Hybrids and Detroit

Topics: Stimulus
06 May 2009

From: Ervan Darnell

Obama has now said many times (e.g. [1]) how Detroit has to join the future and make the hybrids that America wants. Now he is going to force them to do it. Well, Detroit already does make hybrids[4], so what is he talking about? But the implication is that Detroit doesn't know what kind of car Americans want and Congress does. That's ridiculous on the face of it. But some data doesn't hurt either. Americans don't want hybrids, or at least not very many of them:

The hybrid flood marks a lasting commitment to a powertrain technology that currently represents only about 2% of U.S. vehicle sales and, by most accounts, is deeply unprofitable. Toyota said last year that it was finally making money on the Prius after nearly a decade producing it, but executives at other automakers acknowledge that they lose money on every hybrid sold. [2]

And, that's given the current government subsidy of several $K/vehicle [3]. How bad would they be without that incentive? I was car shopping recently and evaluated the Prius, Insight, and Fusion. The first two had such anemic acceleration I would be run over trying to switch lanes. Phooey, why would I want that to save $100/year on gas? But it's part of the PR spin. The high mileage is not just about being a hybrid but compromising at every opportunity to raise mileage.

Meanwhile, SUVs were a profit center for Detroit and kept it alive, exactly the opposite of what Obama wants you to believe. I'm just amazed how many SUV drivers support Obama when he tells them they didn't actually buy the vehicle they wanted to buy. I guess it's not that surprising. Liberalism is usually about what's good for someone else in any case. Raise _your_ taxes, regulate _your_ business, etc.

I'm not arguing that fuel efficiency is a bad thing or that oil doesn't have its external costs. I am arguing that
Obama's claim he knows more about the car market than GM is ridiculous. He's now proceeding to legislate on that assumption, and claim he can fix the macro economy when he's clueless about a simple thing like consumer preference. The auto bailout program cannot be an economic benefit.

[1] http://www.forbes.com/2009/04/30/president-remarks-auto-industry-business-washington-transcript.html
[2] http://www.latimes.com/business/la-fi-hybrid17-2009mar17,0,6173111,full.story
[3] http://www.hybridcars.com/federal-incentives.html
[4] http://www.fordvehicles.com/cars/fusion/