Hybrid Sales Fall Precipitously as Gas Prices Remain Low
Not surprisingly, as gas prices have fallen in recent months, so have sales of hybrid vehicles. In February, only 15,144 hybrids sold in America, down two-thirds from last April, when sales for that segment peaked (and gas was an average of $3.57 a gallon). While auto sales across the board have fallen dramatically as a result of the economic situation, the drop in hybrids has been even more precipitous.
Two main lessons can be learned from this situation, with the most obvious being that the higher gas costs, the more consumers will purchase efficient vehicles. But the second lesson, which is less apparent, is that as Congress forces automakers to build more alternative fuel cars as a condition of the bailouts, it is putting these companies in a new bind– since consumers don’t want to purchase these efficient vehicles while gas is reasonably cheap.
Apparently, the only entity that is more out-of-touch with the American consumer than the domestic automakers is Congress. By forcing automakers to build efficient cars while gas prices hover around $2, Congress could be setting the stage for another domestic auto industry crash in the coming years.
Of course, this could all be solved by just following the number one lesson above– and dramatically increasing the federal gasoline tax so that consumer (and industry) behavior changes permanently. But Congress, like the automakers, rarely makes the right strategic decision.
Bad PR: Tesla Forces Pre-Ordered Roadster Owners to Pay More
Angering many of their early adopters, Tesla Motors is apparently increasing the price of the Roadster models that are set to go into production. Many of the around 600 pre-ordered owners are incensed that Tesla is raising the price of the Roadster after these owners have already paid up to $50,000 per deposit and thought the deal was done.
While the owners seemed alright with the fourteen month delay in delivery, this public relations nightmare may test that patience. While Tesla claims the increase in price is necessary to become profitable, it is unclear how the pre-ordered owners, who have basically become investors in the company, will view this move. READ MORE
How to Save Detroit Automakers From Ourselves
There is concern that the Detroit bailout (which is, in part, requiring the automakers to devote resources towards developing more efficient cars) could backfire. In a couple of years if gas prices have remained relatively low and the economy recovers, high SUV demand from the public could very well return. However, since Detroit is being forced to redirect its focus away from SUVs, it could once again be producing cars that the public does not desire.
The most obvious way to avoid this situation is to set a higher price floor for gas prices so that demand for bigger cars is permanently softened.
DotEarth takes a look at this issue, noting that a new report co-authored by John D. Graham, a former Bush administration official, argues that a series of incentives could actually help accomplish this goal: READ MORE
America Enters the ‘Trance’ Phase of ‘Shock and Trance’
Tom Friedman presents another in-depth case for a dramatic increase in the national gasoline tax, or an economy-wide carbon tax, in the NY Times on Sunday.
His basic argument is that with falling gas prices, we’re quickly falling back into a sense of trance, which is the second half of America’s standard “shock and trance” cycle that has shaped American energy policy over the past forty years.
Although President-elect Obama has articulated his concern that we avoid this oft-repeated mistake of following petro-panic with petro-complacency, he has been opposed to new gas or carbon taxes. Friedman says that this is a terminal mistake.
Here are the highlights of Friedman’s argument:
Regarding the current situation, he notes:
“Of course, it’s a blessing that people who have been hammered by the economy are getting a break at the pump. But for our long-term health, getting re-addicted to oil and gas guzzlers is one of the dumbest things we could do.” READ MORE
Against the bailout: ‘An old man dies, a little girl lives; fair trade’
NYT columnist Roger Cohen had a great analysis of the Detroit bailout this week. Although President Bush did approve a $17 billion bailout on Friday, it is useful to look at Cohen’s points, since this is surely not the last time we will have to contemplate bailing out the Big Three.
Cohen’s op-ed, “Pan Am Dies, America Lives,” which reminds us of the classic line from Sin City, argues that the strength of the American system is derived from the natural rise and fall of companies. He uses the death of Pan Am, once a terrific airline, as an example:
“[F]acts are facts. Pan Am, which had been a leading U.S. international airline since the 1930s, collapsed in 1991. Like other great U.S. companies, it died in the marketplace because it blundered. Churn – of people and businesses – has always defined America. Nobody subsidized U.S. Steel or the automaker Packard in the belief that the world without them was unthinkable.” READ MORE
Friedman on ‘making cars the people want’
“Over the years, Detroit bosses kept repeating: ‘We have to make the cars people want.’ That’s why they’re in trouble. Their job is to make the cars people don’t know they want but will buy like crazy when they see them. I would have been happy with my Sony Walkman had Apple not invented the iPod. Now I can’t live without my iPod. I didn’t know I wanted it, but Apple did. Same with my Toyota hybrid.”
Automaker bailout dies in Senate
Unfortunately for Detroit, they’re not in the coal mining business– otherwise, they may have received the necessary support from Senate Republican leader, Mitch McConnell of Kentucky, who basically doomed the bailout proposal by speaking out strongly against it on Thursday.
As we’ve indicated before, our position is that comprehensive bailouts should really be reserved to threats of systemic collapse, which may not be the case here.
As it now appears, the bailout bill, passed by the House on Wednesday, will die in the Senate. McConnell indicated that he did support a Republican proposal for a bailout, offered by Sen. Corker of Tennessee. That alternative plan would give company bondholders 30 cents on the dollar to reduce the automakers’ debt burden, would bring workers’ wages in-line with foreign competition, and force the UAW to eliminate payments to workers after their jobs have been eliminated.
Nonetheless, it seems unlikely that any compromise between the two competing proposals will be possible this year. GM has indicated that it may not make it to 2009 without a bailout, and Chrysler retained bankruptcy council earlier this month.
GM Vice Chairman Bob Lutz: At $1.50 gas, the American public wants SUVs
This is a FoxNews interview with climate change denier and GM Vice Chairman Bob Lutz. Lutz and Fox host and apparent GM apologist, Gretchen Carlson, both seem to attribute GM’s crisis to external events rather than internal failures: READ MORE
Bailouts put the US on a slippery slope
Beyond the public’s moral outrage and protests of unfairness relating to the Wall Street and Detroit bailouts, there is a systemic hazard that is very real and often overlooked in these objections. That hazard is that once the government steps away from its traditionally passive role, and steps into the role of picking and choosing which companies will be subsidized and saved, and which will not, a huge can of worms is irreversibly opened.
Historically, this was one of the biggest problems with communism– that is– governments are notoriously bad at making centralized decisions. The market is amoral– it picks winners and losers based upon events and merit. But government is biased– it picks winners and losers based upon personal biases and prejudices.
Now that our government is in the business of picking and choosing which companies succeed and which fail, there will be increasing attempts by the government to tell those companies how to run their businesses. And why shouldn’t they? Once these companies failed to survive on their own, it only seems fair that they should forfeit the right to make their own business decisions.
Yet it is this righteous position that is so dangerous and could amplify the problems we already face. Although we personally don’t think a bailout is a good idea unless the actual viability of our entire system is at-risk, if we are going to bail out these companies, we need to resist the urge to micro-manage their businesses. READ MORE
Detroit church prays with SUVs at the alter for Congress to bailout industry
While we have a lot of sympathy for the workers and families who are struggling as a result of the Detroit automakers’ failings, this is pretty unbelievable. Apparently:
“With sport-utility vehicles at the altar and auto workers in the pews, one of Detroit’s largest churches on Sunday offered up prayers for Congress to bail out the struggling auto industry.
“Local car dealerships donated three hybrid SUVs to be displayed during the service, one from each of the Big Three. A Ford Escape, Chevy Tahoe from GM and a Chrysler Aspen were parked just in front of the choir and behind the pulpit. READ MORE
Detroit and America can’t go green without a focus on battery technology
With all the talk of bailing out the Detroit automakers and the need for them to make more efficient vehicles, there has been little attention paid to the actual technology that efficient cars are built upon– batteries.
EV World sums up the problem: “Little if any attention was paid to the fact that America has next to no advanced automotive lithium ion battery production capacity. With the exception of a currently shrinking handful of US-based firms, virtually all advanced nickel metal hydride (NiMH) and lithium ion (Li-ion) production is done overseas, mainly in China, Japan and Korea.” READ MORE
California asks Congress for waiver to regulate vehicle emissions as part of any bailout
As the federal government considers bailing out the Detroit automakers, California Attorney General Jerry Brown has asked Congressional leaders to include in any bailout, a provision granting California a waiver to regulate car emissions under the Clean Air Act. Up until now, the EPA has refused to grant this waiver, thereby preventing California, and numerous other states who have adopted California’s standards, from regulating greenhouse gas emissions from cars due to the doctrine of federal preemption.
Under California law, greenhouse emissions from cars should be reduced by 30% by 2016. READ MORE
Friedman to Obama: efficiency incentives and mandates are not enough– we need a carbon tax
President-elect Obama, in an interview conducted earlier this week and aired Sunday on Meet the Press, indicated that while he supports a transformation in our energy and environmental policies, he wants to accomplish this through incentives, rather than a carbon tax.
Tom Friedman, in effect, responds to that position in his op-ed in Sunday’s NYT.
Laying out the enormous importance of how the billions from bailouts and stimulus packages are spent, Friedman quotes Andy Karsner, a former assistant secretary of energy: “Remember, this money will not be neutral. We are talking about directing an unprecedented volume of cash at our housing, energy, transportation and infrastructure industries. This cash will either fortify the incumbent players and calcify the energy status quo, or it will facilitate the economic transformation we seek. The stimulus will either be white blood cells that will heal us or malignant cells that will continue to sap our strength.” [emphasis added]
Similar to our mantra on this site, Karsner (and Friedman) are basically saying that our country has been operating under an unsustainable status quo for a long time, and the billions and billions of dollars that we are about to spend will either act to cement that untenable situation, or transform it into something healthy and viable. READ MORE
Obama discusses the Big Three automakers on Meet the Press
Highlights of Obama on Meet the Press on Dec. 7:
If automakers want to survive they better start building fuel efficient cars. But we need to keep their feet to the fire.
“If taxpayer money is at stake [for a bailout]… we want to make sure it is conditioned on an auto industry emerging at the end of the process that actually works.”
We need to “introduce a new ethic of responsibility [into business].”
And regarding the environment and energy: Focus on incentivizing efficient cars and increasing efficiency in buildings, but opposed to a fuel tax since people are struggling financially right now.
Oil continues to fall as Merrill Lynch predicts even greater losses
With fears of a prolonged global recession and decreased demand for oil, crude fell to below $44 per barrel on Thursday, the lowest price since January 2005. This is off 70% from the commodity’s high in July of this year.
Further compounding fears of loose demand, Merrill Lynch predicted that oil could potentially fall below $25 per barrel next year if the recession spreads to China. Of course, this is the same Merrill Lynch that bet its entire company on the assumption of an eternal upward climb in the subprime housing market.
