5 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff offers a few words about how most of the U.S. auto industry got stuck in the current moneylosing EV-quagmire. Not being an auto mechanic, the Correspondent invites those who know more about cars than he does to offer comments and corrections.
|No spare tire?|
The Economics Correspondent would like to defend the industry, but only a teeny bit. Because the primary reason they are producing so many moneylosing EV’s is not wokeness or some love of red ink, but instead because Barack Obama forced them to.
The story starts around 2007 when the George W. Bush White House contemplated raising CAFE (corporate average fuel economy) standards for the first time since the 1980’s.
At the time any company selling cars in America had to meet a minimum average fuel mileage standard for their entire fleet of 27MPG. Which is also why automakers, even in 2007, still sold millions of compact cars that Americans really didn’t want and which they largely lost money on, making up the losses with larger, higher-margin cars and particularly light trucks and SUVs: so the entire fleet would meet the CAFE average requirement.
The Bush administration worked with the industry and basically asked “We want to raise the standard, but we don’t want to overly disrupt either the industry or the consumer. What’s a realistic standard you can meet at reasonable cost?”
The two sides then negotiated a new standard that auto fleets must meet a revised average fuel efficiency of 35MPG by the year 2020. The auto industry would achieve this goal by applying continuous technology improvements such as higher engine compression ratios, variable valve timing, transmissions with more speeds/gears, better camshaft and valve designs, and lighter materials such as greater use of aluminum in engine blocks and other components.
However when Barack Obama became president, his administration told the auto industry (paraphrasing) “Don’t get too comfortable with 35MPG. We’ve got new standards.”
In 2011 the Obama administration imposed a 54.5MPG CAFE fuel efficiency standard by the year 2025, a 56% increase and over double what it had been in 2007.
The industry was displeased not only with the dramatic increase from 35MPG to 54.5MPG, but also that they weren’t even consulted. Unlike during the Bush administration there were no good faith negotiations, and when the industry complained to the Obama EPA that 54.5MPG was unrealistic government bureaucrats unsympathetically responded “You’ll think of something.”
(an old article about the industry’s outrage is available at the end of this article)
Well think of something they have, but it has cost them billions in losses and also made cars less dependable for consumers—although many consumers don’t even know and many who do blame the greedy car companies without a clue the government is behind their mechanical problems.
To meet such standards or at least come closer and reduce billions in fines automakers have shed every pound of weight they can with extreme measures such as, for example, getting rid of the spare tires (I know because my car came with no spare tire). Automakers have dropped six-cylinder naturally aspirated engines and replaced them with four-cylinder turbocharged engines. Ford has even recently placed a 1.3 liter 3-cylinder turbo engine in the Ford Focus.
Gasoline direct injection systems (GDI), which produce marginally higher efficiency but create major valve carbon buildup issues, and rubber-belt driven continuously variable transmissions or CVT's are notoriously break-prone.
(Mechanics joke that CVT stands for “continuously variable trash heap” and “constant vehicle trouble”)
Automakers have installed “autostop” systems in cars that automatically shut off the engine at stop lights and then turn them back on when the driver’s foot comes off the brake pedal. Such systems have required reengineering cars’ entire electrical systems so that climate control, radio, power steering, etc… don’t shut off when the autostop kicks in.
And the Correspondent’s personal pet peeve is the transition to turbocharged engines which have more failure points and are generally less reliable than naturally aspirated engines. Although turbo enthusiasts can feel free to disagree in the comments, turbos spin at extremely high RPMs with a microscopic layer of oil preventing mechanical failure, the added components of wastegates and intercoolers introduce more points of failure, the highly compressed hot air and fuel mixtures in small combustion chambers wear out engines faster, require premium fuel and synthetic oil, and turbo compressors are notoriously unforgiving of any owner who runs over his or her maintenance schedule by a hair.
(If the Correspondent has gone wrong here or left something mechanical out anyone with auto mechanics experience feel free to comment)
And all this new complexity has added an anticipated $5,000 in repair costs to the average car while under warranty. Automakers have compensated by raising car prices to cover added financial liabilities associated with all the extra warranty work (see article below).
Meanwhile most of the general public, unaware of the unreachable CAFE standards and associated costs, blame the automakers’ for what they view as an irrational love of complicating cars for the sake of itself and “greed.” The Correspondent has seen news reports about the rising absence of trunk spare tires where multiple car owners and mechanics accuse automakers of taking out the tire to “save money” and for “greed.”
No, it’s to squeeze out every extra fractional mile-per-gallon to avoid massive regulatory fines.
But the biggest change of all is EV’s.
As the Obama administration intended, automakers have been forced to scramble to produce more EV’s since, not consuming any fuel whatsoever, every EV sold improves the entire fleet’s average fuel mileage immeasurably over a car even with a turbocharged four-cylinder engine, gasoline direct injection, CVT transmission, autostop, and no spare tire.
So auto companies have effectively been forced to produce millions of EV’s and hope the public gets on board with wokeness and the (not really so) green crusade because their financial results depend on it.
Auto executives have put on a brave face and made speeches about how great EV’s are and how they are saving the planet, in part because they themselves are somewhat woke, but in larger part because the survival of their companies depends on public demand for EV’s—all thanks to Barack Obama.
However the Economics Correspondent isn’t ready to let auto executives off the hook too easily. In his opinion they’d be a lot less deserving of their moneylosing predicament if, instead of joining the woke crowd and declaring love of EV’s, they told the public the truth and explained they’re losing money on EV’s because the government has forced them to.
Frank, monthly TV ads explaining the consequences of one politician’s edict would go a long way in educating the public on much of why their cars have gotten so much more expensive, why they are so much more complex, why they are more prone to failure, why the spare tire has been taken away, and why so many moneylosing EV’s are being produced: because they have to, not because they really want to, all to satisfy one person who was in power for eight years.
Unfortunately auto executives more often than not are cowards and kneel to not only government regulators, but also to the noisy woke crowd. So the Economics Correspondent's sympathy for them has strict limits, even knowing they’ve been bullied by regulators into their current predicament.
Read USA Today/Detroit Free Press "54 mpg?: Auto industry rips stricter gas mileage levels" at: