Wednesday, 17 October 2007
David Kiley at BusinessWeek asks a critical question: will truck buyers pay for fuel efficiency?
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Quite a lot of chatter has been resonating in the auto industry lately about higher fuel economy standards going into effect, and plenty of speculation has occurred regarding their potential effect on automakers. In June of this year the U.S. Senate approved a bill requiring a 35 mile-per-gallon average standard for passenger cars and light trucks combined by 2020. General Motors, Chrysler, Ford and Toyota all oppose the bill, and instead support a less stringent increase that would maintain unique standards for cars and trucks. The White House seems to agree, indicating a veto would be in order if a fuel economy bill makes it to the executive branch without differentiating trucks from cars.
Over at BusinessWeek, David Kiley asks a question that is surely worrying auto manufacturers who rely on the profits of large trucks: will truck buyers pay for fuel efficiency? Kiley asserts that car companies can build vehicles that satisfy the requirement, but at significant costs that will be passed onto consumers. He uses the example of a Chevy Silverado 1500 pickup, which now costs around $26,000 well equipped. Efficient enough to meet gas mileage standards, the same truck could cost $34,000. Of course, drivers may realize fuel bill savings of $1,000 per year, but truck buyers tend to analyze one-time prices more than long-term costs, explains Kiley.
Research company Global Insights says that in order to meet the proposed standards by 2020, 2 out of 3 cars would need to employ direct fuel injection, smaller displacement engines and turbochargers. Approximately one third would have to run on diesel fuel, and half should be hybrid-electric (some of these technologies overlap, for example, a turbo-diesel hybrid). BorgWarner predicted the same trend back in March of 2007, seeing direct injection and turbos as major factors in increasing efficiency while maintaining performance.
Kiley calls the pickup truck buyer “the most difficult consumer in the country.” He points to Toyota as validation, since the manufacturer just released the journalist-acclaimed second-generation Tundra which has yet to be embraced by widespread customers. While true that manufacturers must control costs passed on to consumers – government subsidy anyone? – it’s also likely that pickup buyers will come around and start to appreciate $60 fill ups as opposed to $100 refueling sessions.
Sources: BusinessWeek, The Detroit News and Earthcars.com
Image: Dealer.com at the 2007 North American International Auto Show [2008 Toyota Tundra CrewMax]
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