November 02, 2005
Autos continue to tank
The worst October for U.S. auto sales in the last 13 years, it was.
|Oct-Oct Change in Full-Size SUV Sales|
What's hot? Toyota's fuel-stingy hybrid Prius, whose sales were up 68% compared to October 2004. What's not? American gas-guzzling SUV's, down over 50%. Sales of all vehicles combined were down 25% for GM and Ford.
There was a time when a 25% drop in car sales would be an indication that a recession is underway. But the clear consensus is that this won't slow the Fed down a bit as it continues to ratchet interest rates up. The theory seems to be that autos don't matter as much for the U.S. economy as they used to.
I think we'll get a chance to test that theory.
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Tracked on November 17, 2005 10:03 PM
Surely this massive decline in sales volume is not unexpected!
By offering employee discounts to the public (to rid themselves of excess inventory), the big three skewed the data.
After record-breaking sales volume due to discount incentives, how could sales volume not fall off afterwards? It's silly to think it could remain at such levels...
More worrisome though: By offering such discounts, they pulled in a lot of people who might have been considering purchasing a car in the near future. In effect, they stole *a lot* of car buyers from the future to make their numbers look good for last quarter. Didn't help GM though.
Posted by: Idaho_Spud at November 2, 2005 08:32 PM
to Idaho Spud: The things are right if we look at monthly change, but here are the Oct 04 - Oct 05 change. It means we compare the sales in Oct 05 with sales in Oct 04 and all the months in the middle don't affect this number.
Let's just remember if there were any incentives a year ago...
Posted by: Dimitry P. at November 3, 2005 12:09 AM
My bad. I see now we are comparing YOY data, not month to month...
Posted by: Idaho_Spud at November 3, 2005 12:29 AM
You are right. So we see steep decline comparing with usual month a year ago, but the reason is the same: incentives-full months have eaten from future demand and we clearly see these effects.
Posted by: Dimitry P. at November 3, 2005 12:44 AM
Notice that Toyota SUV sales were down by a similar percentage. Did they have similar discounts to GM last summer? My belief is that the downturn is almost entirely gasoline price related. GM management misjudged hybrid technology and their R&D did not execute. I think they should go straight to plug-in flex-fuel hybrid electric vehicles for their whole line of vehicles. But it looks like they will "hack" simple alternator replacements (with braking regeneration) and call them hybrids.
Posted by: SlipperySlope at November 3, 2005 05:36 AM
This is for October and we have yet to see any October economic data. But with real September PCE well under the third quarter average this means that we are starting off with a very weak real PCE growth for the fourth quarter. If is quite likely that 4th quarter real pce growth -- on a quarter to quarter basis -- could be negative. For it to be positive November and December retail sales would have to be very strong.
Posted by: spencer at November 3, 2005 06:33 AM
October was a weak month for new car sales. Used car sales were solid, and many of my fellow dealers are reporting similar results. My largest concern currently as a dealer is the possibility of a union strike at Delphi. That would be another brutal blow for GM to absorb, and while we're used to significant dips and swells in sales volume month to month in the car business, the last strike in 1998 was rough.
Posted by: Rick at November 3, 2005 07:02 AM
Rick, how were used car sales for heavy SUV's?
Posted by: Nick at November 3, 2005 08:50 AM
Tahoe sales were only slightly below average. Suburban sales were half of what is typical. Escalade sales were unaffected(Escalade people don't care about fuel prices) Small sport-utes were down 20-30%. Car sales were decent. The big surprise was the lack of truck sales. Even with gas prices at their peak, we had seen steady demand for pickups in late summer and early fall. Not in October.
Posted by: Rick at November 3, 2005 09:13 AM
At the very beginning of this gas price spike (when it finally went above $2 in Texas), a coworker drove us through the local Chevy dealer's lot on the way back from lunch. There were literally HUNDREDS of Tahoes sitting there - dozens in every color. I'd estimate maybe 300 of them.
I'd invite anybody inclined to believe Rick or Movie Guy's take on the US car companies' woes to read past articles on this topic and see what they were saying back then. There's only so many months' sales you can blame on incentives before people start wising up and realizing that the SUV craze is over; and GM (and to a much lesser extent Ford) don't have a good car line to sell in its place.
Posted by: M1EK at November 3, 2005 09:25 AM
And to be fair, Prius sales increases are not relevant YoY - we're still at this point comparing to a much smaller production run from last year (although it was at least the current generation model). A year ago, gas was still around or under $2/gallon here in Texas, but the waits were still long for the car.
Toyota could clearly sell more Priuses than they are now; the question is how many more? The waiting lists are supposedly back up to near their peak when the car was first introduced (we waited 5 months for ours, getting it in late February '04).
Posted by: M1EK at November 3, 2005 09:31 AM
I don't retract anything that I said three main posts ago about U.S. auto sales or GM's success at unloading 2005 product from its dealers's lots. GM made the right call.
It might be worthwhile to study the October sales numbers in more detail. I noticed weaknesses that go far beyond large SUVs. And in countries other than the USA.
Posted by: Movie Guy at November 3, 2005 11:15 AM
ME1K thanks for your kind statements. I always know I can count on you for a healthy dose of optimism when I need it. Thank goodness the house, cars, and kids college is fully paid for. (partially thanks to GM) The SUV craze is indeed at a new low. And the prius is hot. As I've stated before, people buy what makes them feel good. Popularity cannot necessarily be attributed to pure practical sense. With the Prius, ease of justification doesn't lessen the potential for it being a fad. If we all based all of our purchases on what was best for us, many products on the shelves today would remain there forever. Model popularity comes and goes. The question is whether GM, with their unbelievable cost burdens, can sustain themselves until they get hot again. As a dealer, we went through this in the early 90's with GM. We allocate more resources to used cars, additional services etc. It's really not that hard. I fear a strike and lack of product far more than a tough new car market.
Posted by: Rick at November 3, 2005 12:09 PM
"With the Prius, ease of justification doesn't lessen the potential for it being a fad."
Wow. Just, Wow.
Posted by: M1EK at November 3, 2005 01:23 PM
Seems to me the real question on the Prius is whether the fuel economy is as claimed. From what I have read, the lab tests/ government standard, greatly overstate the gains achieved in actual driving.
Here in UK half of new car sales is a diesel. (About one in 12 cars sold is an SUV, (one in 7 in London), we must presume a disproportionate share of those are diesel given fuel costs).
Diesel now has a small price disadvantage v. petrol (when they built the refineries, the demand for gasoline was relatively greater).
But fuel economy is as much as 50% greater. Cost per car as much as £1500 greater ($2200).
The question to my mind is whether a hybrid delivers significant fuel economy advantages over a diesel. And whether US drivers will switch to diesel (here pretty much 100% of petrol stations now sell diesel).
It also occurs to me that the SUV class vehicles can probably enjoy a continued place in the American driver's life, if they can be dieselised.
As to the fate of GM. I am sure it will survive, but whether in a pre or post 9-11 form, and with what market share, is unclear. Worth knowing that the thing that created the pension insurer, the PBGC, was the Studebaker pension fund insolvency in the 1960s, which led directly to the ERISA Act of 1972.
Posted by: John at November 4, 2005 05:53 AM
The deep price discounts of the summer, and $3 gas undoubtedly contributed to this slowdown. While it is widely supposed that spending may be restrained in order to pay for high energy costs, there are other factors at work.
Whenever we have widespread news coverage of some catastrophe, there is some negative affect on sales as a combination of TV'itis or depression keeps people home.
Also, the auto companies surely recognize that they need to build inventories as a cushion against a UAW walkout at Delphi. You can build inventory by either working more hours, or by being less aggressive in pricing. With customers addicted to deep discounts, the absence of those programs creates a wait time. The likely result for Q4's GDP is a rising inventory and soft sales. More importantly, that sets the stage for Q1 of '06 to have either a significant interuption in auto manufacturing, or deep discounting again by the auto companies. Neither result is likely to help the auto business.
Posted by: Bill Ellis at November 4, 2005 06:17 AM
ME1K check out todays businessweek article.
Also check out the print edition of Forbes, my theory about corporate fixed costs, and number of models in the US market newly acquiring share as being the primary culprits for GM are represented within.
And don't worry, I'll be available when you're ready to trade for a real car. STS this time, quit depriving yourself.
Posted by: Rick at November 4, 2005 06:52 AM
"Seems to me the real question on the Prius is whether the fuel economy is as claimed. From what I have read, the lab tests/ government standard, greatly overstate the gains achieved in actual driving."
This happens with most cars -- CR gives the Prius 44, which is a bit lower than we manage on nearly all short city trips. My friend who commutes 10 miles each way to work averages 55.
Posted by: M1EK at November 4, 2005 06:56 AM
That BW article forgets a huge difference: The Prius has space like an Accord Hybrid, and gets mileage better than the Civic Hybrid. A key reason we didn't end up buying the CH and waited for the Prius was space - both passenger and trunk (can't flip the seat down in the CH).
And as for GM cars, let's review:
Over the last couple of years, I've ridden in:
- a Cobalt (driven last month by my coworker, who says it's worse than his 3-generations-old Civic; as a passenger I couldn't disagree; it's tiny, feels cheap like our '89 civic, and doesn't get good mileage).
driven by me:
- a Century (I drove to/from Florida in one; it was as expected - possibly the least crappy of the lot).
- two Malibu Maxxes (rented one on Oahu and drove all week; drove in another my parents rented here in Austin; no bigger than the Prius; drove considerably worse; got sub-20-mpg)
- a Tahoe (a day loaner for Prius fix - dealer scratched bumper and needed a day to repaint - this was horrible; seemed slower at getting up to highway speed than the Prius and was nearly nonnavigable otherwise).
- a Rendezvous (two months ago; rented in Connecticut where I drove a couple hundred miles in it; it was better than the Tahoe; but still sucked)
If it weren't for rental sales, I wonder whether you guys would already be knocked out of the #1 spot.
Posted by: M1EK at November 4, 2005 07:03 AM
ME1K check out this http://www.usatoday.com/money/autos/2005-11-03-no-gas-pain-usat_x.htm
I remember bell bottom jeans as well.
When it makes you feel good about yourself, you buy it. You'll buy the next trend also. I also remember not being able to stock enough Tahoes and Suburbans to keep up with the rate of sale when they were hot. GM was right about that one in the 90's. Mabye they'll last long enough to be right next time.
Posted by: Rick at November 4, 2005 08:27 AM
Has anyone noticed the auto sales weakness in Canada, Japan, and parts of Western Europe?
Posted by: Movie Guy at November 4, 2005 09:28 AM
I think the big problem is the slow and steady erosion of market share in the Big 2.
Yes they have had 'snap backs' but the long term trend is down.
By moving into the profitable pickup/ SUV segment in a big way they sustained profits. But now the Japanese manufacturers have entered those segments with good cars: Honda CRV etc. My aunt and her partner both drive Subaru FWDs and are very happy with them.
What's more, the Japanese SUV type vehicles are more 'car like' and that seems to be where the market is going (smaller more fuel efficient SUVs and perhaps pickups).
Wherever the Big Two go, the Japanese follow, and sometimes they get there at the same time. It's like a dogfight where they are caught in ever decreasing circles by a more manoeuvrable opponent (there is an Air Force major named John Boyd who invented modern air combat technique-- this was basically his key insight, the pilot and plane which could change what it was doing faster, react faster to new information, would win see www.belisarius.com ).
GM just doesn't make money on cars. Toyota does. As Toyota invades the SUV bailiwick, GM gets squeezed. GM is running out of places to hide.
In the long run I think the Big Two will use chapter 11 to get out of their legacy cost bases - pensions and healthcare. But with each turn of the wheel, they have smaller market share.
I have seen this pattern again and again in mature industries, whether it was mainframe computers (against IBM), or steel (against Nucor and the imports): the industry leader, with the superior execution, just slowly, brutally squeezes out the laggards. It's happening in airlines too, with Southwestern still eating the lunch of its competitors.
Posted by: John at November 4, 2005 09:33 AM
PS Rick I would add I think hybrids are potentially irrelevant in this. I am not convinced they add enough value to ever be a mass market car.
Posted by: John at November 4, 2005 09:34 AM
From your link:
"But that doesn't mean interest in fuel economy has vanished, Cars.com says: "Honda's fuel-efficient models drove more e-mail inquiries to dealers than any other used vehicles" in a recent survey period.
The switch shouldn't be read as a wholesale return to gas guzzlers, says AAA spokesman Geoff Sundstrom. "We'd be a little surprised if consumers turned on a dime — in this case 50 cents — and went back to big SUVs; $2.50 a gallon, on average, is still awfully high for most people," he says."
Posted by: M1EK at November 4, 2005 09:34 AM
"PS Rick I would add I think hybrids are potentially irrelevant in this. I am not convinced they add enough value to ever be a mass market car."
John, Toyota is selling the Prius to the US at 100,000 per year and could clearly sell more if they could make more. That's mass-market by any reasonable definition of the word.
Posted by: M1EK at November 4, 2005 09:39 AM
I am not sure this is a chance to test the theory about U.S. auto not mattering as much. It is very difficult to hold all other things constant in the U.S. economy.
The interactive effect of weather, terrorism, war, tax reductions, government spending, changes in productivity, actions by other countries, and other make it hard to know if U.S. auto companies matter or not.
Posted by: nate at November 4, 2005 11:58 AM
"...make it hard to know if U.S. auto companies matter or not."
You have to be kidding. Study the production and sales numbers, then go down the extensive list of suppliers. The cumulative hit on the U.S. economy is large.
Posted by: Movie Guy at November 4, 2005 12:24 PM
you have a good point. please do not misunderstand me. i tend to think auto companies matter more than many think, yet at the same time acknowledge that I could be wrong. i may not be as optimistic about GDP growth next year as many (assuming fed keeps raising interest rates to 4.5% and beyond) and think the probability of a recession per the recession probability index for year 2006 (see prior econbrowser posting) may be understated.
Posted by: nate at November 4, 2005 06:04 PM
when i say "matter or not", i mean matter to the overall U.S. economy.
in an absolute sense, the situation at GM and Ford definitely matter. There is going to be pain, suffering, loss, uncertainty and transitions for people at GM and Ford. This matters, and I did not intend to imply otherwise.
Posted by: nate at November 4, 2005 06:41 PM
I agree. I read the BLS data. but I have some doubts about sustainability. If auto sales are an indication, we're in for a bumpy 2006.
I looked at the following BLS quarterly rollups and reviewed the automobile data:
I can't say that I have a lot of confidence in the automobile and supporting industry numbers. It looks like something is missing. I know it's supposed to be reasonably accurate, but I always shake my head. Maybe it's just me, but I believe that auto production is still a big driver in this economy. One wouldn't always get that impression from reading the BLS data. But I don't know many other American source employers that have that many people working per shift with large volumes of inbound parts cargo traffic rolling in all day. From a helicopter or the ground, sometimes the best description is simple: "That's a big operation."
I like manufacturing. It's hard to watch it flow overseas in chunks. And I see no way for U.S. GDP growth to continue on an upward value added path as we lose more operations of all types. The Delphi bankruptcy will open another floodgate of additional production flow overseas as other suppliers mimic the Delphi model.
Posted by: Movie Guy at November 4, 2005 07:03 PM
I agree with MG...
Point #1 - did GM have to have the fire sale this last summer? Short answer 'yes'... they had to move the product and turn those cars sitting on lots into cash... as much cash as they could. Was it enough cash? No... but they did what they had to do.
Point #2 - is automaking still important. Damed right it is. It is still the largest driver of manufacturing & manufacturing is still a HUGE driver of the economy... consumer products consumption PULLs product from manufacturing & then causes a whole bunch of related service activity as a result. Without the connection... a whole lot of jobs associated with that consumption evaporates... and then soon the consumption too. Auto mfg is the biggest of all mfg sectors.
Point #3 will Delphi's issues lead to more offshoring of the value added in auto mfg? My guess is 'yes'... and a lot too. I spent the last part of the week with auto suppliers... They are watching this like a hawk.
Nate - you ought to read a few books:
1) 'The Machine That Changed The World' & 2) 'Lean Thinking'... both by James Womack & Daniel Jones. They tell the story of how you can manufacture almost anywhere if the management knows how to run a mfg organization correctly - they use automotive as an example with Toyota as the poster child for how to do it.
3) 'Manufacturing Works' by Zimmerman. They did a ten year study to measure the economic significance of mfg & learned it is still huge... even in our current IT based 'service economy'. I have taken classes from this guy - very good.
Posted by: dryfly at November 4, 2005 09:42 PM
100k cars a year, I think you would agree, on 14 million cars a year is just not a significant market.
It might grow to half a million, or a million-- and as quickly as production can be ramped up.
But there are a number of imponderables (to me):
- whether the extra fuel economy justifies the extra cost, for the majority of drivers
- whether the extra fuel economy is, in practice, that great for most drivers
- long term reliability of these cars, and hence residual value (a key driver in cost of ownership and leasing cost) - for example, as I understand it, the battery pack needs to be renewed after 7 years at a cost of several thousand dollars
You will remember the 'false dawn' of passenger diesels in the US in the 70s. Which may be one of the reasons why there is such customer resistance to them now. Hybrids could go the same way.
There are some departures in automotive propulsion which I think *are* pretty significant:
- rise and rise of diesel engines in Europe - half of new cars sold. (I'm not sure why the concept of a diesel hybrid has not yet been tried)
- first practical electric cars running in London. I have seen little fanfare about these. But if you know London you can see why these would be a brilliant idea-- they are even smaller than the Swatch 'Smart Car' hence ease of parking and manoeuvring. I believe they cost about £8k each, which is competitive for a car. And they don't pay the congestion tax, so an owner is easily saving £1600 pa. There are a host of cities in the world (very few in North America) where such a vehicle is eminently practical.
It would be great if hybrids offered the perceived benefits (here they are still far too expensive relative to their gasoline counterparts). I just don't know (yet) whether this is a 'fad' or a sustained step change in passenger car propulsion.
Posted by: John at November 5, 2005 01:34 AM
"I'm not sure why the concept of a diesel hybrid has not yet been tried"
Diesels are good at long distance driving, hybrids at city driving, but both engines cost more than a petrol engine. A diesel-hybrid would require someone that drives a lot both in cities and highway to make up for the added cost.
Posted by: Christian at November 5, 2005 04:32 AM
"long term reliability of these cars, and hence residual value (a key driver in cost of ownership and leasing cost) - for example, as I understand it, the battery pack needs to be renewed after 7 years at a cost of several thousand dollars"
Where do you guys all come from?
This is FUD, pure and simple. The residual value of the first-gen Prius is extremely high; and right now I could sell our 2004 Prius for exactly what we paid for it 18 months ago.
Toyota warranties the battery for 8 years and 100,000 miles; and early indications are that this was more conservative than usual for a warranty.
Posted by: M1EK at November 5, 2005 05:59 AM
"100k cars a year, I think you would agree, on 14 million cars a year is just not a significant market."
100k cars a year puts it in Toyota's top 3 selling cars, if I remember correctly (I looked yesterday for last months' sales detail and couldn't find it; but I remember from before that it was outselling all but Corolla and Camry).
That's "mainstream", if you believe that the Avalon, for instance, is mainstream.
Posted by: M1EK at November 5, 2005 06:02 AM
Oh, and MORE FUD:
"You will remember the 'false dawn' of passenger diesels in the US in the 70s. Which may be one of the reasons why there is such customer resistance to them now. Hybrids could go the same way."
Yes, I remember those diesels. Their ONLY justification was fuel economy; they were awful cars.
Compare and contrast to the Prius, which is a damn fine car. (See Consumer Reports' review).
Or to Toyota's hybrid SUVs, which outscored all competitors (hybrid or non).
Posted by: M1EK at November 5, 2005 06:05 AM
Automakers can improve milage on suvs with new hybrid systems and other technological advances - some of which I think will limit driver's control over the vehicle (as drivers are enormously wasteful). View the 2nd gear shift lockout on the corvette.
Japanese carmakers will continue to make inroads, but will not do so with small hybrid cars.
Most americans do not aspire to small hybrid car ownership, I concede that this market will grow somewhat. Carmakers will strike a balance that gives the public what they want.
Unfortuneately for detroit, japan seems to be ahead in this race. It didn't have to be this way - but anybody who mentioned gas mileage as a selling point at a us manufacturer prior to last year was almost certainly laughed out of the boardroom.
Honda rolled out the insight in 2000.
Posted by: biker at November 5, 2005 07:30 AM
"Or to Toyota's hybrid SUVs, which outscored all competitors (hybrid or non)."
You really don't want to go there, do you?
Posted by: Movie Guy at November 5, 2005 08:49 AM
""Or to Toyota's hybrid SUVs, which outscored all competitors (hybrid or non)."
You really don't want to go there, do you?"
Are you going to spend 900 lines on it? If yes, then I don't want to go there.
Consumer Reports rated them the tops in their class, compared to hybrid and non-hybrid SUVs. In a discussion about the diesel debacle of the 1970s, that's all that ought to be required to show that they are good vehicles whether or not you care about the powerplant, unlike those diesel cars.
Posted by: M1EK at November 5, 2005 10:30 AM
Bang for the buck, the first two hybrid plus SUVs from Toyota are fuel economy performance and marketing failures. The gasoline only versions of the Toyota Highlander and Lexus RX330 are better buys with similar fuel economy performances.
A few sources:
Doug Douglas, Consumer Reports, email@example.com, 10/3/2005 6:02:00 PM
Consumer Reports -- "The Highlander Hybrid and RX400h are excellent overall packages, providing an inviting blend of performance, fuel economy, comfort, and features for those who don't mind paying extra. The 22-mpg overall for the Highlander Limited ($39,885 as tested) and 23 mpg-overall for the RX400h ($49,883 as tested) are the best Consumer Reports has measured in a midsized SUV."
"But for drivers considering a hybrid to save money, it's hard to build a dollars-and-cents case for either of these SUVs based on fuel-savings at the gas pump. Both vehicles cost thousands of dollars more than the conventionally-powered versions of these vehicles. It could take 10 years or more to recoup that cost through savings at the pump-assuming that you're driving about 15,000 miles a year and that gas costs about $3 a gallon."
Toyota to rethink on Hybrid Plus models ('big electrical appliance')
August 8, 2005
Customers are not willing to pay dearly for what Toyota chief engineer for product planning, Shigeyuki Hori describes as a "big electric appliance".
"The hybrid versions of the Harrier [Highlander hybrid] and Kluger [Lexus RX400h] sports utility vehicles in the domestic market have not worked well," Mr Hori said recently.
He says lack of sales success could be because the hybrid system adds 20 per cent or more to the retail price of the two models, which were launched in March.
BEHIND THE WHEEL/2006 Lexus RX400h; The Hybrid Emperor's New Clothes
By JEFF SABATINI
New York Times
July 31, 2005
"In my test-driving, the Lexus hybrid, which is based on the gasoline-only RX 330, did not achieve better mileage than the 2005 RX330 that I drove for comparison."
More Thirsty Than You'd Think
By JAMES G. COBB
New York Times
July 31, 2005
"I have a reputation as an economy driver - four decades ago, I drove in the Mobil Economy Runs, on teams that competed to use the least gasoline - and I usually get better mileage in any car than anyone I know. I calculated my mileage in the Highlander Hybrid as 23 m.p.g. (although the car's computer said it was 25)."
BOB KNOLL - Take the Four-Cylinder Instead
"If you want a hybrid car to save energy, you may be disappointed in the Highlander Hybrid. On a recent 900-plus-mile Los Angeles-Phoenix round trip, my all-wheeldrive test car averaged just 21.6 m.p.g. - on pricey premium fuel. What's more, my average for one 400-mile leg was just 16 m.p.g."
JERRY GARRETT - Unmet Expectations
"The hybrid premium would be easier to take if the mileage were terrific, but I managed only 23.7 m.p.g. over 300 miles of urban plodding, high-speed cruising and rural driving in upstate New York. This was not much better than the 22 m.p.g. I recorded, over mostly the same roads, in a large nonhybrid sedan, the 2005 Toyota Avalon."
"To some extent, these new hybrids seem driven less by engineering than by marketing, building on Toyota's environmental image to sell premium-price cars to those who'll pay for a green label. "For the typical hybrid buyer, it's an ideological choice more than than a financial choice," Gabriel Shenhar, senior auto test engineer for Consumer Reports, said last week. He suggested that if Toyota had truly wanted to make a fuel-efficient seven-passenger wagon, it could have developed a hybrid from the four-cylinder Highlander with real-world mileage of 30 m.p.g."
Posted by: Movie Guy at November 5, 2005 09:41 PM
No one would be more gratified than I if hybrids turn out to be a winner. I think though 100k is hybrid sales *across all models* so not strictly comparable to *sales of one model* of passenger car. As I said, 100k on 14m-- one swallow does not (yet) make a summer.
But to date I haven't seen that evidence that they will prove to be a long term winner. They are a winner in a marketing sense, but as Movie Guy points out in his quotes, the vast majority of car buyers are not prepared to pay thousands of dollars more for the same car with a different power plant.
Your points about residual values are irrelevant: the key metric is residual value at 5 years, not at 18 months. And this is a market characterised by scarcity which drives up residuals. BMWs historically held their resids quite well, but then they crashed (a complex and expensive car to maintain) past a certain age-- a phenomenon I track here, where you see lots of old BMWs parked on Council Estates (public housing).
What we don't have is enough operating history on these things. Toyota builds good cars with low total lifecycle costs of ownership, but whether this extends to a whole new powerplant system remains to be seen.
My point about diesel cars was that fashion comes, and goes. What I have seen in the press suggests the operating efficiencies of driving a hybrid aren't large enough to justify the cost to the buyer. Since there is already a substitute available (the same car with a petrol engine) they could just develop into an (interesting) niche product.
Posted by: John at November 6, 2005 01:55 AM
"I think though 100k is hybrid sales *across all models*"
No. Prius alone is slated for 100K this year.
"the vast majority of car buyers are not prepared to pay thousands of dollars more for the same car with a different power plant."
I agree. That's why the Prius is a huge winner and the others, not so much, until they get their added cost down.
"Your points about residual values are irrelevant: the key metric is residual value at 5 years, not at 18 months."
Hence the previous gen Prius, which have been out long enough to have cars that are 5 years old, and are doing very well.
"What we don't have is enough operating history on these things."
200,000 miles. Bought back by Toyota for study.
"My point about diesel cars was that fashion comes, and goes."
Agreed, fashion comes and goes. The problem in comparing today's hybrids to yesterday's diesels is that all the diesels had were fuel economy; they were otherwise very poor cars. The hybrid vehicles currently on the market are class-toppers.
And MovieGuy, pay attention to this line in the (very short) post in which I asked you not to respond if it was going to be long:
"Consumer Reports rated them the tops in their class, compared to hybrid and non-hybrid SUVs. In a discussion about the diesel debacle of the 1970s, that's all that ought to be required to show that they are good vehicles whether or not you care about the powerplant, unlike those diesel cars."
Posted by: M1EK at November 6, 2005 08:22 AM
I think that the hybrid suvs were rushed to market to capitalize on this high-margin market.
An suv is probably not a great platform to showcase hybrid technology.
The scaling (or inability to appropriately scale) of the components and clear aeodynamic disadvantages may negate the hybrid system gains.
So is it worthwhlie to have a hybrid at all - why not have a more efficient plain vanilla engine drivetrain ? Many of the hybrid advantages have nothing to do with making the car "go" - the engine shutoff at stops and removal of fuel while coasting are two of the biggies. A wide tire, aerodynamically "dirty" vehicle driven by somebody who doesn't shut off the a/c doesn't realize these gains.
Posted by: biker at November 6, 2005 08:56 AM
An suv is probably not a great platform to showcase hybrid technology.
A diesel electric hybrid could work well in a large vehicle platform like an SUV. I read about GM producing buses with diesel-electric hybrid technology & they expect to see gas mileage improve 50% or more... possibly even double on some routes.
Part of the success of hybrids is how they are used... if they are used in long haul over-the-road driving then the milage converges on the gas or diesel engine mode alone... you get the milage of whatever the vehicle would run with only the engine running (plus lugging around the electic motor & battery)... not good.
But in city stop-n-go is when the engine alone is least efficient (acceleration-deceleration) but the electric motor is MOST efficient. That is why the Prius is so-so in long trips but ass kick in stop-n-go commuter & urban environments... the electric motor does most of the work at the low speeds & acceleration using energy provided earlier by the engine while running at high speed... almost 'free'.
If going long distance OTR most of the time - look at vehicles with diesel engines alone, only make sure to get one that is properly sized & geared & turbo-charged... like the VW Jetta TDI My wife and I each own one... she has the sedan & I have the wagon... both have manual transmissions... we routinely get 45 mpg to 50 mpg... and they were pretty inexpensive to buy... a little over $20K each.
I realize they aren't cleared for use in Cali yet but really are pretty clean - okay everywhere else. My understand that as soon as low sulfur diesel fuel is everywhere that they will be approved for use even in Cali.
Posted by: dryfly at November 6, 2005 11:15 AM
A bus or locomotive can be built with big robust components and the cost defrayed over probably ten times the milage that a consumer vehicle can.
I agree with your assesment of the pure diesel for a large mileage improvement for low cost.
Posted by: biker at November 6, 2005 02:17 PM
The advantage of a diesel hybrid is not mileage but driving pleasure. The electric engine would supply the excelleration which a diesel lacks compared with a gas engine
Posted by: c at November 6, 2005 06:03 PM
If you look at the European diesels out there now, with turbochargers, the acceleration problem is pretty much licked.
I agree generally that diesel hybrid is an interesting technology especially for buses etc that do an enormous amount of stop and go.
Posted by: John at November 7, 2005 12:34 AM
Mostly true, but the Prius can run the A/C off the battery. Don't know about the Escape, but I assume the Toyota SUVs can do it too. (1st-gen US Prius could not do so, if I remember correctly, and I don't think Civic Hybrid can either).
Posted by: M1EK at November 7, 2005 05:58 AM
Future cars will be more "driver proof" - if the suv is driven "a little wrong" the milage plummets. Anybody can hop in my insight and do 45-50mpg under most conditions because the car is so light and efficient.
I think that battery technology and high voltage systems will lead to some really cool cars (and unfortuneately, trucks).
Posted by: biker at November 7, 2005 10:30 AM
The seeming paradox, in relation to the lack of investment by the leading oil companies, may have a relatively simple, but stark and disturbing explanation. Oil companies are not re-investing more of their huge profits in increased exploration and production, because, probably, they just don't believe the extra oil is there to be found! The rate of return on extra investment in increased exploration, leading to increased production appears to have been falling for a least the last five years - probably longer. This is a depressing thought leading up to Christmas I know, but I just thought I share it to bring everyone down! As Marlowe wrote, "It is a comfort in wretchedness to have companions in woe." Happy Christmas!
Posted by: michael krug at December 1, 2005 08:50 AM