greater fuel efficiency.) I think, therefore, it may be a mistake to judge the motivations and needs of the AVERAGE car buyer on the basis of this relatively small and unaverage part of the total market.
So, my point still remains; to view the market for cars in this country only in terms of new car sales is to miss entirely what is actually going on in the grand old USA. It doesn't address the reality of the road -- which creates a rather serious problem whether you see the issue that must be resolved as how to make Detroit more profitable or how to encourage more efficient use of energy by the nation's drivers as a whole. Conversations like the one taking place here are mostly taking place in fantasy land -- the everyone is upper middle class "Friends" Consumerland fantasy of unemployed waiters living in Manhatten penthouses -- promoted for obvious reasons by the media and its advertising clients.
What I'm asking people to do is look around you and observe real life in America. And stop thinking in the cliches of left AND right. It's the unions. It's bad technology. American cars are crap and ugly. Whatever.
The fact is, whatever the short comings of American cars, Americans are still driving them -- in many cases for decades. Jeezus, I drove a crap Chevette -- really you couldn't ask for a bigger joke of a car -- bought used, for cash, from Budget rental -- for 17 YEARS WITHOUT ANY MAJOR INVESTMENT IN ANYTHING OTHER THAN REPLACING THE BRAKES. The damn thing wouldn't die -- I prayed for it to die. As my son pointed out recently, long after the plastic interior parts of the car started to crumble into dust, the damn engine and transmission still kept chugging along. No matter how anxious you are to bad-mouth Detroit, I think you have to call engineering that can outlive plastic pretty "good enough" engineering. I bought the car to haul kids and toys and groceries around in a short trip, high traffic urban environment. It performed that task very efficiently.
Detroit's problems are probably most related, more than anything else, to the fact that today there are too many car makers and too many vehicle choices. More than the new car market can bear. It's not the 1950s anymore -- when car makers were selling what was essentially, despite the fact that cars had been around for decades, new technology to the first generation of Americans able to afford them in genuinely mass numbers. When relatively minor style changes and technology upgrades, etc., could provide an excuse, for a mass market of buyers, to trade in or trade up on a very frequent, in fact for many middle class Americans, yearly, basis. Plus, today, unlike the 1950s, there's a used car market that provides a huge array of relatively inexpensive transportation choices for a wide variety of purposes. Today, cars are a necessary commodity most often purchased for a quite specific use. And while Americans are less likely to have new cars they are more likely to have several cars -- the van for family transportation, the 4 wheel drive for recreation, the sub-compact for in-city driving, the fuel efficient daily commuter, the light truck for hauling, etc., etc. -- many of which will be driven into the ground before being replaced.
I sell car parts to people who are still using 35 to 40 year old cars as daily drivers. Now, that is a very small part of the market. But, driver's of 10-15, even 20 year old cars? Not a small market at all.
What are the consequences of greatly increased gas taxes for those drivers? For how many are new cars with the newest technology really realistic options? What do we do with all the perfectly workable older cars on the road? Confiscate them? Penalize the less affluent people who drive them in some financial way? What kind of transportation options do we provide for people who can't afford to purchase the newest technology? And if we do drive these people out of the automotive market, will it accomplish what we want? Will it have any or sufficient impact on the purchasing habits of the smaller, more affluent new car market?
The modern automotive market is extremely complex. And yet, we persist in talking about it in simplistic ways that have more to do with political ideology than market reality.
As someone who would like to see a reduction in energy use, I think the answer more likely lies in increases in mass transportation and major changes in housing patterns, etc., than in anything that Detroit can do. As someone who would like to see the American auto industry survive in some sustainable fashion, I think the answer for Detroit lies somewhere in the realities of the marketplace rather than in the punitive or outdated fantasies of politicians (left and right).
As far as I can see, Detroit doesn't have a problem which GM filing for bankruptcy (perhaps along with Chrysler) doesn't solve.
Too many dealerships they can't cut loose, the inability to down-size factories or re-negotiate bad union contracts, bad debt that can't be restructured. All of this goes back on the table for a bankrupt company. It's part of what we have these statutes for in the first place.
So let 'em file, and the market will do it's thing. The car market is a zero-sum game of competition: national demand for cars is not going to suddenly go down if GM is cut in half. We'll just buy made-in-the-US Hondas.
The only reason we are seriously talking about a bail-out at all is because the UAW owns a majority of the politicians in Washington right now.
One other thing, for a lot of people fuel is a relatively minor expense compared total cost of owning a car. I loved loved loved my 1992 Honda civic that got 42/48 mpg, but I get a hell of a lot more car for the total cost of ownership from my 19/24mpg minivan. Even if gas goes to $10/gallon, for my family it's still a better value proposition than a smaller, more fuel efficient model.
No, I think you don't understand your own points. Unless, I'm badly misunderstanding what you mean, they contradict each other.
If everyone drove the same car "for decades," then new cars would make up a larger percentage of the market. All cars start out as new cars. The only thing that new cars as a percentage of cars sold each year means is how many times the average car is sold in its lifetime.
If every car is used only by its original owner, then the new car percentage is 100%. If every car has two owners, then the new car percentage is 50%. And so on.
If that number is declining, that means that cars are being sold more times before being junked. That can have a lot of causes, but I think that the plausible one is that cars are lasting for longer, but people still want a new (to them) car about as often. So people cycle through cars; some people perhaps always buy four year old cars and sell them after four more years to get another four year old car, or whatever. The details don't matter.
I don't understand your argument. You claim in one place that the percentage of cars sold that are new cars is declining, but then you claim that people are now driving the same car "for decades." The same car may now be driven for decades, but if the percentage of cars sold that are new is declining, it's not being driven by the same person. Your case of driving a car for 17 years until it dies, wanting it to die but not replacing it with another used car, cannot be typical if the percentage of cars sold new is declining.
Are you arguing that merely because there have been advances in engineering that tradeoffs between safety, smaller cars, and price don't exist? Certainly the 2008 Camry V-6 gets a worse gas mileage than the 4 cylinder model, and 19-mpg in the city and 28-mpg on the highway is not super impressive. The Camry Hybrid gets a lot better gas mileage, but it is a lot less powered. It's insane to pretend that there are no tradeoffs, simply because some engineering advances are possible.
Anyway, October Traffic Volume Trends came out from the FHWA. A 3.5% decline, marking the twelfth straight month of decline. Remarkable, especially since average gas prices had really started their decline in October, down 70 cents from September and only 20 cents higher than October 2007.
Tara --
I'd be really interested to see who is buying the cars produced by those non-union workers in the South. I would bet the national sales pattern for the car industry as a whole is pretty consistent with what we find in our business (that caters to the high end automotive collector)-- that sales are strongest in those more affluent states with a long history of unionizaton and, despite high interest in our products, weakest in the South where even the best working class wages are less likely to provide entry to the middle class. Non-union auto workers in the South may be doing better than workers in other industries in the region, but the region still, despite all the reverses experienced by workers in the rust belt and the recent increased prosperity the South has experienced compared to its agricultural past, remains very poor compared to (and a much less profitable market to sell into) those regions of the country where the working class has tradtionally enjoyed more benefit from its labor.
Personally, I think our consumer economy has gone about as far as it can on ever lower wages and ever easier credit. How any major American industry survives the destruction of the American mass consumer market and its middle class is a mystery to me. I sell to a very affluent niche market -- I don't worry about losing my customer base. But, as bigger US industries go under, I lose access to materials, suppliers and craft skills that I need to produce products as well as lose potential new customers. I don't have a solution, but I know we can't lose big players like the auto makers without tremendously negative consequences for the economy as a whole.
Blame the unions if you want. But, from my perspective as a business owner, the bigger problem, for those of us who hope to make a buck off the American consumer, is a cheap labor strategy that is providing ever diminishing returns.
John, I plotted the VMT and gasoline supplied through august. You'll be interested in seeing whats been happening with rising gas prices since 2005. Like I predicted, fuel efficiency has been going down, despite less people buying trucks and SUVs and people driving less this past year. People buy more efficienct vehicles, but they drive less efficiently. Just like large rewards, excessive penalties promote irrational behavior.
What I think esmense is noticing is a trend in the making.
For years we were a "new car every 3-4 years" family. It didn't have to be zero miles new, we were perfectly willing to negotiate for a dealer tagged demo with several thousand miles on it.
What changed for us was when the prices of vehicles started going up so much that 60 months became the standard note term. Of course, this is because the 36 month note yielded a payment higher than our house payment.
So, we decided that when we had worn out the old vehicles (purchased in 1991 and 1993) that we'd start looking for good used car bargains and wear them out.
I'm now on a 1998 Caddy purchased used in 2003 with 80,000 miles on it. It's got 165,000 now and still doing quite well. It gets 30 mpg on the highway, 23 in town. Since my hubby does most of our in town driving on his motorcycle, that's not a problem.
Where this didn't work out is that we're still waiting for the 1991 Ford F150 to die. Seventeen years, at least 400,000 miles and it won't die. It gets crappy gas mileage - 17mpg is about all one can squeeze from it.
This trend I'm speaking of is of older people to be sure. We simply do not care what anyone thinks of the car we drive.
Yet, my son-in-law is so in love with his 3 year old Passat that it will take three children before he trades it off. (He should get started on those children pretty soon, I say.)
I love how many people are saying we need to increase the gas tax to FORCE Americans to gravitate toward cars that are smaller, less safe, with no towing capacity. IOW, cars Americans do not want.
The side benefit will be the increase in food costs, increase in transportation costs (airlines, trucking etc), and the general big decrease in the disposable income of many Americans.
Oh goodie. I can't wait.
Americans will still purchase the vehicle they desire because more often than not, it is practical for them. They will simply eat the cost and be poorer for it. Nice job folks. The Europeans do not have quite the standard of living we Americans have. Fuel costs being one reason.
Also, the rise in fuel costs helped to put us in the economic mess we are in.
What’s not being talked about is whether the global or the U.S. only units of the Big Three are in trouble? Their overseas operations seem to produce decent small cars, so obviously they have the knowledge to build these. Besides building small cars is not nirvana. There is a reason why Hyundai and Mitsubishi have to offer 10 year warranties to sell theirs. Perhaps the real issues bankrupting the U.S. auto industry are the corporate tax structure and corporate welfare from their U.S. operations and union contracts.