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Tuesday, November 25, 2008

Demanding a Failing Plan

Congress, in it's decree to the (formerly) Big 3, wants sustainable green vehicles as part of the plan that they bring back to DC next month as they beg for more money.

The problem is, as pointed out by the Washington Post; in it's green section; is that green vehicles are money losers, and probably will continue to be for the foreseeable future.

The story reminds readers that the Toyota Prius, the poster child for how to build a good hybrid, is a money loser for Toyota. The company won't say how much they lose per car, but experts figure thousands of dollars per unit sold.

The Chevy Volt, the car that gets environmentalists into a nearly orgasmic state, won't save GM. Instead, it could sink the company based on estimates of $8-10,000 just for the battery pack. Conservative estimates are GM would need to get upwards of $50k per car to turn a profit on it. Even at $4.00 a gallon for gas they'd be hard pressed to price the car at a profitable price. That's why they are limiting early production to 10,000 vehicles a year.

GM already plans to have nine hybrid models on the market next year, but if each of them is a money loser, that Congressional bailout money might just as well go down the drain.

President-Elect Obama yesterday reiterated the requirement for a bold plan from the automakers to come up with a sustainable business model based on vehicles such as the Volt, Fusion Hybrid, etc.

I wonder what Congress will say if the three CEO's show up and tell them the truth, that business model doesn't exist, and probably won't for the next five to ten years?

Here's something Congress could look at, though it will drive the Green lobby nuts. They need to relax some of the diesel restrictions that they put in place. Ford's Fiesta, (which isn't going to come here with a diesel), and VW's Jetta diesel give people cars with mileage in the Prius range, but with the ability to turn a profit on the car.

VW and BMW both have diesel cars that have passed California's tough emissions standards, and are going on sale in all 50 states, and don't eliminate the performance Americans like to get better mileage. The flip side is with the federal fuel tax, and most state taxes being higher on diesels, the cost of fuel for them has a 20-30% premium over gas, discouraging the sales of those higher mileage vehicles.

A second thing Congress could do, instead of limiting the tax credits they are planning to hybrids, they could provide a smaller tax credit towards anyone who purchases a vehicle with an EPA estimated milage greated than 32 or 35mpg combined, and increase that number slightly each year.

As the Post story points out, getting the full benefit of the proposed $7500 non-refundable (you don't get back more than you pay in) credit for hybrids and electic vehicles means only those making more than $50k per year would see the full benefit of the credit.

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Blogger shoprat said...

Next Obama and Congress will tell us to flap our arms and fly.

3:45 PM  

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