Detroit, Mich. – Today, Michigan’s federally controlled automakers and their governor endorse a 39-mpg-by-2015 car fuel-economy mandate that they know to be unachievable and that will do enormous harm to their bottom lines. But when market socialism replaces the rational decisions of the marketplace, such irrationality becomes commonplace.
Consider:
– After 30 years of tax-goosed fuel prices — triple those in the U.S. — and massive diesel subsidies, to boot, Europe has only just reached a 39-mpg fleet average. Yet Dave McCurdy, head of the auto lobbying group the Alliance of Automobile Manufacturers, said Washington’s goal “is doable.”
– McCurdy buttresses this irrational statement by claiming that 130 models already get 30 miles or better on the highway. This is a calculated, Cintonesque fib. In fact, only 14 vehicles — most of them expensive hybrids — currently get a combined city/highway average of 30 mpg, which is what the federal mandate requires.
– President Obama trumpets high-mileage European cars while automakers embrace the European tax incentive to motivate consumers to buy them. But hiking gas taxes in the U.S. is political suicide. So automakers get stuck making Obama’s dream cars, while Obama punts on the tax incentive.
– Gas-engine fuel efficiency gains generally average 1.5 percent per year, but achieving the 2015 standard would mean a whopping 6.6 percent increase annually. This means that manufacturers will have to equip cars with alternative engine technologies like diesel or hybrid, increasing vehicle costs by $2,500 to $8,000 per vehicle, say engineers. Yet a “senior administration official” simply pulls a number out of the hat and says the cost will be “only” $1,300 per car.
– Whether $1,300 or $8,000, consumers won’t be buying. A 2008 Center for Automotive Research survey found consumers unwilling to spend more than $200 extra on cars to have environmental improvements.
– Rep. John Dingell endorsed Obama’s plan, not because it will mean fewer jobs and less money in the pockets of his constituents, but because he will now be in control of billions of dollars in government welfare that the feds promise automakers to make up for their losses producing unprofitable vehicles the public doesn’t want.
– Anticipating the government mandate, Ford is crowing about making less profit. You read that right. This month, the company boasted about converting its Warren plant from producing SUVs to small Ford Focuses. The plant was once Ford’s most profitable, producing trucks generating at least $5,000 per vehicle. The Focus will make $1,500 per vehicle at best. Hooray?
Americas’ personal transportation market is no longer governed by consumer choice but by government edict. Consumers don’t rank fuel efficiency (just 16 percent of U.S vehicle sales are small cars) or global warming as high priorities. But Washington Democrats do.
To explain the inevitable contortions this clash of government and consumer choices will engender, get used to lots of irrationality.