Dump Detroit if they can't compete with the Prius
President Barack Obama and Democrats in Congress have some new and refreshing ideas for America. To fight foreign oil dependency and global warming - while creating jobs - Democrats are proposing huge investments in cost-inefficient green technologies often built by inefficient companies.
To make these green technologies more cost-effective, many - including this blogger - have suggested a gas tax. Thus far, however, President Obama has been against the idea. In these economic times, it's hard to blame him for such a stance. Still, eventually, some tough decisions must be made.
US automakers are struggling just to survive and if US auto sales don't pick up next year, it's going to be hard for these automakers to survive without a massive bailout. As a result, many are suggesting tax incentives for the consumers of US-made vehicles - most of which are gas-guzzlers. That's not very green.
Yet, this is the conundrum Obama and Democrats must manage. Is it really worth it to create a false market based upon gas-guzzler sales? Maybe the reality is, is that Americans are going to be purchasing less cars. That could be the new automotive reality, and there have been a few studies suggesting that America's love affair with the car is over.
Even more important, there is a good chance that California will soon be regulating its own emissions standards. That means vehicles like the Toyota Prius and the Honda Insight might quickly become the best selling vehicles in California, and as many as 17 other states. Yet, what will Detroit automakers sell? They have few, if any, hot, fuel efficient models.
Some will undoubtedly claim that GM can sell the Chevy Volt, for instance. Well, GM probably won't be selling many Volts by 2016 when California's 30 percent reduction goes into effect. And, even if GM can increase production, the Insight will cost $20,000, the Volt $40,000. Can the Volt really be enough, especially if gas prices don't increase drastically?
Even Ford, with its new hybrid technology, still doesn't have a Prius-contender. While its new Ford Fusion hybrid is compelling, why is Ford only planning to make 25,000 of these hybrid vehicles? More important, if you're rolling out a new hybrid drive, why would you not challenge the standard, the Prius, as Honda did? Can you not compete?
By 2016, when California emission standards go live, Toyota could be selling a million hybrids per year, a majority of them Prius hybrids, yet Detroit might not yet have a competitive - in terms of technology AND costs - product. Can you really bank on Detroit in that reality?