The Truth About 60MPG

There is furious lobbying going on, as the automakers and the greens try to sway the Obama administration on future CAFE standards.  The greens, including Consumer Reports, NRDC, and others are claiming that not only is 60MPG feasible, but it will be good for us. Here are some of their main claims.

1)  60MPG will increase jobs and profitability of the Big 3.  Apparently, Citibank looked into a crystal ball and decided that the Big 3 market share and margins would increase with higher fuel economy vehicles.  But the Big 3 rely on large vehicles, even today, for a lot of their profits.  And jobs?  That depends.  If free trade with China continues, I see batteries and other components coming from China, which is a powerhouse in rare earth mining and raw materials processing.  Look at it this way--in the rise of Li-Ion batteries for tools and laptop computers, where are all the parts coming from?  China and Korea.

2) 60MPG will not cost much, and will pay for itself.   True, at $4/gal, a 60MPG car will pay back a sizeable premium in 3-4 years.  However, the cost estimates of some the technology are pie-in-the-sky.  What happens to li-ion battery costs if we start making millions of relatively huge car batteries?  Are the greens ready to strip-mine China for lithium?  What about the supply of rare earth metals for the powerful magnets needed by the motor/generators?   

3) Americans want 60MPG cars.  Sure they do--but they don't want to pay much for them.  As many surveys have shown, when you attach costs to highly efficient cars, interest drops off rapidly.  Today, there are numerous highly efficient small and medium cars available.  However, trucks and SUVs are still hot sellers.   What Americans really want is free efficiency.  They want large cars and cheap gas.  They want fat free french fries.

4)  60MPG is within easy reach, with off the shelf tech.  Sure, for small and mid-sized cars.  Give me a B/C platform and let me add a couple of thousand dollars in engine upgrades, more transmission gears, aluminum and high strength steel components.  You'll have a 60MPG small car that costs $25,000.  Great.  Now, how do you do it for a mid-sized SUV or minivan?  Or the Texas workhorse, the 1-ton pickup?  Not so easy.

Here are some of my thoughts about CAFE standards.

A)  Reducing vehicle weight will reduce overall safety, or add cost due to expensive countermeasures like additional airbags.  It's physics.  In a two car crash, the heavier car does better.  Until all the old heavy vehicles are off of the road, about 10 years after the lightweight ones are introduced, the new vehicles will be at a disadvantage.

B)  High CAFE standards will increase up-front costs, and reduce sales.   Suppose CAFE adds $4,000 in today's money to a typical family vehicle.  Some people will respond by buying used, some will buy smaller or cheaper, and some will defer their purchase.   Yes, you will save money down the road.  But you have to pay the down payment and the taxes now.  I agree with the AAM that sales volumes will be decreased.  Fewer new car sales means fewer jobs in sales and manufacturing.  However, there may be a renaissance in the old car repair industry, as people keep their old beaters longer.

C) High CAFE standards will reduce consumer choice.  How do you make a pickup truck which can pull a 10,000lb trailer, or haul 2,000lbs of bricks in its bed, which gets close to 60MPG?  I don't think it is possible.  Batteries are heavy and reduce payload.  Beefy suspensions and large engines all work against efficiency.  Even with efficiency improvements, in order to be able to sell pickup trucks, the automakers will have to get people to buy smaller cars to offset them.  That's how CAFE works.  The only way to do this is through price manipulation--either lose money on small cars, or jack up margins in large trucks.  Since method one nearly killed the Big 3 once already, I suspect the answer is going to be method two.  People who want muscle cars or pickup trucks will have to pay a lot more for them or do without.  Instead, there will be strong pressure on consumers to pick small cars and range limited EVs.  Products like high-performance sports cars may be very different under a 60MPG regime--slower, more expensive.

So what is the answer?

If you want to influence consumers directly, and do it in a transparent way, you need to tax fossil fuel.  Don't specify a fleet efficiency standard, rather, increase gas taxes slowly until consumers start to respond.  You can make it revenue neutral by rebating the taxes, or offsetting somewhere else.  But there isn't political will to do that.  It's easier to hide behind CAFE.  

Eventually, though, people will notice that CAFE is just another tax, just applied in a more complicated, hidden way.  Unfortunately, it may be too late, after the industry has changed in drastic ways.

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Tuesday Night Cruisers

A few pics from Woodward Ave as the sun was setting.

The Ritchie Boys At Holocaust Memorial Center

One of the Detroit area's hidden gems (well, it isn't that hidden) is the Holocaust Memorial Center. A fascinating, if grim, museum of Holocaust history with stunning architecture.

The HMC debuted a new exhibit this last weekend, about the Ritchie Boys, a unit of soldiers who were trained in intelligence gathering and interrogation techniques at the Army's Fort Ritchie, before being sent to Europe to help with the invasion. Many of the Ritchie Boys were Jews who had German language skills.

I went to the opening and shot a few photos.

Out front, a pair of (Brits!) WWII reenactors set up a very nice mini-camp, featuring a lovingly restored Jeep, as well as some excellent replica Browning machine guns, real Garands, and some token barbed wire.

Some old timers

A member of the Jewish War Veterans honor guard

One of the Ritchie Boys, Si Lewen, was an artist and sketched what he saw during the invasion

One of the Ritchie Boys tells his story

One of their misions was propoganda. The would drive around in a truck with a huge amplifier to broadcast German language de-motivation. This was dangerous work, as the Germans would often shoot towards the sound, and they eventually learned to run wires to the speaker some distance away, to draw the fire from the truck.

Paratooper uniform

My favorite part of the exhibit... they should have had more guns. They should have had a Colt 1911 and a Garand, at least.

Infantry uniform

Guy Stern, one of the Ritchie Boys, and also a director of the HMC, speaks about his experience

Class notes from Fort Ritchie, about identifying German weapons and units.

Tools of the trade.

Memorial Flame

A few more Jeep photos

If you haven't gone to the Holocaust Memorial Center, I suggest you take half a day and visit. It is pretty heavy, depressing stuff, but it is a good experience.

The MONOTYPE Car

Designer Fernando Ocana has published a Master's of Art project for an urban vehicle he calls MONOFORM. A 3-person compact city car, his design focuses on how the exterior of the vehicle interacts with the view of the city around it, by using various glass planes to reflect images.



As a pure design project, it is pretty neat. As a vehicle, it is of course unworkable. Rear stearing has inherent stability problems at high speed. Driver visibility in this vehicle doesn't look to be good. There doesn't appear to be any suspension travel. And, probably the most severe issue, the aerodynamics of this shape are probably unworkable.

Would anyone want to drive around in something that looks like a phone booth designed by Lockheed Martin stealth engineers having a bad day?

Green Vehicles RIP

Another one gone, another one gone, another one bites the dust.

Green Vehicles of Salinas CA has closed its doors. They were trying to develop an electric 3-wheeler, the Triac, but after burning through nearly $700,000 in state and local taxpayer funds.

The Triac was supposed to be another one of those rule-dodging vehicles which was considered by regulators to be a motorcycle and not a passenger car, because of its 3 wheel design.

According to the article here, the president of Green Vehicles notified the city of his company's failure via email. Nice.

So whey did the fail? The same reason that Aptera failed, and the same reason that most of the electric start-ups are going to fail. Building a safe, comfortable, reliable, affordable vehicle is not easy, and people are not as willing to experiment with such an expensive purchase as you might think.

When the dust settles, in a few years, I am convinced that the electric vehicles which are successful in the marketplace will come from the established automotive companies, with perhaps a niche player like Fisker or Tesla hanging on.

Despite the arrogant "we can do better" attitude of the start-ups, they are learning that the "old dinosaurs" do know a thing or two about product development and marketing.

CR (Still) Hates American Cars

Consumer Reports, which claims to be an impartial advocate for the consumer, to my mind is really a left-leaning organization of dubious intent. CR frequently tells consumers what CR thinks is best for them, rather than primarily taking their interests into account.  Witness their love for socialized medicine and CFL bulbs.  

Today's example, this blog posting from CR on "Best Used Cars Under $20,000"

Several CR staffers submit their choices, and all of them pick Honda or Toyota vehicles, except for two.  There is 1/2 a vote for a Ford Fusion, and 1 vote for a VW.  

Really guys?  You have $20,000 to spend, which is plenty, and you don't even consider some of the better American used vehicles, such as the Ford Escape, Chevrolet Equinox/Saturn Vue, Chevrolet Malibu, Ford Taurus, Chrysler 300?   

Consider: you can get a late model used Malibu or Taurus for under $20,000 which has all the trimmings, including leather heated seats, automatic lights, back up sensors, automatic climate control, etc. 

Space Shuttle Joke

Saw this suggestion for a practical joke making the rounds.

"When the Space Shuttle lands, everyone wear ape suits!"

Heh.

Nissan Leaf vs Chevy Volt Pricing

Nissan has announced that it is increasing the price on the 2012 Leaf, by $2,400 over the 2011 model, to $36,000.   Compare that to the price of the Volt, at $40,000.  Nissan also is capped at 20,000 units/year for the U.S. market, while GM has said it plans to produce 60,000 Volts in 2012.

If the Leaf is scarce, dealer markups may continue, reducing the price advantage further.  

Personally, if I was in the market for a plug-in car, I would probably choose the Volt over the Leaf, buying the gasoline hybrid capability for an extra $4,000 or less.

Auto Alliance CAFE Web Site

The Alliance of Automobile Manufacturers has launched a web site to promote the automaker's side of the CAFE debate.  You can find it here.  

Toyota: No Electric RAV4 For You!

According to this source, Toyota will reserve its plug-in RAV4 product (co-produced with Tesla) for fleets and government entities, and won't sell them to the general public.

The Toyota RAV4 EV will make its comeback after first being sold 15 years ago. The vehicle won't be made available to consumers, Yoza said, instead they are focusing on "very strategic applications" such as fleets and car sharing programs. Despite being a BEV that could benefit from fast charging, the RAV4 EV will not include a CHAdeMO charging port. Yoza said Toyota will not offer fast charging on any vehicles until the SAE determines a standard.

 I can hear the shrieking of the BEV boosters all the way from my perch here in Detroit.  "Toyota thinks it's the 1990's!"  Several are probably loading up their super-8 movie cameras in preparation for "Who Killed The Electric Car 2".

Why would Toyota do it this way?  Simple.  Cost.  Chances are the RAV4 EV will be so expensive that Toyota doesn't want to lose a ton of money on them.  Think about the overhead for a new small volume vehicle--dealer training, special service tools, parts distribution.  Instead, by keeping it fleet only, Toyota can keep costs down by centralizing service and support.  

The RAV4 EV is mostly a product for CARB and the "green states" who follow California mandates.  It helps get Toyota the EV points it needs in California, so it can keep selling Tundras (13/17MPG) Sequoias (13/18MPG), FJ Cruisers (15/20MPG) and 4Runners (17/22MPG).   

CNG Civic: Cheap Running But Slow

The Honda Civic GX is slated to be sold to retail customers nationally in 2012 (it was only available in four states, previously).  Since it runs on compressed natural gas, it is relatively cheap to run, with CNG fuel economy in the range of 28mpg (EPA estimate) and CNG costing around $1.70/gal.  

However, there are some big trade-offs involved in driving a Civic GX.  Acceleration is poor, with 0-60mph times coming in at 12.6s according to Edmunds.  The range is limited compared to a gasoline powered car, or a Chevy Volt, typically around 200 miles.  And if you want to fuel at home, which is likely because CNG stations are not common, you need to install a CNG compressor which will cost you around $5000, installed.  

Does the Civic GX make more sense than a Chevrolet Volt?  It's a tough call.  The Volt's price (after subsidy) is around $33,000.  The GX price is about $30,000 if you include the cost of the CNG compressor.  For the extra $3,000 you gain the ability to fuel anywhere (if you run it on gasoline or charge at 110v).  CNG miles cost about $.07, while all-electric miles will cost you about $0.06 per mile.  

But the Volt gets to 60mph in about 8.5s, and in range sustaining (gas) mode has a range of over 300 miles.  I think while the government tax credit is in place, I'd take the Volt.

A Couple Evening Car Photos

I went to Woodward to get some ice cream today before sunset. Spotted a few neat cars.

This one appears to be a GM guy driving a late pre-production Chevrolet Caprice.

And this is a tail light of a new Cadillac SRX crossover. It surprised me, the shape of it, I had not noticed it before. It's like a little throwback fin, back to the 1970's.

Carbon Motors, Aptera, VPG, etc.

For a while, it looked like all of the smart kids knew how to make a better car, and how to run the business better than the big boys.  There was a "gold rush" of sorts, as electric car and other niche producers scrambled to set up shop and grab venture capital funding.   

Then the hard economic reality kicked in.   Making cars is hard.  It takes a huge amount of money, people, and time.  And the regulatory hurdles are enormous.

Look at the up-start graveyard.  Bricklin's Visionary Vehicles?  Nowhere.  Mahindra USA?  Limbo at best.  

Aptera is waiting for a federal loan which will probably never come.

So apparently is Carbon Motors, the purpose-built BMW diesel powered police vehicle.  Carbon requested $310,000,000, but is still waiting a year later.  

VPG, maker of a purpose built wheelchair accessible taxi vehicle, apparently got a $50,000,000 loan from DOE to produce a CNG version.  

Survey: U.S. Consumers Unwilling To Pay For CAFE

The Boston Consulting Group, a business consultancy, has issued an interesting report about how automakers can achieve the stringent 2020 fuel economy and CO2 emissions standards without having to resort to electric vehicles.  There is a lot of interesting stuff in there, and as I digest it I'll probably post more about it.

One thing that jumped out at me is this table.  In it, a majority 56% of survey respondents in the U.S. are not willing to pay any premium for an "environmentally friendly car".

And also, consider the odd result for the people who would, if they vehicle would pay for itself.  They are willing to pay up to $3,900 premium, but expect it to pay back in 3 years.  That implies an expected fuel savings of 325 gal/year at $4/gal.  A 27mpg car uses 444 gal/year with a typical 12,000 mile/year driver.  This means people expect the equivalent of going from 27mpg to 100mpg, for $3,900!   Clearly, this is not going to be realistic in any short term time scale. 

The closest vehicle we have now to 100mpg is the Volt, which carries a premium of about $15,000 (compared to a well equipped Cruze).  

So, basically, American consumers are saying, "we'd love fuel efficient cars--as long as they don't cost much (or anything) extra".

CAFE May Cramp High End Luxury Market

An interesting piece in the WSJ, here, expains that luxury car makers such as Porsche and Mercedes may be severely impacted by future CAFE rules.

Future U.S. government fuel economy regulations could saddle auto makers with steep fines or even bar the sale of certain models. Violations of proposed government standards could cost auto makers up to $25,000 a vehicle beginning in 2016, up from current levels of $5 to hundreds of dollars per vehicle.

The issue for the luxury automakers is that CAFE is a fleet average, not a per-car requirement. Large full line carmakers like GM can produce lots of Cruzes to offset a few Cadillac V8's. However, Mercedes doesn't sell enough high MPG vehicles to avoid paying today's fine. And when CAFE marches north of 50mpg average, Mercedes only option is to find some hybrid electric powertrains schnell.

I am not a fan of CAFE because of the way it hides regulation from the consumer, and distorts the car market. However, I don't see why luxury car makers such as Mercedes should be exempt. If CAFE is the regulatory regime, and the goal is to reduce fuel consumption, the luxury car makers should not be allowed to skate.

Now, don't get me wrong, I am not saying that powerful cars should be banned. But I think the wealthy folks who love European luxury cars can afford a "CO2 premium" for their sins. I also admit, bad economic policy aside, that I like the competitive advantage that CAFE gives the full-line automakers such as the Detroit 3.

The Tablet Race?

Somehow, the wizards at Apple figured out that the next big thing in
personal computing was going to be the tablet. Apple's iPad wasn't
even that great of a computer when it first went on sale. They are
great for consuming media (as long as it isn't Flash) but not great
for any sort of intense productive or creative work.

What amazes me is that the very smart people at companies like HP,
Dell, Motorola, and Microsoft were apparently unready to compete.
Only now are credible iPad alternatives appearing, like the Galaxy and
Xoom, but even these are closer to oversized smart phones than general
purpose computers.

Where is Microsoft? Why isn't there a useable Windows edition
optimized for fingertips and not mice?

Now here comes HP, with another tablet OS, based on its (dying) Palm
sourced WebOS.

I think people will settle on two or three systems at most. One may
be Windows, I think, when Microsoft is finally ready. The other will
be Android which has a huge head start over WebOS and RIM's QNX. And
Apples iOS of course is too big to go away.

Me, I about to pull the trigger on an Eee Pad Transformer or maybe an
Iconia, if I can find a nice deal. I want Flash support and a
credible app store.