Gas2 Week in Review, March 25: Prices, Safety, and CAFE Standards
This week on Gas2 it seems as if a lot of interest has centered on three particular areas. First, pricing came under scrutiny, with dealers across the U.S. charging really different prices for the Chevy Bolt, and various U.S. states debating whether EVs should or should not be eligible for price incentives. Second, vehicle safety was in the news, with automotive workers as well as drivers, passengers, and pedestrians part of larger discussions about how much human fallibility should balance out machine intelligence. Third, lots of talk focused on whether U.S. automakers can actually meet CAFE standards and still make a profit. Here are those stories, and more, for the week of March 25, 2017.
Now available in seven states, the Chevy Bolt has seen wildly different prices, depending on franchise location, dealer markdowns, and overall degree of sales aggressiveness. For example, a SoCal dealer advertised the Bolt for $4,439 less than a dealership five miles away. Federal tax credit and California EV rebate are really making the Bolt appealing there. Nationally, the Bolt sticker price ranged from 3.4% discounts all the way to 5.3% discounts. Any markdowns are coming out of dealer margins, according to GM spokespeople.
The consistent transition to EVs in 2017 comes with a difficult emotional evolution for businesses that adhere to long-established models. Instead of generating billions in profits each year through the conflation of legacy automobile prices alongside the fossil fuel industry profits, EVs are incrementally eroding gasoline consumption, making an already unstable commodity even more tenuous. With such changes continuing ahead in 2017, Big Oil is turning to the states, with pressure to increase EV fees. U.S. states, in turn, are wondering where they’ll get the revenue to fund road construction and repair costs as the gas bounty begins to dissipate.
The business climate in Alabama, with an absence of unions and packages of tax incentives, was quite appealing to automakers Mercedes Benz, Toyota, Honda, and Hyundai over the last couple of decades. Rather than a single product, these and other auto manufacturers rely on outside suppliers to assemble a finished car. Today, 160 auto parts manufacturers have also located in the Alabama, and those companies pay over $1.3 billion in wages every year to 26,000 workers. In a darker side to the picture, though, for 2014, industrial injuries at the factories operated by parts suppliers were 50% higher in Alabama than the rest of the U.S. industry. Not only are those workers exposed to a greater risk of injury, they also earn about 30% less than workers in the industrialized (and unionized) North.
Programmers of self-driving technologies must teach the machine how to assess traffic situations, including those that will, ultimately, cause the death of driver, passenger, and/ or pedestrian. Yet, because a driving situation may result in multiple possible pedestrian fatalities, self-driving technology may not choose to save the driver. Car crashes kill more than 30,000 people in the U.S. annually, and human reactions often factor into the severity of the injuries and damage when an accident occurs. Tesla CEO Elon Musk argues that fully autonomous vehicles reach a safety level at least twice that of a person. In what seems like concurrence, the Federal Automated Vehicles Policy has disseminated proactive safety guidelines through autonomous innovation. AAA found that 78% of people polled were afraid of riding in a self-driving car, a statistic that remained unchanged from the last year. Although most people surveyed said they fear traveling in a fully self-driving car, 59% also said they would like autonomous technology in their next vehicles.
U.S. automakers have been crying out that, if they meet the proposed 2025 CAFE standards, millions of workers will lose their jobs, and car costs will soar. Yet research indicates that CAFE standards may actually be 40% lower than previous estimates. This is because the technology already exists in the form of turbocharging techniques, advanced automatic transmissions, and the use of lightweight materials such as carbon fiber and aluminium. Indeed, U.S. CAFE standards are quite lower than what European and Chinese regulators require. Formulaic calculations used today are outdated and inaccurate. Yet car companies are sticking to “fake news” about how the proposed CAFE number is an impossibly high level to reach and way beyond their abilities.
Although U.S. automakers were delighted when President Trump announced last week in Michigan that he is ordering a CAFE review for the standards due to take effect in 2025, they are also in a bit of flux. The review could expose a series of contradictions. Car companies have already invested billions to improve fuel economy and risk squandering that investment. Progress toward making efficient automobiles to date makes future efficiency gains less expensive rather than more so. Regulators in other countries don’t attend much to the actions of U.S. regulators do. A Border Adjustment Tax will force automakers to reexamine their total fiscal pictures. And, if Trump eliminates the Advanced Technology Vehicles Manufacturing loan program that the automakers originally companies welcomed and arranged during the Obama administration, the result may be a period of chaos and unpredictability that will likely damage their bottom lines and reduce their competitiveness.
Photo credit: Foter.com