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Auto Makers Forced To Sell Cars that Lose Money

November 24th, 2012

Why would an auto maker manufacture a car that they know will never be profitable? Because the state of California is forcing them to. In an effort to have cleaner air and burn less fuel, California lawmakers have had laws in place that require car manufacturers to create vehicles that produce little or no emissions.  With prompting from global warming alarmists, these same lawmakers have passed recent legislation that will be even more strict come next year. Every automaker that wants to be able to sell vehicles in California must offer one of these types of autos. The current law in place allowed manufacturers to get by with just offering high mileage vehicles, such as hybrids. But the newly passed legislation goes a significant step further, by requiring them to offer electric vehicles with no emissions. It matters not to legislators that there is little demand for these types of cars. Manufacturers must offer them, or lose the right to sell cars to most populated state in the union. And auto makers don’t want to be shut out of a state that boasts 10% of overall car sales in the USA.

Chrysler has estimated that it’s brand new electric car will lose approximately $9000 on each one it sells. Sounds crazy? Basically, all gas powered car owners are subsidizing a government enforced vehicle for everyone else. Some argue that this is what happens when government buerocrats get involved in dictating what consumers should buy and what manufacturers can make. Capitalists and free market advocates argue that market forces should dictate what is bought and sold, not politicians. But when it comes to the state of California, it is anything but a capitalist market.

 

 

The Japan Disaster And The Auto Industry

March 15th, 2011

The disaster in Japan has widespread repercussions for the citizens in that country, and our hearts go out to all affected. But the effects go far beyond the borders of Japan. This event has far reaching ramifications for the economy, including the automotive industry.
Of course you have the major car manufacturers, Honda, Toyota, and Nissan. Toyota was perhaps the hardest hit, as they have many plants in the vicinity. Many manufacturing plants cannot produce products anywhere near full capacity since there are rolling blackouts due to the nuclear power plants being off line.
Parts for other auto makers are manufactured in Japan, and supply disruptions are expected.
The port facilities that help load the ships that bring the product over to the US have diminished capacity as well. Some ports will be out of commission for months.
Tire manufacturer The Bridgestone Group has pledged 3.5 million dollars to aid in the relief efforts in Japan. Toyo Tires Group indicates that even though they have a plant right near the epicenter of the vicious quake, they sustained little damage to their facilities and can continue operations as normal once the blackouts are over. Many customers may need to wait to get tires mounted on Tire Changers if this disaster disrupts service for too long.
Stocks on Wall street in all effected industries have taken a significant hit due to this disaster, and continued uncertainty is expected.
There is speculation that this event could disrupt the auto industry greater than anything since WWII. Our prayers are with the people of Japan.

Japan Earthquake

Photo Courtesy BBC / UK