Monday, April 06, 2009

Nuisance Consumers With Insufferable Preferences

The stunning shift in consumer preferences that should make the White House's freshly minted auto experts feel vulnerable has been reported under headlines such as "Like a Rock: Hybrid Car Sales Plummet" (Wall Street Journal, Dec. 9) and "Hybrid Car Sales Go from 60 to 0 at Breakneck Speed" (Los Angeles Times, March 17). Absent $4 gasoline, customers, those nuisances with their insufferable preferences, do not want the vehicles the politicians want them to want, even with manufacturers now offering large rebates and other incentives.

The two best-selling vehicles in America this year are large pickup trucks (Ford F-Series and Chevy Silverado). In February, Toyota sold 13,600 Tundra and Tacoma pickups and 7,232 Priuses (see chart above). It sells the Prius at a loss, which it can afford to do because it makes pots of money selling pickups. Has the Car Designer in Chief, aka the president, considered the possibility that what he calls "the cars of tomorrow" will forever be that?


~George Will's column today

10 Comments:

At 4/06/2009 8:47 AM, Anonymous Anonymous said...

It is starting to become clear that for RePO (Reid-Pelosi-Obama) Motors to work, there will need to be "government motivated buying". Will we soon see public humiliation for the 'wrong' purchase?

 
At 4/06/2009 9:23 AM, Blogger Paul said...

"Absent $4 gasoline" is the key phrase here. Obama and the Democrats are shutting down millions of acres of potential energy sources in the Green River Valley, adding new taxes to domestic oil companies, and ensuring no new offshore drilling will occur on their watch. We'll be back to $4 gas soon enough, and the people will be herded back into the glorified lawnmowers.

 
At 4/06/2009 9:37 AM, Blogger Chris Janc said...

This highlights the biggest issue with green policy right now: how to achieve goals without destroying the economy.

While producing cleaner, more fuel efficient cars is a laudable goal, the best way to encourage the purchase of such cars is through increased energy (gasoline) costs, which will take a very big toll economically.

Of course, there is another argument to be made about the profitability of hybrids: once the auto makers have re-tooled to make those vehicles their primary fleet, the costs to produce will be greatly reduced. This should drive prices to the consumer down, making those vehicles more attractive.

That said, I am still against the government dictating what kind of car I can buy.

 
At 4/06/2009 9:49 AM, Blogger misterjosh said...

I hate to go all Greg Mankiw on you, but they really need to start taxing Gas higher.

 
At 4/06/2009 9:53 AM, Blogger Monkeesfan said...

Paul - don't be so sure, as most of last year's spike was because of unexpectedly high demand that's unlikely to be replicated to the same level this time around. And Obamanomics will be dead by 2011 the same as Hillarycare was dead by 1995.

Misterjosh, there is no need to be taxing Gas. Period.

 
At 4/06/2009 9:54 AM, Blogger Colin said...

You should have included the prior paragraph, which says:

Last week, in an unenthralled summary of GM's "viability" plan, Obama's administration said: "GM earns a large share of its profits from high-margin trucks and SUVs, which are vulnerable to a continuing shift in consumer preference to smaller vehicles. Additionally, while the Chevy Volt holds promise, it will likely be too expensive to be commercially successful in the short term."

There are at least a couple possible explanations here. One is that whoever wrote the administration's report on General Motors is incapable of performing basic research. Another is that they are ideologically blinkered and see only what they want to see: a future in which small, fuel efficient cars reign supreme. So take your pick, incompetence or ideology.

 
At 4/06/2009 10:13 AM, Blogger OBloodyHell said...

> Of course, there is another argument to be made about the profitability of hybrids: once the auto makers have re-tooled to make those vehicles their primary fleet, the costs to produce will be greatly reduced.

This is a ridiculous and unwarranted assumption, that all that stops these cars from being cheaper is economies of scale.

It's a blatant, self-evident fact that, by virtue of the dual systems (Hint: where did you think the term "hybrid" comes from?) they have more components in them, which automatically means higher costs. *Period*.

In real fact, it takes gas on the order of not four but SEVEN dollars a gallon to justify them *now*.

This makes them a yuppie version of the State Lotteries: A tax on people who can't do basic math.

To wit:

Avg cost of 40mpg "standard" Honda: US$19,000

Avg cost of supposed 60mpg "Hybrid": $26,000

Difference: $7,000.

Add in extra expense for increased interest/financing cost: $7,700.

The average person drives 10-12k miles per year (assume it's 12k).

12kmi/40mpg == 300 gallons.
12kmi/60mpg == 200 gallons.

Difference in operating cost per year: 100 gallons of gas.

Hence, a 5 year ownership expense/savings represents 500 gallons of gas, which must be played off against that extra $7,700 the car cost.

500 gallons of gas has to cost over $15 a gallon in order to pay that $7700 back.

Clearly, all these numbers can be played with a bit -- increase the time of ownership, decrease the added expense of the hybrid -- but it still means that, even with about a minimal $3000 difference in price between the two, the son of a bitch piece of crap hybrid isn't going to pay for itself at less than ***$6 a gallon***.


In short, the non-PC term for people who buy hybrids is:
"MATHEMATICALLY RETARDED IDIOTS".

 
At 4/06/2009 12:39 PM, Blogger Colin said...

"500 gallons of gas has to cost over $15 a gallon in order to pay that $7700 back."

It's even worse than that because the $7700 is a one-time cost while gas is incremental. Thus the $7700 represents money that could have been in the bank earning interest.

 
At 4/06/2009 1:41 PM, Blogger QT said...

Colin,

Thanks for mentioning the issue of present value.

OBH,

Although the average miles driven is more like 15,000 per year, agree that the math is against the Prius. Additionally, repairs (like replacing that battery) are also 8.4% higher than cars of comparable size to say nothing of the cost of replacing the battery.

The Prius became a personal statement. It is interesting that the public are not buying.

 
At 4/07/2009 9:04 AM, Blogger 1 said...

"I hate to go all Greg Mankiw on you, but they really need to start taxing Gas higher"...

You of course misterjosh are willing to pay the higher gasoline extortion rates (unless you're joking) for all of us, right?

Note the following from the Tax Foundation that came out 2005: Local, State and Federal Gas Taxes Consume 45.9 Cents Per Gallon on Average...

Makes me wonder how local, state, and federal governments can be constantly crying poormouth...

 

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