New Fuel Economy Standards (CAFE)

[ERD50]

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Originally Posted by FinanceDude GM LOSES money on every small car they make, where as Honda and Toyota MAKE money on every small car they sell.

So how do CAFE standards change any of this?

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I'll rephrase my question: If a 2008 Suburban got 30 mpg on the highway and 30 mpg in the city, how many people would own one? They sell a TON of them without such high MPG, they could very well sell more with the higher MPG.......... A real difference could be made if we could find a way to DOUBLE the MPG of all those semis hauling freight. One of my clients runs a trucking business, and she told me they consider 7 mpg very good for a loaded semi on a long haul........

These are just 'wishes' - they do not reflect current technological and market realities.

When a 30mpg Suburban-like vehicle can be produced at a profit, one of the car companies will fill that market demand.

Do you really think that WalMart (owner of the largest private fleet of vehicles in the world) is unaware of how much money they would save (and good free press they would get) if the DOUBLED the mpg of their fleet? Just because they 'wish' they could double their mpg, does not mean there is cost effective way to do that.

And 7 mpg is exceptionally good mileage compared to a personal hybrid. Let's see... 2006 Honda Insight (best in class) 66 mpg highway, usually carries one 180# adult, Ok, let's be generous TWO 180# adults.

So the Insight carries 360 pounds at 66 miles on a gallon of fuel. Let's say 70 miles for easy math. So the semi (a 7 mpg) gets 1/10 the mpg. Are you going to tell me the semi is only carrying 3,600 pounds of cargo?

On the contrary, the efficiency of the semi is AMAZING!

BTW - I'm not trying to turn this into a 'GM versus anyone-else' story. I personally don't care WHO provides the high mpg vehicles - there is a trade-off and the american public, for the most part, is not lining up to buy high mpg vehicles.

-ERD50

[DallasGuy]

Why do Toyota and Honda lead in sales AND fuel efficiency? Because they build both a high mileage vehicle AND build a qualify vehicle. I don't know many (if any) domestic vehicles that can compete on qualify and fuel efficiency with the Toyota Corrolla, Toyota Yaris, Honda Fit and Honda Civic. Because there aren't any. The only way that domestic car makers will actually produce vehicles like this is if they're forced to. Any yes, if they're of high qualify (the Chevy Metro wasn't), people will buy them....why do Honda and Toyota keep gaining market share? And even Honda and Toyota can put smaller, higher mileage engines in these same "mileage leaders" to get even better gas mileage. They do it in Europe and Asia already...they just don't offer the smaller engines as an option in the US. Why? Because they don't want to charge less money for the smaller engine. It's not because the demand isn't there. I drove a 1985 Honda Civic that had a 1.3 liter engine and occasionally got over 45 mpg's if I drove conservatively. If Honda could produce a non-hybrid car like that in 1985, whey don't they offer one today? It's not because the demand isn't there. Build them and they will sell!

[samclem]

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Originally Posted by FinanceDude A real difference could be made if we could find a way to DOUBLE the MPG of all those semis hauling freight. One of my clients runs a trucking business, and she told me they consider 7 mpg very good for a loaded semi on a long haul.............

Actually, 7 MPG is much more efficient, at ton-miles/gal, than even a very efficient economy car.

A Prius gets about 30 ton-miles per gal (hwy, for payload weight, not incl vehicle)
A semi-tractor trailer rig gets about 75.6 ton-miles/gal (hwy, payload weight)
A train: 260 ton-miles/gal (payload weight )
A barge: 680 ton-miles/gal. (payload weight)

So, a loaded tractor-trailer is more than twice as efficent as an economy car. Trucking companies would spend a LOT to get better mileage (comapred to auto buyers), so I doubt there's much that could be done easily at this point to save fuel in the trucking business.

[FinanceDude]

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Originally Posted by DallasGuy Why do Toyota and Honda lead in sales AND fuel efficiency? Because they build both a high mileage vehicle AND build a qualify vehicle. I don't know many (if any) domestic vehicles that can compete on qualify and fuel efficiency with the Toyota Corrolla, Toyota Yaris, Honda Fit and Honda Civic. Because there aren't any. The only way that domestic car makers will actually produce vehicles like this is if they're forced to. Any yes, if they're of high qualify (the Chevy Metro wasn't), people will buy them....why do Honda and Toyota keep gaining market share? And even Honda and Toyota can put smaller, higher mileage engines in these same "mileage leaders" to get even better gas mileage. They do it in Europe and Asia already...they just don't offer the smaller engines as an option in the US. Why? Because they don't want to charge less money for the smaller engine. It's not because the demand isn't there. I drove a 1985 Honda Civic that had a 1.3 liter engine and occasionally got over 45 mpg's if I drove conservatively. If Honda could produce a non-hybrid car like that in 1985, whey don't they offer one today? It's not because the demand isn't there. Build them and they will sell!

I agree with that, it almost seems like ALL the carmakers were more attuned to mpg in the mid 80's than today.......

I remember the Toyota MR2. Little sporty car, drove like a go-cart. One of my college buddies had one, and with a manual he got 40 on the highway..........

[ERD50]

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Originally Posted by DallasGuy The only way that domestic car makers will actually produce vehicles like this is if they're forced to.

Sorry, but I think this is totally off-base.

You seem to be saying that domestic car manufacturers are not making the types of cars that people want (quality and mpg). OK, I'll go along with that for the sake of the discussion.

Do we *really* want the govt to 'force' them to do it? Why not let the free market speak (it is!).

What you are actually saying is, that a govt representative should be sitting in on GM's planning sessions, and helping them design the new model year roll-out. That the govt should be making cost/quality and marketing decisions. Hey - convertibles will be big next year - trust me, I'm from the govt! I don't want that. Do you?

-ERD50

[DallasGuy]

Quote:

Originally Posted by ERD50 Sorry, but I think this is totally off-base. You seem to be saying that domestic car manufacturers are not making the types of cars that people want (quality and mpg). OK, I'll go along with that for the sake of the discussion. Do we *really* want the govt to 'force' them to do it? Why not let the free market speak (it is!). What you are actually saying is, that a govt representative should be sitting in on GM's planning sessions, and helping them design the new model year roll-out. That the govt should be making cost/quality and marketing decisions. Hey - convertibles will be big next year - trust me, I'm from the govt! I don't want that. Do you? -ERD50

I'm not saying that the government should be sitting in on marketing decisions of car makers, but the car companies will drag their feet forever before offering higher mileage quality vehicles in the US because they don't make as much money on them. I agree with you that it is a marketing decision by car companies selling vehicles in the US not to offer the higher mileage vehicles that other parts of the world get, but not because there isn't a market for them, but because it's an economic decision by the car companies to make more money off of us "rich Americans". They can and DO make more money in the US, therefore why offer a cheaper higher mileage vehicle unless forced to by the government by enacting higher CAFE standards. And there IS a market for those higher mileage vehicles, but currently the car companies won't go there unless forced to.

You say that the free market is deciding what vehicles to sell in the US. The free market isn't deciding...car companies are deciding based on profit motives, not consumer demand.

[FinanceDude]

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Originally Posted by ERD50 Sorry, but I think this is totally off-base. You seem to be saying that domestic car manufacturers are not making the types of cars that people want (quality and mpg). OK, I'll go along with that for the sake of the discussion.

It seems to be the current modus operandi...........

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Do we *really* want the govt to 'force' them to do it? Why not let the free market speak (it is!).

Toyota and Honda are forcing the Big 3's hands, by pummeling them in sales each year, forcing them to sell models at fire sale prices with big rebates. That doesn't help resale value, so the cycle continues.......

On an inflation-adjusted basis, gas is still cheap. A fair number of folks are going pay the piper and keep driving...........

[ERD50]

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Originally Posted by DallasGuy I'm not saying that the government should be sitting in on marketing decisions of car makers, but the car companies will drag their feet forever before offering higher mileage quality vehicles in the US because they don't make as much money on them.

OK, I understand you better now. Yes, the car makers will drag their feet in making high mpg cars if there is little profit in them. But I think you are putting the cart before the horse (or something?). There is (relatively) little profit in them, because there is (relatively) little demand.

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therefore why offer a cheaper higher mileage vehicle unless forced to by the government by enacting higher CAFE standards.

A more effective way of creating this demands is through fuel taxes. That creates demand for high mpg cars AND encourages conservation through a myriad of ways that the govt cannot legislate. Though they do try - T-AL pointed out in another thread how an 18mpg SUV labeled 'hybrid' can use the car-pool lane, but a 35mpg non-hybrid is banned. It just gets wacky unless you go to the root - fuel prices.

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And there IS a market for those higher mileage vehicles, but currently the car companies won't go there unless forced to.

They will go wherever there is a profit to be made. If there is demand, there will be profit - how can this not be?

By your logic, car makers would only sell top of the line cars loaded with options (ignore mpg for a minute), because they make nice profit margins (and amounts) on those. But they sell mid and low priced cars, some stripped down, because there is a market for them, and if they don't sell the car to me their competition will. It is better to make a small profit, than no sale at all (with no follow up service sales).

mpg is the same - if there was a larger market, it would be addressed more than it is today.


-ERD50

[cute fuzzy bunny]

Of course theres very little demand. The masses have been inoculated to believe that bigger, faster and more expensive is almost always better. You need to be driving down the road in an 8000lb vehicle, eating a half pound cheeseburger with a quart of mayonnaise on it, while your iphone is securely jammed to the side of your face.

Otherwise you're just sucking.

[DallasGuy]

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Originally Posted by cute fuzzy bunny Of course theres very little demand. The masses have been inoculated to believe that bigger, faster and more expensive is almost always better. You need to be driving down the road in an 8000lb vehicle, eating a half pound cheeseburger with a quart of mayonnaise on it, while your iphone is securely jammed to the side of your face. Otherwise you're just sucking.

Pretty funny!

[ERD50]

If you guys really think advertising is THAT powerful, then instead of CAFE standards, we should only allow car makers to advertise vehicles that get above xx/yy mpg city/highway. That would fix us up this old pesky fuel consumption problem in a nano-jiffy!

-ERD50

[cute fuzzy bunny]

You must be right, advertising and peoples desires must just not have any effect.

Thats why the majority of vehicles I see on the road are large luxury cars, SUV's and pickup trucks.

I'd presumed all this time that these folks really werent regulary hauling 5000 lb trailers, heaps of cinder blocks, and six people with all their luggage.

I stand corrected.

[ERD50]

Buy any 'New Coke' lately? How much did they spend on advertising?

Of course, I never said that advertising did not have 'any effect', just that I thought you 'overestimate the power of advertising'.

Zathras: Tesla *is* a great example of a greenie putting their money on the line. But, it's not an affordable car, so not really an answer (yet) to a cheap, high mpg vehicle. Hopefully, someday soon!

-ERD50

[cute fuzzy bunny]

When in doubt, pick an outlier. New Coke wasnt an advertising mistake it was a major strategic product error.

As far as the lack of power in advertising...hmm...the world seems to be disagreeing with that thesis.

People wont buy something that they dont want, that they dont like, that doesnt improve their perceptual status, no matter how many advertising dollars are involved.

But create a perception of betterness, or make something they want to buy seem like a good choice, and the public will champ at the bit.

Hell, give me a half billion in marketing budget, and I'll bet I can even make a vulcan like you want to pay an extra 30-50% of profit markup on a computer that isnt any better than the average.

I'll not only make you think that and get you to buy, I'll get you to stand up and take your own time defending your decision by telling people on the internet that its better, and I'll get you to repeat all the same marketing horsepuckey that I fed you. Word for word.

[jazz4cash]

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Originally Posted by cute fuzzy bunny When in doubt, pick an outlier. New Coke wasnt an advertising mistake it was a major strategic product error. As far as the lack of power in advertising...hmm...the world seems to be disagreeing with that thesis.

Not an outlier...precisely on point! Coca-cola decided what product to offer the public, produced it, and pushed it to consumers via advertising. I believe this was in response to somone's opinion that mfrs simply 'decided' to make inefficient vehicles and 'tell' the public what to buy.

[FinanceDude]

Well, the Prius seems to be a "hip" vehicle for the Hollywood types, although I doubt Ferrari, Mercedes, Porsche, or Rolls Royce are scared........they are just adding to their fleet.........

[ERD50]

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Originally Posted by cute fuzzy bunny Hell, give me a half billion in marketing budget, and I'll bet I can even make a vulcan like you want to pay an extra 30-50% of profit markup on a computer that isnt any better than the average.

Honestly CFB, this 'issue' seems to be much more of a 'hot button' for you than it is for me. Did an apple fall off a tree and scare your mother while you were in the womb?

Not gonna bite though. Just putting on a string of garlic and getting out my vampire mirror and making the incantation..."Lexus". You can go on about how it wasn't the advertising, really won't be that expensive when you factor in depreciation, amortization.....

'outlier' or 'inconvenient truth'?

-ERD50

[FinanceDude]

Speaking of cars, how many folks have seen the Lexus commercials that show Joe Average American buying a $50,000 car for his wife?

I married the RIGHT woman, she would call the divorce lawyer as she was standing in the driveway if I did that........:

[cute fuzzy bunny]

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Originally Posted by jazz4cash Not an outlier...precisely on point! Coca-cola decided what product to offer the public, produced it, and pushed it to consumers via advertising. I believe this was in response to somone's opinion that mfrs simply 'decided' to make inefficient vehicles and 'tell' the public what to buy.

Okay then, let me give a refresher course in "How to screw up a major branded product 101", since it seems that the new coke debacle isnt well remembered.

Coke was a flagship worldwide branded product with a rapidly growing competitor that had a sweeter, somewhat different tasting product, Pepsi. Seeing that Pepsi was quickly catching up to them in product sales, Coke elected to change their product recipe to simulate Pepsi, drop their regular product, and "join them if you cant beat them". Clearly this was a fundamental error in judgment on behalf of company management.

People bought Coke because they liked Coke, it was what they wanted to drink, and because it was probably what they'd been drinking for years. Changing the formula meant that most of your existing customers would stop buying it because it was no longer the same. In parallel, there was no reason for existing Pepsi drinkers to say "well hey, this new coke tastes almost the same, lets abandon what we know and like for this other thing!". All the advertising in the world wouldnt change that, because there was no impetus for existing customers to stay and no reason for prospective customers to switch.

The approximate equivalent would have been Chevy saying "well, those Ford truck guys were right and they make better trucks, so we're going to make a near duplicate of the Ford pickup, except we're going to put a Chevy badge on it.". Ford buyers arent likely to stop buying Fords and start buying Chevy's that are just about the same as Fords. And your long time Chevy buyers arent going to be thrilled with it either.

This isnt a case of "lets make something people dont want and then shove it down their throat with advertising that makes them do things they otherwise wouldnt", its "Lets excite people about buying what they want anyway - a big powerful heavy safe vehicle that makes them feel big and powerful, then build lots of what they really want."

The advertising isnt creating the demand, its simply helping elevate the original desire in the customer.

Creating an advertising and product strategy around small fuel efficient cars would be like the Beef industry putting up ads telling you that tofu and broccoli are better for you, so eat that instead. Its not what you want. On the other hand, putting on a "BEEF! Its whats for dinner!!!" while showing large sizzling slabs of meat on a grill? That'll work.

Perhaps theres a fundamental disconnect in that people here think that the average american consumer cares about oil economics and politics and wants to do the right thing for the country and the earth.

People are largely interested in being comfortable, serving their own base needs, covering up their inadequacies and avoiding things they fear (or conquering them).

Marketing and advertising simply plays on those instincts.

Except for a small percentage of intelligent, earth-crunchy people, gas mileage isnt of interest for most people. In a recent survey I saw of car buying criteria, gas mileage hovered in the #4/#5. With $3.25 gas in evidence.

The car buying public is more interested in speed, safety, power, comfort and reliability, not mileage or emissions. The car companies make more money selling big, feature rich vehicles with big motors and aggressive looks.

Its a win/win for the car makers and the buying public...all the latter needs is just a little push.

By the way, I'm not getting the Lexus stuff. Its just proving my point. My wife was advertised into believing that a Toyota with a different name on it would tell everyone that she's wealthy and powerful and has "arrived", and she never had a nice new expensive car before. I had no need to deny her something that she wanted.

[FinanceDude]

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Originally Posted by cute fuzzy bunny By the way, I'm not getting the Lexus stuff. Its just proving my point. My wife was advertised into believing that a Toyota with a different name on it would tell everyone that she's wealthy and powerful and has "arrived", and she never had a nice new expensive car before. I had no need to deny her something that she wanted.

The main difference is,you can afford said car. Does Lexus really want us to believe the average American can afford a Lexus? Because, they can't..........