Is Ford CEO wrong on hybrids and plug-ins?
Ford focus on Ecoboost and small cars good, but not enough
Hybrid sales have tanked even more than realized
In the last few years the government has bought one quarter of all GM and Ford hybrids as hybrid sales, overall, have declined. And even more plug-in hybrids, such as the Chevy Volt, will be bought by the government.
But, if government subsidies and purchases are the key to hybrids and plug-ins, the US automotive business model is destined for a blow out according to Ford CEO Alan Mulally.
“He was saying, ‘You have to have a business that doesn’t need all these government incentives,’” said Karen Hampton , a Ford spokeswoman said, recounting the talk. “Incentives have a role to play when you’re trying to get new technology off the ground or change behaviors, but it’s not meant to be a permanent part of the business equation.”
Unfortunately, according to a gazillion studies on the subject, plug-ins have no chance of achieving any level of viability without massive, almost-permanent government intervention. And today’s hybrid car sales seem to prove that quite conclusively.
Today, hybrid sales are pretty much all about the Toyota Prius. Yet, the Prius isn’t even a top ten seller in the US. Take away government and fleet sales and less than 2 percent of conventional consumers are even interested in actually buying a hybrid, despite studies that suggest a significant percent of consumers are interested in hybrids - but ONLY as long as they don’t cost extra.
Unfortunately, today most auto consumers believe the Prius and other hybrids cost too much extra, especially up front. Ironically, despite costing twice as much as the Prius, the Chevy Volt will only save consumers $300 per year in fueling costs compared to the Prius according to the government.
What consumer wouldn’t want to save $300 per year for only an extra $20,000 up front?
Yet, perhaps Mulally is hitting upon an even a larger issue.
GM might be profitable today, but that doesn’t mean GM, nor any other US automaker, will be profitable tomorrow. Moreover, today’s profitability took tens of billions in government aid to achieve and billions more in government loans, grants etc. to build vehicles like the Volt. Plus, any Volt success will be dependent not just upon massive government incentives, but massive government purchasing.
The Volt is not going to run GM into deep profits. That’s for certain.
Regardless, years ago I would have attacked Ford’s CEO with a vengeance, believing he was both underestimating the potential of consumers and of hybrid and plug-in vehicles, but a decade of sales data has changed my tune. Sadly, the mountain of evidence supporting Mulally is essentially undeniable to any objective reviewer of the data.
Of course, that doesn’t mean Ford is offering a real solution, although I do give Ford some significant props for Ecoboost and its very big embrace of small cars like the the Fiesta and Focus. Nevertheless, the dangers of foreign oil dependence loom as large as ever, not to mention the snail’s pace economic recovery. It would take little to push US auto sales back to around 10 million units per year or less, and push the US auto industry back into bankruptcy.
Disappointingly, the Chevy Volt offers NOTHING to minimize such risk in the next decade, maybe even two. Even if a big gas spike, for instance, made the Volt more cost-effective, most US auto consumers simply wouldn’t be able to afford such vehicles since every other consumer product would also cost more. Even the significantly cheaper Prius would probably still be too expensive for most.
So what else can be done?
Inevitably, it seems to me that Mr. Mulally, possibly the best CEO in the auto industry – the same CEO that kept Ford out of bankruptcy and buoyed the entire US auto industry – is the most important voice in the US auto industry today. That CEO seems to be saying that the US auto industry is on a slippery slope. Dangers and risks are everywhere and too many of the solutions being put forth are mostly just cost-ineffective marketing gimmicks almost completely funded and supported by the government.
Consequently, much more comprehensive coordination between automakers and government – based on reality – seems desperately needed. Shareholder profits must be reconnected to national security in the short term and the long term, especially considering how indebted the US auto industry is to the government and taxpayers.
While outlandish, I’d love to see Mr. Mulally and Ford host – and challenge – the rest of the auto industry and the government to a conference on ending US foreign oil dependence by 2025. Certainly, such a moonshot might be entirely impossible to achieve, but it’s time to start thinking big and viable.
I’ll bet whatever you want CaTic.
It takes about 5 years just to create a new production line, and there aren’t any yet slated for plug-in pickup trucks, for instance.
And, the only automaker predicting more than a few percent penetration is Nissan at 10 percent.
Just how are BEVs going to make up greater share if automakers aren’t preparing for greater share considering the great amount of time it takes? And we’re not even getting into the lithium production manufacturing capabilities and supply chains.
Recall that Hybrids and PHEV are transitory technologies towards battery electric vehicles.
Battery cost aside, BEV’s are cheaper to produce because the powertrain contains far fewer and much simpler components. There are battery technologies that promise to deliver higher energy density at cheaper costs. Some are on the verge of being commercialized. The most promising technologies will deliver better driving ranges than gasoline for the same weight but may take 10-15 years to develop. In the meantime, we would make enormous strides if our cars and trucks could work on electricity within our cities…
My family needs two vehicles for the foreseeable future; one of which could be a 4-passenger city car. I will purchase a BEV the minute one that meets my needs becomes available and my gas savings will cover more than half my monthly payments, making it cheaper than any gas-based car to own. Moreover I’ll never have to stop at a gas station to fill-up and I’ll (nearly) never have to stop at the garage for regular maintenance.
It would not take much of a marketing push to make BEV’s (with a 100 to 150 mile range) attractive to the typical suburbanite family.
Mark my words, BEV’s will represent a significant portion of the market within this decade.
Its a shame that Ford hasn’t offered up a direct competitor to the Prius. Their low-volume mid-size vehicles are only half-assed. While the Fusion Hybrid is an admirable effort, the Escape belongs on the island of misfit toys. Its too high off the ground and squar-ish to enjoy any aerodynamic help (the cornerstone of Prius success). Interior space is too small as well.
The next volume success for a hybrid will need to be more of a people mover. Who can get a third row to pop-up at the back of a wagon? Hyundai might do it. Ford should try with a wagon version of the Fusion platform or by adapting the Mazda 5.
The oil companies know what they’re doing by rising prices slowly. It’s abrupt jumps that wake people up to the necessities of fuel economy. Don’t expect the market to wake up or Ford to preempt.
One of the things that can affect the price of oil – is what the American dollar is worth and if it gets devalued because of our enormous debt – we could see significant increases in the price of oil – as well as the cost of imported cars.
In that situation – American-made hybrids might end up cheaper (relatively) than foreign-produced hybrids.
“They” say that the U.S. is the Saudi Arabia of Coal, Wind and Natural Gas these days but as long as foreign oil is cheaper we’ll buy it.
Remember also – what the “foreign oil” argument is – and is not.
Much of our imported “foreign” oil does NOT come from the Middle East.
It comes from places that are geographically closer to us because the price of oil has two major components – it’s worldwide commodity price ….PLUS the cost to transport it.
So for any place on the face of the earth – any country, including the US is going to buy oil from where the total cost of it (to include the transport costs) is cheaper.
The reason why we are in the Middle East is because if that area blows up into a regional war – and the oil wells get shut own – it increases the price of oil worldwide because there is less of it.
So… what hybrids accomplish is NOT to free us from buying oil in the Middle East because we don’t buy that much from the Middle East to start with.
We are more worried about the Worldwide PRICE of oil because it’s the PRICE of oil – no matter where it comes from – that affects our economy.
If we don’t do something about our own debt, we will end up paying more for oil as a result of our devalued dollar not because the middle east blows up.
One needs a crystal ball to answer this question. It all depends on what happens with oil availablity and oil pricing…
If nothing significant happens regarding oil the next few years, the hybrid market will suffer.
On the other hand, if we have another significantly oil even in the next year or so, I think Americans will finally be convinced that they need to cut back on oil consumption, and we will see a significant improvement in hybrid sales