It is full speed ahead on Detroit-bashing these days, and one hot economic question of the moment is whether or not to keep the Big Three out of bankruptcy. President Obama has previously stated that if the Feds are to bail out Detroit, the Big Three should build products more in tune with consumer demand. There is even talk of having the government appoint a “car czar” to help oversee the Big Three’s future.
Anticipating future consumer demand is, of course, the trick. It takes about five years to get a new vehicle from concept to the showroom. Whatever car builders worldwide are pondering today won’t be for sale until around 2014.
Here is a real life challenge. Pretend for a moment that you are Obama’s car czar. It is the mid-1990’s and designers at two of the world’s best car brands bring forth plans for first generation hybrid electric/gas passenger vehicles for launch in Year 2000. One design is a futuristic two-seater three-door hatchback, feather light (under 2,000 pounds even with its heavy battery pack), and a real gas sipper that eventually earned an EPA highway mileage rating of 70 mpg. At the time it was the highest highway mileage of any production car in the history of EPA ratings. The second proposed vehicle is a futuristic four-door four-seater weighing in closer to 3000 pounds with a combined EPA rating in the low 40s.
Both prototypes cost hundreds of millions, even billions, to bring to market. Okay, “Joe the car czar,” which do you build?
If you chose the four-seater with the combined EPA rating in the low 40s, congratulations. You had the vision, foresight, and environmentalist “chops” to build the Toyota Prius. Recently, Toyota sold the one millionth Prius worldwide. It is far and away the most successful hybrid ever built. (Some would argue the only successful hybrid ever built.)
If you selected the two-seater with the 70 mpg EPA highway rating, you chose the first generation Honda Insight. The Insight launched in America in late 1999 and, despite its incredible fuel economy and distinguished Honda pedigree, it never really caught on even among the “greenie” road warriors. In early 2006 and despite rising gas prices, Honda pulled the plug on the first generation Insight in the U.S. market due to lackluster sales. Indeed, in the First Quarter 2006 Honda reportedly sold only 320 Insights nationwide, while Toyota sold 30,357 Prius units.
Predicting consumer demand five years hence is no easy task, and every car company goofs whether the home office speaks English, German, or Japanese. It is even difficult to guess the right environmental battleground a half decade hence. For example, ethanol reduces petroleum imports (and tankers on the sensitive waterways) and its production consumes CO2 and produces oxygen. GM has led the way with their “flex fuel” vehicles that can run on 85 percent ethanol. There are over one million GM flex fuel vehicles on the road, maybe the best kept “green” secret in America.
The future? Look for an update in 2014!