Tuesday, June 28, 2005

Automotive News Roundup

by Tom Bozzo

While everyone is unapologetically blogging about whatever it is they feel like, I might as well note these items from this week's car news:

1. Senate rejects latest proposal to increase fuel economy standards

2. Chrysler repositions PT Cruiser as a small car as part of effort to jump-start sales

3. What a deal! Maybach to offer $50,000 discounts for dealer demos, resort vehicles


1. In grinding the sausage for its version of the "energy" bill, the Senate last week rejected a measure proposed by Richard Durbin (n.b.: comments with ad hominem attacks on Durbin will be summarily deleted) that would have increased CAFE fuel economy standards to 40 MPG for cars and 27.5 MPG for "light trucks" by a larger margin than a similar proposal in 2002. The Automotive News lede does not miss the irony:
Oil is $60 a barrel. Gasoline costs nearly $3 a gallon in some places. At the same time, advocates of higher federal fuel economy standards are losing ground.
A measure that did pass gives NHTSA authority to raise the standards, but forces an eleven-point test intended to thwart the use of that authority. But consider the criteria, via the American Highway Users Alliance [Editorial comments in blue]:
1. Technological feasibility; [Check. You can get a 37 MPG Accord now; then there are the Eurodiesels.]
2. Economic Practicability; [Check. The latest diesels, in particular, are not much of an imposition.]
3. The effect of other government motor vehicle standards on fuel economy; [Presumably, this is an injunction against meeting the standards with a New Trabi, but not a serious issue considering #1 and #2.]
4. The need of the nation to conserve energy; [Duh.]
5. The desirability of reducing U.S. dependency on foreign oil; [Ditto.]
6. The effects of fuel economy standards on motor vehicle safety, and passenger safety; [Seems somewhat cumulative of #3, but if not, see comment on #3.]
7. The effects of increased fuel economy on air quality; [Not likely to hurt, though diesels would need particulate filters.]
8. The adverse effects of increased CAFE standards on the competitiveness of U.S. manufacturers; [A better question is the adverse effects on U.S. manufacturers' competitiveness from the strategy of burning incense — or the MNF — to the oil gods in hopes that we'll see $30 oil again.]
9. The effects of CAFE Standards on U.S. employment; [See #8.]
10. The cost and lead time required for the introductions of new technologies; [I want an A8 4.2 TDI now, damnit!]
11. The potential for advanced hybrid and fuel cell technologies. [Can't make increased standards harder to achieve, presumably.]

Part of me doesn't feel too bad about the CAFE vote, except that it's the only finger that can be put in the dike. Given my occasional irrational belief in consumers' willingness to respond to price incentives, I'd rather see a moderately stiff but revenue neutral gas tax (i.e., with the proceeds of the tax refunded to consumers to offset the hardship of higher pump prices), increasing over time, to get people used to the idea of expensive petroleum-based fuels without an automotive-design mandate. However, this idea has as much chance of being enacted as Bush has a chance of being impeached by the Republican congress. A boy can dream, though.

2. The PT Cruiser article highlights one of the fundamental flaws of CAFE: manufacturers have trashed the regulations' car/light truck distinction to the point of near-meaninglessness. The PT Cruiser, when it originally came to market, was at the vanguard of the effort to game the standards by classifying car-based vehicles as light trucks. That has accelerated as the SUV market has become increasingly dominated by relatively small models derived from cars' mechanical platforms, and arguably reached a pinnacle when a few mostly cosmetic changes to the Subaru Outback allowed the current model to shift into truck-land — so with much less fuel-efficient engines dominating its product mix, higher-trim Outbacks wouldn't weigh on its car fuel economy average.

The PT Cruiser is, in fact, derived from the mechanicals of the Neon economy car. With Truckageddon in full swing, the latest marketing innovation is to market the PT Cruiser as a fuel-efficient small wagon-like car. I expect it will stay a small truck for CAFE purposes to offset gas-guzzling Hemi-equipped Dodge trucks.

3. Meanwhile, if it wasn't obvious, the rich are under-taxed!

Maybach (Flash-intensive site) is the Mercedes-Benz ultra-luxury brand, offering the Maybach 57 ($327,500) and the Maybach 62 ($377,500) — same sausage, different length — intended to compete with the likes of Rolls-Royce. (The Maybach has also contributed some questionable styling details to the forthcoming Mercedes S-Class.) Maybach sales have been a disappointment so far. It turns out that part of the problem is believed to be the marketing model.

Part of what separates the Maybach from V-12 S-Class models at half the price is that the Maybach is quasi-bespoke, and buyers are expected to select from a broad array of colors and interior finishes as if they were fitting out an airplane. However, this apparently turns out to thwart a class of potential Maybach customers that happens to have at least $327,500 burning one or more holes in their pockets and wants the "immediate gratification" of buying one off the lot. Those people end up buying dealer demonstrators or cars purchased by hotels to entertain high rollers. I guess it's good to be King.

Seasonality Addendum: The Maybach story notes that whereas 244 Maybachs were sold in 2004, only 48 of those were sold in the first five months of the year. That seems to provide an answer to what one does with one's year-end bonus when splurging on a $400/head dinner isn't enough.

Second Addendum: In comments, Ken corrects me on the timing of certain year-end bonus payments. Maybe I should be thinking about the timing of NBA or NFL signing bonuses.
I dunno about that last conclusion. We get our year-end bonuses in February; most of the firms have gone to paying in the following calendar year.

If there's an effect there, it's that people want the car for the summer months. I would almost bet that the buying curve was bell-shaped.

Otherwise, spot-on as usual. The most offensive thing about the CAFE standards being omitted is that they want to "study feasibility." Asking the people who spend $1/litre for gas what mileage they get is apparently not evidence.
I kinda forgot the target market for the Maybach in writing that last comment, as the cars are aimed at people who own jets (or fractions thereof), rather than the NYC working rich as such.

I'd guess for that (jet-owning) set, the Ferrari 575, Porsche Carrera GT or Mercedes SLR is the summer car, and the Maybach is the winter car. I haven't yet located DC sales data including Maybach, though, so I have no idea where the peak actually is.
If you heard about energy policy and car mileage from a friend and you didn't know he was talking about America, you would believe that these examples are representative of the USSR under Stalin, or Germany under Hitler, or Cambodia under Pol Pot.

Bryan, if this blog truly were a totalitarian regime, you'd already have been reassigned to a career driving the Regent St. trolley.
I'm proud that my senator was fighting for higher CAFE standards. Go Illinois! Go Blue 2008.
Yes. But I wish he hadn't apologized.
LMAO, re: trolley driving!

I wish he hadn't apologized either, but likely for different reasons.
Mr. Smith might be interested to know that prior to 1972, the US government forced US producers to produce crude oil at fixed prices. This, you'll note the irony, was at the height of the Cold War. And in fact, the continuation of so-called "minimum mark-up laws", state gasoline taxes, etc. ensures that the market for gasoline in the US is hardly a free one. Mr. Smith's crude and offensive argument by analogy is yet another version of the classic, if laughably naive, "you're messing with the free market you commie liberal!"

In fact, raising fuel efficiency standards can be seen as a modest tinkering with a market that *already* has massive artificial price controls. And let me point this out: opposition to such a move can only be seen as deeply un-American, unpatriotic, and morally wrong.

Mr. Smith may be happy to leave us at the hands of the terrorists the next time a refinery in Saudi Arabia is hit, or an oil tanker is bombed, or the mullahs in Iran decide to stop exports, but Americans who truly care about this great nation and the proud men and women in uniform who give their lives to protect it, realize that lessening our dependence on foreign oil, and fossil fuels altogether, is a smart move that helps the security of our nation and saves lives.

The only crude and offensive person here is you, Ms. Kildare. I don't see where I even made an argument, and otherwise you seem to be assuming a lot of stuff that I do not agree with.
Gentlemen, you can't fight in here, this is the war room!

Bryan's remark was a clearly sarcastic and IMHO mostly harmless reply to my Durbin aside in the main post, for which I zinged him back. 'Nuff said there. Darcy makes some valid points that could easily have been made without reference to Bryan's supposed motivations.

Please confine attacks to the arguments, not commenters' motivations. I reserve the right to moderate comments to enforce civility otherwise.
Here, succinctly, is your argument Mr. Smith: "Requiring higher gas mileage standards is similar to price controls under planned economies such as in the U.S.S.R. under Stalin and under National Socialism under Hitler."

In my previous comment I explained why such an analogy is absurd. It's quite telling that you have nothing to say regarding the merits of *that* argument. Most likely, because the fact of wide-spread price controls in the crude and gasoline markets is something you're completely unfamiliar with. "Wovon wir nicht sprechen können, darüber müssen wir schweigen," as Wittgenstein so eloquently points out.

I, for my part, was being equally sarcastic in impugning your patriotism, and I apologize to Mr. Bozzo if that wasn't readily apparent.

Finally, I note with some amusement your use of "Ms."; if a mistake, my picture might have given you a clue as to my gender; if deliberate, one can only wonder if in your world, being called a woman is an insult.

Ooops. The "Ms." was indeed a mistake. Sorry.

I was making no argument. I took Durbin's quotation and replaced the Gitmo stuff with fuel standards, just a jab to Tom. Perhaps the recent uproar about his quotation was justifiable though, given how much my similar comment produced, even though it was a joke.

I still am making no relevant arguments relating to this post, but I hope we can both smile and be happy.
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