Why Is the Auto Industry So Frantic to Go Green?

January 13th, 2010
Lutz, Whitacre & Co. at Chevrolet press conference, Detroit

Lutz, Whitacre & Co. at Chevrolet press conference, Detroit

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.

Bill Ford, Michigan Governor Jennifer Granholm at NAIAS

Bill Ford, Michigan Governor Jennifer Granholm at NAIAS

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.

—jgoods

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  1. Travis
    | #1

    20 years? Try 100. New oil fields are being found (or restarted) and I think it’ll take that long before oil burners go away. And by then, EVs will be ancient history and a technology like hydrogen fuel cells will have been fully developed. It’s good to be green to a point, but cleaner gas burners is the way to go right now.

  2. jgoods
    | #2

    This is basically what the bankers said today at a Congressional hearing: We’ll clean up our act; don’t regulate us. If it takes 100 years before the “oil burners go away,” you and I will be long gone and so will much life as we know it. I mean, as long as there is plentiful oil, does that mean we should keep putting its residue in the atmosphere? I made the argument in this post that it was mostly economics and government that would force the issue. Really, it’s the globe that’s forcing the issue.

  3. panayoti
    | #3

    Nice piece Mr. Goods! At least you’ve moved somewhat to the middle on the economics of going Green. I will take issue with you on your declaration of the gas burners being on the way out. You cover your behind by implying that it will take 20 or so years for that to happen, but you also declare that it is a certainty. I must disagree. Nothing in this world is a certainty today, especially your rather pompous statement in this regard. Technology moves far too fast for anything to be labeled a certainty.

    I’ve berated you for months now about what I see as your extremist view on the condition of the planet and efforts to “save” it from ourselves. I could go on about flawed and manipulated data by the folks in your camp, but that would be superfluous. Although you’ve stated that you’d like to throw a bomb at me, I do agree with you that there is much more that we can do to clean up the planet and make it a cleaner place to live. Where we differ is that I am a Rooseveltian Conservationist while you take the Muirian view of disaster at every corner. May I suggest that you take a look at Mr. Roosevelt’s approach at a time that the Robber Barons were doing everything to stop him. The Barons had much more power than the folks in your camp do today. So for him to pass the legislation to placate them was a monumental feat and one that has endeared his methodology to me to this day.

    I will also take issue with your declaration that hybrids and EVs will take a dominant position in the market because of the pressure being put on them. Yes, there is political pressure for sure because of the bailouts. I don’t see that you can make a case for economic and social pressure however. As even you have come to accept, it makes no economic sense to make sardine cans and as for social pressure, the average American prefers their SUVs, big Sedans and muscle cars over sardine cans that cost $4-$6K more. So I believe that your statement is “a far-out, radical predication” and that you were out of line making that rather pompous statement.

    Your political buddies are on the verge of drinking the Kool Aid and will be dealt a black eye or two in the coming elections and if my theory is correct, the political pressure you mention will be severely mitigated by a more Conservative Congress. So Detroit will once again focus on the bottom line and should concentrate on making vehicles people want (see Subaru, Hyundai, Kia) If they don’t (see Fiat, nee Chrysler), they will just go away, this time with no bailout. Allow me to cover my behind here and say that my view will change if the EPA usurps Congressional oversight of clean air standards and mandates standards so stringent that only hybrids and EVs will be able to meet those standards. Another variable would be a Congressionally mandated federal excise tax on gasoline should the Democrats prevail in this years elections.

  4. jgoods
    | #4

    @panayoti
    Señor Panayoti, why do you make everything into a confrontation? You seem forever on a mission to “convert” me to your point of view, or put me in a political camp, or make our exchanges into a battle of tree-huggers vs. “Rooseveltian conservationists.” It’s always your realism vs. my extremist liberal Kool-Aid hogwash.

    If TR were alive today, do you really think he would be advocating “SUVs, big Sedans and muscle cars over sardine cans”? Do you really think he would advocate your kind of laissez-faire which would effectively put him on the side of the Robber Barons—whom you unaccountably put in MY “camp” (your par. 2)? Sometimes I frankly don’t know what you’re talking about!

    The issue I raised was not that economic pressure was being put on hybrids and EVs (your par. 3). It was about the kind of pressure that is being put on automakers to go green and why they have to respond. You insist on taking the short-term view that because Americans prefer gas guzzlers to hybrids we should and must cater to that (in the sacred marketplace).

    Well, the market for these cars was created not by the simple abundance of petroleum but by the automakers who saw a way to profit from that. When and as they see a way to profit from EVs and hybrids, they will do so. And, yes, I do believe that time will come within the next 20 years. Why is that, as you said twice, “a rather pompous statement”?

    Come on, amigo, I know it’s fun to be contentious, but your discussions forever verge on being, well, pompous.

  5. zerrath
    | #5

    Worlds supply of lithium will run out before oil does, if battery production continues at present rate.

  6. | #6

    Just whos electricity grid will cope with the extra load?

  7. panayoti
    | #7

    Very well Mr. Goods, I will apologize for appearing contentious and will make every effort to be more “civil”. I was under the impression that you rather enjoyed the repartee and that you enjoyed the banter. My apologies
    for irritating you. I respect your intelligence and devotion to covering the subject as well as your economic perspective, much as I disagree with most of it. It is very difficult to get my blood boiling about issues but your perspective is so antithetical to what I believe to be true that I feel compelled to counter your perspective.

    I reread my reply to your question and see absolutely nothing that can be construed as a personal attack. In fact, I praised you for appearing to somewhat change your position on green economics. The issue that I have berated you about in the past is what I perceive to be “not in the mainstream thinking”. As bright as I think you might be, I can’t find comfort in many of your statements or your prophesying as being something that can be taken to the bank. Perhaps we can agree to disagree.

    That having been said, perhaps we both should stick to the topic at hand and not use this board to air our personal likes and dislikes and even go so far as to not attack each other’s opinion. I don’t think that is what this board was intended to do and I am sure your readers would agree.

  8. CM
    | #8

    zerrath, there is a lot more lithium in this earth than there is oil. Most lithium comes from Bolivia simply because they have the most concentrated ores thus is the cheapest source, but lithium ores are common, and it can even be extracted from seawater at a reasonable cost. Moreover, unlike oil that is lost when burned, lithium is not used up in battery operation. Even when a LiIon battery stops working because the battery structure has broken down, all the lithium is still there and can be recycled into new Lithium batteries. @zerrath

  9. Goodboid
    | #9

    Thank goodness that kids are not born fossilized as a few commentators in here.

    The question isn’t whether we have touched peak oil, or whether oil will be around a hundred years from now. Oil is and will always be a nastier way of generating power.

  10. Mike
    | #10

    The greenest thing the car makers can do is to come up with car that lasts twice as long. By the same toke, the greenest thing car owners can do is to maintain them and keep them for longer periods of time. Far more sensible and economical than buying that $30,000 hybrid.

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