Free Market? How Detroit Designed Its Own Catastrophe
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Jon Cohn has a very intelligent take on Obama's auto industry announcement today. It's all worth reading. Emotionally, I was struck most strongly by this paragraph:
Obama is committed to pushing the auto industry to become greener even as it becomes leaner. And that is absolutely the right goal. But right now the big obstacle to selling more fuel efficient cars is on the demand side. Consumers just don't want them badly enough, at least not with gas prices as low as they are. Can Obama fix that problem, too, by enacting some sort of pollution tax (whether in the form of a direct carbon levy or a cap-and-trade system)?
Well. This is why Detroit is so effed up. Let me tell a quick story.
I've finally decided that for my next car, I ought to buy a hybrid, and I ought to buy American if I can. I want a midsize sedan. You know, a normal car, like normal people drive. I'd love to buy a Ford or Chrysler or Buick or Pontiac or maybe even a Saturn (not a Chevrolet; I have my limits) hybrid midsize sedan.
You'd think they'd be rushing such models out, wouldn't you? But in fact, astonishingly, they hardly exist.
Ford is coming out right now with a Fusion hybrid (the Mercury-badged version is called the Milan). Saturn has something called the Aura, whose availability is extremely limited. Chrysler, Buick, and Pontiac have nothing as far as I can see.
And yet, most of these manufacturers are making ... SUV hybrids! I went to the Cadillac website, on the assumption that if Cadillac had any brains, they'd be making a hybrid sedan that someone like me (far from right but doing okay) could maybe afford. The only hybrid Cadillac is pushing is -- get this -- the Escalade hybrid.
An Escalade hybrid? That's like taking one strip of bacon off of your Wendy's triple bacon-cheeseburger and calling it a diet.
Cohn makes a fair point that Detroit would make here. Hybrid SUVs are selling. There's no great demand yet for midsize hybrid sedans. Well, fine, make some hybrid SUVs, but: create the market for sedans, you idiots. Markets are created all the time in capitalist society.
Once upon a time no one knew they needed a car with radio. Now no one would buy a car without at least a single CD player and more likely a six-CD changer and all kinds of MP3 and satellite technology. A decade ago, no one had any problem listening to songs in the running order artists intended them to be heard. But a new invention changed all that. And so on and so on.
They're so unimaginative in Detroit. You create a market with a sizzling ad campaign, one that sells an idea of the future as bound up in the new line of vehicles, and in hard incentives or disincentives. A pollution tax is one idea in the latter category. In the former, read this, about what Germany is doing:
The German government is paying people who junk old cars a bonus of $3,250 toward a new, environmentally cleaner vehicle, as part of a $67 billion government stimulus plan ...
... Additionally, Volkswagen AG on Monday unveiled an "Environment Premium Plus" program to provide additional incentives such as price reductions and cheaper financing to customers taking advantage of the government bonus. With the added VW incentives, Kamand said he would be able to knock $6,000 off the $26,800 sticker price.
Owners of cars that are at least nine years old and registered in Germany for at least a year can take advantage through the end of the year.