Saturday, April 30, 2005

American Industry needs to produce better cars

The most frustrating deficiency of the American automotive industry is its startling lack of vision. We know that one of the great challenges of the twenty-first century will be energy. Global oil production is set to peak in the next decade. The current fluctuation in the price spike in gasoline should be warning enough to the average American citizen that the cost and availability of energy is intimately linked to our standard of living.

Considering this fact, you would think that public policy and private industry would focus on increasing energy efficiency. So consider the automotive industry. Who is manufacturing the first hybrid automobiles? Who is making the most fuel-efficient cars? Answer: Toyota and Honda. I took some solace that Ford has a hybrid car, the Ascent, until I found out they were licensing the technology for it from Toyota. How disappointing.

In the 1970s, the big 3 were suddenly startled out of their slumbering oligopoly by a demographic trend on the west coast. Young car buyers were buying Japanese cars. You didn’t need a series of marketing survey to see why. The cars these consumers were purchasing were small, fuel efficient, dependable automobiles. It took the big three a good decade to catch on to the long-term trend, in the process trying to leap into the market with such memorable triumphs as the Pinto, the Chevette, the AMC Hornet etc. We know how this story ended. Today, Honda and Toyota have a legion of dedicated car buyers who associate the brand with quality and dependability.

I would like to suggest that the car industry is facing another such turning point in its history. Expect the long-term price of gas to rise. I believe the Japanese motor corporations have seen the writing on the wall. I have no doubt that market conditions will spurn interest in more fuel-efficient cars. While I am not a huge proponent of free markets, I have no doubt that the markets will respond to these trends, and the demand for greater efficiency will be met with innovative answers. The sacred cow of technology will provide. The only question remains, which will be in the best position to respond.

Once again, Detroit is setting itself up to lose. The Honda Insight and the Toyota Prius are your harbingers in this market.

I would like to be able to attribute all this to some conspiracy; shady smoke filled rooms with executives from General Motors and Exxon shaking hands and making deals to prevent the secret X class automobile that gets 200 miles per gallon from ever reaching the market. The conspirators snicker as they place the blueprints for super Car-X in a safety deposit box deep in the dark recesses of the main headquarters of the Illuminati.

I will suppress this urge to fantasize though, and take the more likely explanation, which is just that American industry has its head up its ass, yet again.