Published on December 31st, 2016 | by Steve Hanley
Auto Industry Fuel Economy Lies Exposed
Mitch Bainwol, head of the industry trade group Alliance of Automobile Manufacturers, is up to his old tricks — lying to the American public. Recently, Bainwol made this bizarro statement. “Well-meaning regulatory action risks increasing compliance costs to the point that additional safety and fuel-efficiency technologies put new vehicles out of financial reach of the average new car purchaser.” Translated, that means CAFE fuel economy regulations are driving the cost of new vehicles into the stratosphere. Pretty soon, ordinary people won’t be able to afford to buy a new car.
Bainwol has a point. The average cost of a new vehicle in America today is now $34,230. That’s a pile of cash no matter how you look at it. But are government regulations the culprit? No, say long time industry analysts Alan Baum and Dan Luria. Writing for The Hill, the pair has a very different perspective.
“In reality, today’s new vehicles are increasingly out of reach for many middle- and low-income Americans for reasons that have little to do with government standards. First, a shift toward trucks (including crossovers) has led to higher average prices, which for new vehicles have risen from $28,133 in 2009 to $34,230 in 2016. Second, a stronger economy has led to more robust demand, which supports higher prices. But by far the majority of the increase in prices owes to the addition of luxury features, such as comfort and entertainment.”
Auto makers are not stupid and they have every right to make as much money as they can possibly stuff into their wallets. But deliberately lying to people to cover up your own greed-induced behavior is despicable. Of course, in Trumperica, despicable is the new normal but still, the auto industry should be ashamed at such duplicity.
“The rise in crossover sales and more demand for luxury features are a result of growing U.S. income inequality that favors upper-middle class and upper-income buyers in the new car market. Automakers understand this trend and have modified their offerings by adding luxury features to more models and by creating more high-end versions in every segment.
“True, today’s vehicles have safety features like seat belts and airbags. But those regulation-driven items are not the source of most of the price increases. Even today’s base models include air conditioning, power locks and windows, cruise control, and 6-speaker sound systems, features unheard of for base models several decades ago when vehicle ownership was at an all-time high. Many higher-end models are also offered with more efficient powertrain packages, and many of today’s more affluent new-vehicle buyers willingly pay extra to get those packages.
“The rising level of feature content is occurring across automakers’ fleets. In every segment, high-end variants have been introduced or expanded in the last few years. And sales of these “higher-trim” level models have been increasing significantly faster than overall sales. The share of these high-trim models is often more than 25 percent, as compared to less than 10 percent in the past.”
The United Auto Workers and other unions also dispute the CAFE fuel economy smear. They argue that regulation often results in innovation, investment, which create more jobs. They point to strong job growth at automotive suppliers Strong job growth at many U.S. suppliers of fuel-saving technologies – among them BorgWarner, Bosch, Continental, Eaton, Delphi, and Owens Corning.
The pair ends their analysis with this observation. “Are today’s new cars and trucks less affordable for households at, near, and below the median income? Absolutely. But that reflects changes in the U.S. income distribution and the profit maximization strategies of the automakers, which have chosen to restrict production capacity and drive the market toward higher margin, higher trim level models. That strategy has resulted in record industry profits and in substantial job growth at both automakers and suppliers. Fuel economy standards are not free, but they are hardly a primary driver of why new vehicle prices have outpaced median income.” In other words, Mitch Bainwol, stop lying to the people and shut up!
Alan Baum is Principal of Baum & Associates, an automotive forecasting and research consultancy. Dan Luria is an independent industry analyst.
Source: The Hill