"Fuel Reduction using Electrons to End Dependence On the Mideast"

Those who are interested in seeing this pass, need to write their representative and have the ATM fiasco on this credit changed!!

http://www.greencarcongress.com/2007..._int.html#more

 

I like the idea... but I don't like the implementation. I don't think consumer incentives is the way to go. Give the companies making the car incentives and have them price it resonably well to comprable vehicles and the plugin will sell itself. Passing this bill doesn't give the manufactures any incentive to build such a vehicle. imo

 

I hear what you're saying, but it wont work because the automakers are ALREADY taking a loss on the fuel efficient cars as it is thanks to the CAFE problems.

CAFE is a federal mandate on the automakers to meet minimum fuel economy standards when averaged across all the cars they will build that year (though they currently have different numbers for cars vs. trucks).

As a result of CAFE, economy cars that get high mileage are technically SOLD AT A LOSS! (I'm guessing most consumers don't know this). The manufacturer takes this loss on one individual car because it drives the fleet's average fuel economy numbers up helping the automaker beat their mandated average. This, in turn, allows the manufacturer to now sell a gas guzzler, which is sold at a profit which more than offsets the loss they took on the economy car.

Unfortunately, during economic downturns or when the price of gas is sky high (as it is now), consumers are forced to rethink their buying habbits (when money is not a factor, most any consumer will buy a gas guzzler over a economy car). This means that the automaker sells disproportionately more economy cars (in which they suffer a financial loss) than gas guzzlers (which was how they had planned to make up for the loss -- but those cars aren't selling).

By throwing plug-in technology into the cars, the price to engineer and build will only go higher, which the consumer will not agree to pay, forcing the maker into even more of a loss.

Unfortunately CAFE standards only incent the makers to 'meet' their mandated numbers... they are NOT incented to do even better; they are punished if they do better.

Finance guys have to calculate what sort of price needs to be charged for a car in order to drive its sales figures either up or down (yes, they might actually want to drive it down). Since they're selling the car at a loss but they are, after all, in business to try to make a profit... they try to minimize the losses and maximize the profits. Once they've sold enough economy cars to hit their numbers, they frankly DO NOT want to sell any more of them because that would just increase their losses (remember, those cars are sold BELOW what they cost to produce). If they can drive up the sales of the profitable cars (which hurt their CAFE numbers) then they'll try to boost the sales of the economy cars, but ONLY enough to bring the CAFE numbers back in line.

Now... what would happen if instead of the automaker having to play the price games, we put the CAFE standards directly onto the consumers? We could either do this in the form of a one-time tax or rebate (the tax would get more expensive as the fuel economy of the car was poorer), neutral for cars that meet the desired standard, and would be a government tax rebate for cars that exceed the desired economy standards (proportionate to how much they exceed the standard). It could also be imposed as part of the annual license plates or tags, but that's a state level and CAFE is a federal standard.

I think this would have two impacts

#1 Consumers would directly recognized that they are being "fined" for buying an inefficient car. They would rethink whether they want to pay a hefty tax (possibly an annual recurring tax) or collect a nice rebate.

#2 Since the manufacturers would no longer have to play pricing games, all cars could be sold at a profit (instead of some at a loss and others at a profit). This would mean that the manufacturer is happy to sell consumers _ANY_ car. If everyone wants a car that gets 60mpg, then the makers would be happy to churn them out.

Market fluctuations (like the price of gas) that drive consumers into a different category of cars wouldn't actually hurt the manufacturers.

I think the main reason that congress & senate do NOT like the idea of charging consumers directly (they prefer to hide behind the CAFE game and try to make the auto makers look like the bad guys) is because consumers would resent these fees and that doesn't necessarily help them when they're up for re-election.

Consumers already pay these fines or collect these rebates today -- they just don't know it. When you buy an economy car, the low price of your car was actually due to a subsidy (think of this as your 'rebate') from someone who unknowingly paid a very high profit margin (think of this as their 'tax') when they bought a gas guzzler.

Consumers actually believe that economy cars are cheap to build and luxury cars are expensive to build. But most of the cost of the car is in the research, engineering, testing, production engineering, safey, health care costs, etc. required to bring that car from concept to reality. The actual material that goes INTO the car and the amount of time (and the number of people assembling the car on the production line) are actually NOT substantially different when you compare a luxury car to an economy car. Yes, the luxury car does technically have more raw materials and might require a little more assembly, but when you consider that you can get an economy car for less than $15000 and almost no luxury car costs less than $30000 there is absolutely no way the luxury car costs double (or more if you think about luxury cars in the $50,000+ market) to build.

 

Interesting analysis, Tim. One potentially meaningful adjustment you might make is avoiding treating "small," "economy," "fuel-efficient," and "inexpensive" cars as if they're all the same thing. The bottom part of your post does this better than the first part.

A quick way to look at it: it probably costs between 18,000 and 22,000 to build most cars. (That's a SWAG, not based on a published source.) Car prices aren't just the materials and assembly -- they're retirements, healthcare, management, overhead and inventory, advertising, and dealers -- all of which are very stable per-unit costs, no matter what the unit is. (More or less.) So an inexpensive car has a *very* thin margin (though I'm not sure they're all automatically sold at a loss). And inexpensive cars *tend to* be smaller and thus get better mileage, so they boost CAFE averages a bit. BUT, there are different CAFE averages required for cars than for trucks, so Toyota doesn't really need to sell all the Priuses in the world to offset their "gas guzzling" big trucks as far as CAFE averages go.

So it's not really that makers are taking a loss on small cars in order to boost their CAFE; it's that small cars cost so much to produce now, from all the associated overhead, that the price that recoups the cost of a small car is more or less the highest price the market will bear to begin with. The only reason SUV's cost as much as they do (says the former owner of ultracheap 70's Blazers and TrailDusters) is because people demonstrate themselves willing to pay it. The automakers will always charge as much for a car as they can until the high price leads to less profit (through fewer units sold) than a lower price would. With small cars the market won't pay more than $20,000 for, automakers do what they always did: make a little, break even, lose a little. With SUVs they can sell for $45,000 that cost maybe $5,000 more in parts and assembly than the small car, they'll laugh all the way to the bank. That's profit-taking for you.

I don't think that really undermines any of Tim's analysis -- I'm just saying, it doesn't probably have quite so much to do with CAFE as simply the realities of production economics for cars. Might be wrong, though.

Cheers --
Doug

 

ALong the lines of Tim's suggestion, doesn't England (or other parts of Europe) have auto registration that varies based roughly on fuel economy? That's a similar way of punishing guzzlers. And there's nothing wrong with having it implemented on the state level, rather than waiting for the actions of our bloated, juggernaut of a congress to work up the courage to raise CAFE. Most states seem to follow the smart trends like that, so once NY and CA adopted those laws, it might spread. That can be done independent of CAFE, and may very well just help it to succeed (in the important aspect of altering public attitudes).

 

Tim, you point out a lot of what is wrong with the system. Create a system that gives the incentives for manufacturers to produce something worth buying. Giving the incentives to the consumers on something that doesn't exist makes no sense. Chicken egg I guess.

 

In this case, I think there are two of three major incentives for products that exists: 1. EV 2. Plug-in Conversions. The 3rd, Plug-in Hybrid doesnt yet exists, but I think it's a good push (since everyone else is pushing that now) for the auto manufacturers to make them.

There are lots of current hybrids out there (and more everyday) that are crying out for an affordable conversion kits. IMO there's lots of hybrid owners (esp hybrid owners who got a hybrid for FE reasons) who would want to double their mileage if it was affordable (much more so than to buy a new PHEV - when it comes).

I for one hopes it passes...I will never get another gas-only car....but EVs are still expensive, and PHEV are not there yet. That leaves me to look at conversion kits...but, alas, still too expensive.

 

Never say never. I'm sure hydrogen power cars will come of age (electric only engine). Also, diesel technology have cars getting 70mpg, it's a matter of addressing exhaust but that seems achievable too.

Note... that by gas-only car, I assume you meant non-hybrid.

 

Yup...poor choice of words. I meant I will never buy an ICE-only car (even if it's biodiesel). It either has to be a hybrid (would prefere PHEV biodiesel), or a pure electric-motor. Hydrogen fuel cell would be ok too, but I think battery will always be ahead of hydrogen...even with disproportionately tiny research funding that BEV gets compared to hydrogen.

 

I think hydrogen will win out -- eventually. The problems with hydrogen are that it's only in a liquid state at extremely cold temperatures or extremely high pressure (neither are viable options - so that rules out liquid hydrogen). This would seemingly leave us with the option of using compressed cylinders of hydrogen gas. But hydrogen is also the smallest atom on the periodic table -- which means if there's the slightest flaw in a seal then it would probably leak.

This makes refueling and the fuel distribution logistics more of a problem that it was for petroleum fuels.

Somewhat recently there was a breakthrough in hydrogen storage which binds hydrogen to a pellet. The pellet is completely safe to handle and can be stored at room temperature and no hydrogen loss will occur until the pellet is exposed to a catalyst to release it's hydrogen. A citation from a related article that I can no longer find said the pellets exceed current US Dept. of Energy reqts for 2015 by providing enough energy for a car to drive 500km on 50 liters of fuel. (You can see a press release at: http://www.investindk.com/visNyhed.asp?artikelID=13655 )

That sounds fairly promising because it looks like it overcomes some key problems with hydrogen fuel.

The part I don't understand is what they expect to become of the salt from the pellets. If you read the short article, it basically explains that they use sea salt to bind amonia. The amonia is catalyitcly made binding nitrogen to hydrogen. Ok, fair enough. But if you then expose the pellets to the catalyst to release the hydrogen, the nitrogen can just go back into the atmosphere, leaving you with the original sea salt -- but what happens to all that salt? Is it recycled to make more hydrogen pellets? This would mean the car would have to have a holding tank for the spent salt pellets. Environmentally it would be a bad idea to just dump the salt onto the roadway as the pellets are consumed. Salt tends to accelerate corrosion of metals, sours soil to the point that vegetation wont grow in salty soil, and storm drain runoff could be a problem for freshwater rivers and lakes.

I'm inferring that a vehicle would need a holding tank for spent salt pellets. The salt would either need to be recycled into new hydrogen fuel pellets or the salt would need to be disposed of in a way that doesn't harm the environment.

Still... it's a progress and looks to have promise.