Why Is the Auto Industry So Frantic to Go Green?
The Detroit Show is only the latest example of how carmakers are vigorously promoting green tech. Most of the press and public interest there seemed to be in green cars, whether concepts or production models. Execs talked up hybrids and electrics at a blistering pace, even getting the pols to come from Washington to Detroit to approve their efforts.
You actually had Bob Lutz of GM endorsing the idea of a higher gas tax! Two years ago, he called climate change a “total crock of s**t” and said hybrid cars “make no economic sense”; now he’s promoting the Volt. Why are the naysayers and Luddites converting?
The auto industry is promoting green because it has no choice: It’s a matter of its survival. Economic, social, and political pressures will drive the industry to green cars at some point within the next twenty years (that is, hybrids and EVs will take a dominant market share)—and that’s not some far-out, radical prediction.
Ford shows how a major company is taking the green road, in fact, leading the way for its U.S. and world competitors. Executive Chairman Bill Ford was recently interviewed by McKinsey (naysayers, please read this) and made the case for sustainability and change—how, basically, the auto industry must innovate or die—and ways in which Ford has taken that path. No one can confirm what technology will ultimately predominate in cars, so you have to hedge your bets on all of them:
Whichever avenue proves to be the predominant one—whether it’s electric or biofuels or hydrogen or diesel—we will be there with the hardware. During the difficult years from 2006 to 2008, I insisted we keep our R&D spending going in all these areas. Many of our competitors cut back. Now we are emerging, hopefully, in a better market, with a leadership position in many of these key technologies. That’s something I feel very good about.
What the company is also betting on is a revived industrial base in this country, a prerequisite for the U.S. to become competitive again. Defining that revival will be the job of industry and government, and green cars will clearly be a significant part of it. The feds have not only set rigorous CAFE standards for the next six-plus years, they have invested heavily in the auto industry, as you may have noticed. The pressure is on.
Still, how can hybrids make sense—with oil demand dropping and supplies increasing? Besides, only two or three percent of cars sold last year in the U.S. were hybrids. What kind of market is that? The point is, it’s not a viable market, it’s an investment to create a viable market.
Right now, you can’t get people to buy these (expensive) cars by appealing to their social side or by stressing economic arguments or dependence on foreign oil. You can only show them the benefits that will emerge (and that is the job of marketing). You can encourage early adoption by offering tax benefits and other incentives; work with industry to develop new infrastructure, whatever is required. And yes, it will cost a lot of money. Many people will fight that, calling it “industrial policy” or some other kind of bad thing.
A few of our readers have been knocking hybrids and pushing clean diesels, taking me to task for being a tree-hugger. Well, I do love trees. And I do love cars. If there is one certainty in my world, it is that the gas-burners are on the way out, and I think most people will recognize this if they think about it. Give ‘em 20 years, and they’ll come round.
Are you nearsighted or farsighted? How do you view the viability of green cars? Let us have your thoughts.