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Can Green Cars Save the Auto Industry – Yes

Even as manufacturing giants like G.M. and Chrysler have begun to declare bankruptcy, one thing has become clear: without a massive change in automotive policy, we may see the collapse of some of the best known and respected names in automotive history. However, not everyone in the auto industry is as pessimistic about the future. Recent start-up companies like electric car manufacturer Tesla Motors may have given hope to many potential investors and automotive analysts. As a new source of “green” manufacturing jobs and market share, electric and hybrid cars seem to be the future of car production. Especially with Daimler AG’s recent purchase of nearly 10 percent in Tesla, which makes it effectively worth nearly half of GM’s market value (550 million dollars). But will this boom in alternative energy investment be enough to kick-start the US economy and the automotive industry?

A Potential Trade-off

At the end of 2008, the Toyota Prius was one of the most desired cars available in the United States. In fact, Toyota was so swamped with orders that the reservation list for a new Prius shifted from weeks to months in a matter of days. And with an estimated 50 MPG, it’s hard not to see why many chose it over more conservative cars. As gas rose over 4 and a half dollars at the height of the gas crunch, fuel efficient vehicles were suddenly in demand. Hybrids versions of vehicles like the Honda Accord also sold in record numbers compared to previous years.

Meanwhile, parking lots filled with Hummers and other gas guzzling SUV’s remained curiously empty of customers. Almost unbelievably, the most desired car in America shifted for the first time in over 18 years from a pickup truck to a more gas friendly sedan. For a while, it seemed that America had finally come to its senses and begun to the choose more responsible car, like much of the rest of the world. However, as the economy gradually declined, so did gas prices. But did America learn its lesson? Maybe.

While truck and SUV sales are on the decline, so are hybrids and electric vehicles. And although reports indicate that many potential buyers are holding off on buying their new car until the economy brightens, the savings produced by energy efficient vehicles and electric vehicles may provide the impetus for future car purchases and financing. If gas does rise again, many more people may decide to make their next vehicle a fuel-efficient vehicle or electric vehicle.

This shift will benefit not only start-ups companies like Tesla but also major automotive giants like Toyota and GM, who have both announced major shifts in electric car production in the forms of the new Lexus HS 250h and the Chevy Volt. Even Chrysler has stepped up their plug-in electric car schedule for sometime next year with a new series of Jeeps and Town and County minivans to compete their annual lineups. Indeed, if these manufactures can excite buyers with new electric and hybrid cars, they may be able to begin to pull a profit again and, in the case of Chrysler and GM, pull out of bankruptcy. However, a transition to more fuel efficient vehicle may soon not become an option but rather a requirement.

Mandatory?

As President Obama recently announced, car makers may soon face a required 35.5 MPG rating according to new potential CAFE standards. This would mean that, by 2016, all major car manufactures would have to have an average fuel standard of 35 and a half miles per gallon in fuel economy for each vehicle. Otherwise, car makers would be forced to pay extra in penalties. However, these companies would have almost 7 years to enact the changes and its successful fulfillment would likely be at the end of the next administration. But that is not to say change would not occur before then. Sometimes regulation can spur innovation. And with innovation comes investment and stimulus.

This “green” bubble of innovation and investment may also help affect other sectors of the economy other than manufacturing. Along with its inherent blue-collar jobs, new start-up companies in America will also stimulate foreign investment and create new white collar jobs to manage the companies. And, it will also stimulate revenue through tariffs and taxes once the industry progresses. This investment will also likely spread to related domestic industries such as battery production and charging stations because demand will surely rise. However, as the industry matures, innovation will undoubtedly provide all the convenience available with conventional gas powered cars.

Unlike older hybrids and electric vehicles, newer models avoid some of the pitfalls and shortcomings of previous models such as limited mobility and battery charge. The newer hybrid models will have the same range as more conventional cars as they mostly likely also contain a small gas motor as well. However, they also store energy in compact battery packs underneath the car while from the kinetic energy created through driving which allows them to increase their MPG rating. According to Chrysler, many can potentially reach the 40 mile mark on electric power alone, which many consumers believe is essential in any successful car. But as the Dodge EV and Tesla Roadsters have repeatedly demonstrated, this does not have to represent a compromise in performance.

It is clear though. Hybrid-Electric vehicles are the future. But whether we adopt them now or later will determine whether we can save our existing companies and jump start the automotive industry.

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