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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.

 

 

Electric Cars Not Living Up to Hype

October 13th, 2012
Much has been made about electric cars over the past year. You’ve heard the President promote all kinds of “green” businesses, and he has helped encourage them by offering all kinds of incentives like tax breaks for purchasing these products. Obama even bragged that America could have 1 million electric vehicles on the road by 2015.
Despite all of these large efforts, the campaign has done little to boost sales of this technology. Optimism was huge three to four years ago when the first mass produced electric cars came onto the market.
Stocks of companies that manufactured the components shot up in anticipation that this was the next wave of popular technology that was going to expand. Electric cars included the Chevy Volt and Nissan Leaf and many others.
When we look at the numbers, we see that reality does not meet the hype. Here are some numbers from 2011 – 
 
 
 
Dec 2010
Jan 2011
Feb 2011
Mar 2011
Total
Volt
326
321
281
608
1,536
Leaf
19
87
67
298
471
 
As illustrated in the chart above, there is no way that auto makers are going to meet the projected figures, especially since all of the problems that have recently been brought to light about the Chevy Volt. These problems, combined with high costs, and the stable gasoline prices have dampened demand for these cars.
 
Given the high price of nearly $50,000 for the Volt, even after the tax incentives, most consumers just find it too expensive to give up their traditional gas automobiles, especially since these cars don’t perform nearly as well, and they don’t have as much room. 
 
When you factor in the recent national average electricity rate of 11 cents per kilowatt hour, Consumer Reports calculated that the Volt costs about 5.7 cents per mile to drive in electric-only mode. That really is not enough savings to chase the perceived benefits. For the time being, hybris, such as the Toyota Prius might be the best alternative.
Furthermore, with new oilfields being exploited in the USA, and oil production expected to actually increase, the hopes for these manufacturers may end up being much further off into the future than anticipated.
 

Automotive Battery

Automotive Battery