Having invested heavily in luxury automakers Tesla and Fisker, the Obama administration is now putting the screws to their gas-engine competitors, Porsche, BMW, et al.
In their regulatory plot to make the gas engine go the way of the incandescent light bulb, Obama’s EPA is not just mandating 56 mpg by 2025 — effectively creating a standard only hybrid electrics can meet — but putting in place harsh fines for companies that make engines they don’t like.
“Future U.S. government fuel economy regulations could saddle auto makers with steep fines or even bar the sale of certain models,” reports the Wall Street Journal’s Sharon Terlep. “Violations of proposed government standards could cost auto makers up to $25,000 a vehicle beginning in 2016, up from current levels of $5 to hundreds of dollars per vehicle.”
Fines for failing to meet arbitrary mpg edicts have been the cost of doing business for luxury automakers for decades since Corporate Average Fuel Economy (CAFE) rules debuted. Mercedes, for example, paid $2.9 million in 2010 because it makes a limited menu of high-performance vehicles that the company cannot offset with tiny fuel-sippers as major manufacturers like Toyota and GM do. But now that EPA’s green priestess Lisa Jackson has taken over CAFE enforcement from NHTSA, the sin taxes are gonna get painful.
“This is basically an attack on the way they do business because the things they traditionally sell are based on size and power,” Bill Visnic, an auto analyst with Edmunds.com, told the Journal. “To do something like this is essentially putting them out of business here.”
And putting them out of business would benefit . . . Washington’s “investments.”
Not uncoincidentally, the Obama Energy Department has invested $529 million in Fisker Automotive and $465 million in Tesla. Both are Silicon Valley–based, Friends-of-Barack, luxury electric carmakers.
Fisker will use its federal loan to build the $100,000 Karma and $50,000 Nina luxury electrics. Their wealthy buyers will get a further taxpayer gift of $7,500 on purchase. Tesla’s loan goes to development of the $60,000 Model S sedan.
Meanwhile, the feds will be strangling gas-powered automakers with penalties — including Government Motors’ Cadillac division — as the draconian rules are phased in beginning in 2017 (less than two product cycles away). These automakers haven’t made electrics a priority because, well . . . their customers don’t want them.
Electrics are simply inferior to high-performance gas engines. Take Tesla’s $120,000 Roadster sports car. Though impressive in performance, it is less capable than the similar Lotus Elise — which costs half as much. That’s one reason the Roadster is going out of production this year.
“(Luxury automakers) have avoided the investment until now,” TrueCar.com auto analyst Scott Painter tells the Journal. “Now the American government is saying, ‘You’ve got to go do it.’”
And you thought central planning had gone extinct with the Soviet Gosplan.
“Praying for the insanity to blow over is the auto industry’s strategy for dealing with the Obama administration’s latest urge to double down on fuel economy mandates,” writes Journal columnist Holman Jenkins.
But prayer did not save light bulb jobs. Manufacturers must prepare for government edicts, and — like the feds bulb ban which has shut down factories across the U.S. — automakers will soon have to start retooling to make Washington’s green cars.
It will put luxury automakers in a tough spot: Make electrics its customers don’t want, or make gas-powered cars priced out of reach by government fines.
— Henry Payne is editor of TheMichiganView.com and cartoonist for the Detroit News.
When will the insanity end? I will not buy any car from a company the government owns or has given to unions. (Pity, too...I really liked Buicks). I wish I had about five years as dictator so I could abolish the EPA, the Education Dept., the NLRB, get us out of the U.N. while forming an organization of democracies,and restore freedom.
Reply to this commentLinkReport AbuseAs of March, Chevy had sold just 928 Volts, and Nissan had sold a whopping 173 Leafs in the US. People just don't want them. And unless there's some technological breakthrough that permits ten times the energy density in batteries, no one will ever want them. But that won't stop the EPA - they'd rather see the car companies go bust. In 10 years, I foresee Americans getting on two-year waiting lists for the privilege of buying the 21st-century equivalent of a Trabant or Moskva from Government Motors. Think it can't happen here?
Reply to this commentLinkReport AbuseWhat is going to happen since they will put all new cars out of reach $$$$ is create a market in rebuilding classic (pre-1979) luxury (and not so luxury)cars. If a new car is hundred grand why not rebuild a classic one that you custom build to your own taste? Many people seem to prefer the cars of years gone by anyway. A new crate engine, a new coat of today's paint to keep the rust at bay, and you got a car with character.
It will be like Cuba where they keep the 1950's cars on the road because there are few new ones (and those stink).
CAFE really needs to go. Why does the government have to have a say in what we drive?
Reply to this commentLinkReport AbuseIf the US will still tie it´s economic growth opportunities to the rather cheap availabilty of crude oil, there will be no other option than refurbishing old gas guzzlers, I agree with that. A vicious circle though. European car manufacturers already offer cars with 56 mpg and beyond, but not in the US?! Maybe they do when it´s mandatory.
Reply to this commentLinkReport AbuseWhy shouldn't we tie our economic growth to the cheap availability of crude oil?
It's cheap, it's available, and will be for at least 100 years, more if you include the cheap and available conversion technologies.
The only time oil is neither cheap, nor available, is when govt gets in the way. Like the do in Europe.
Reply to this commentLinkReport AbuseExactly. Especially when you factor in cheap coal and cheap natural gas. Energy is mostly expensive because of govt over-regulation.
Reply to this commentLinkReport AbuseIf I understand correctly, in some countries (Japan comes to mind, there may be others) you are REQUIRED to dispose of your "old" car after 5 years or so - even if it's still running perfectly. As a result, there ARE no old cars to customize. It's getting harder to do that here, too. Modern cars are so complex and electronics-laden, it's well-nigh impossible for a shade-tree mechanic to work on them.
Reply to this commentLinkReport AbuseMr. Kammeyer, you might be interested in this NYT article from 1993:
External Link
.....Rather, experts say, there really are relatively few old cars in Japan, because of an automobile inspection system that is so onerous and expensive that many people prefer to trade in a perfectly good three- or five-year-old car rather than spend hundreds or even thousands of dollars for the inspection.
The inspection system, critics say, is a case study of the regulations in Japan that benefit businesses at the expense of hard-pressed consumers. It is the type of regulation that Japan's new Government is promising to relax as part of a major effort to improve living conditions.
"The people who profit from this are maintenance shops and car makers," said Fumio Matsuda, head of the Japan Automobile Consumers Union.
Japan's 83,000 garages obtain 44 percent of their roughly $60 billion in annual revenues as a result of mandatory inspections. Automobile companies benefit because people replace their cars frequently."
IOW a convenient system for the automakers and repair shops, but not for consumers.
(I have no idea if this system still exists. I think not; there's a website offering right-hand drive Japanese car models from the late 1990's.)
External Link
Reply to this commentLinkReport AbuseIf I understand correctly, in some countries (Japan comes to mind, there may be others) you are REQUIRED to dispose of your "old" car after 5 years or so - even if it's still running perfectly. As a result, there ARE no old cars to customize. It's getting harder to do that here, too. Modern cars are so complex and electronics-laden, it's well-nigh impossible for a shade-tree mechanic to work on them.
Reply to this commentLinkReport AbuseYou miss the point. If a new car is going to run $100k, you can purchase a late model used car, spend $25k for a professional rebuild, and still be way ahead of the game.
It's very doable, but I doubt that many people would take that course of action.
Reply to this commentLinkReport AbuseAs I recall, it's at about 10 years, and it's merely highly encouraged by drastically increasing the taxes on a car to the point it's not worth keeping it, unless it's a special, collectible item. When I lived there as a military member, U.S. personnel were exempt from that onerous taxation - we would literally troll junkyards and pick up perfectly fine cars that the previous owner drove in to re-register and resell to our fellow Americans.
Reply to this commentLinkReport AbuseAlways use scare quotes when talking about government "investments". Its SPENDING. There is no chance of taxpayers ever getting a return on their money that is being spent against their will.
Every time a Democrat says the word "invest" you can count on your children and grandchildren having to pay yet higher taxes to service the debt incurred by the increased spending.
Government "investment" is essentially a redistribution of wealth from ordinary taxpayers to the wealthy owners of the private companies receiving the subsidy (use this approach when discussing the issue with a liberal, it puts it in class warfare terms that they can understand).
The Volts sales figures are due to spike: GE, the Queen of Corporate Welfare, has announced they plan on buying a fleet of them (something like half the initial production run). Of course, they'll be getting a taxpayer subsidy of $7500 per car...
Reply to this commentLinkReport AbuseI will vote for any presidential candidate who agrees to appoint Sarah Palin EPA administrator.
Reply to this commentLinkReport AbuseI will vote for anyone that will end the EPA and return the function to the states where it should have been along.
Reply to this commentLinkReport AbuseThe goal of this administration is to ensure that the only cars available for purchase aren't usefull for anything practical. That's the only way they can force us to ride the trains and buses they insist on buying.
Reply to this commentLinkReport AbuseThis is primarily an attack on us "non-elites" rather than on the the auto industry. It's part of the green movement's we humans (everyone but themselves that is) are the problem. These unwashed millions should use mass transit but it suffers because too many people can afford to have their own transportation. They will not be satisfied until the two car garage for everyone but themselves is replaced by parking for a motor scooter or a bicycle.
Reply to this commentLinkReport AbuseOf course it hurts the middle class guys the most. They are the ones building the luxury cars. The hurt and stick it to the rich always misses the target and gets the middle class. Always!
The same thing happened when they taxed new yachts a few years ago, rich people stopped buying them and middle class yacht builders got laid off.
Reply to this commentLinkReport AbuseI think the government should get out of the business of mandating to people what they should buy. If I want an incandescent light bulb, I should be able to buy it.. If I want a dishwasher or washing machine that actually works, or a toilet that actually flushes, I should be able to buy it. If I want a car, I don't need the government telling me what to buy. No wonder this country is so messed up.
Reply to this commentLinkReport AbuseAmen!
Reply to this commentLinkReport AbuseGood lord people, did you even read the article? So they're going to go from fining each car $5 to fining them several hundred dollars. That's a couple hundred dollars on a MERCEDES BENZ! Have any of you looked at the price of a Benz lately? That $300 is one third of one percent of the purchase price. Yes 0.3%. I get tired of this chicken little crud. Mercedes Benz, BMW and Rolls Royce aren't going out of business because the price of their cars went up 300 bucks nor will anyone even notice.
As far as the investment, they put 50,000,000,000 into GM in the last two years. That's 100x times as much as they LOANED Fisker. GM and countless American's who build cars are still employed because of that and half of it's been paid back in stock too. If they hadn't done that we'd have ONE car company left and you'd all be forced to buy tiny little cars from Europe or Japan.
And as far as the Tesla Roadster going out of production.... Do some research. The car is based on a Lotus foundation that is no longer being built as of this year thus Tesla couldn't convert them to electric anymore.
I realize that people just like to whine without having any real basis but there's plenty of real things to worry yourself about without making them up.
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