Your Next Car Will Be Chinese. More than that, it'll likely be electric. Okay, maybe not your next car, but we're right on the brink of another major shift in the auto industry. The change is going to come
fast. And it's going to hurt.
For forty years, we've watched the slow decline of the American motor vehicle industry. At the start of that period, the Big Three (General Motors, Ford, and Chrysler) held more than 90% of the American market and accounted for major sales in most markets around the world.
That was then. The Big Three (one of which is now more than half foreign owned) account for a slim majority of auto sales. General Motors has seen it's share of the market fall from 65% to 25%. Until recently, that decline has been gradual, but now it's accelerating. The American automobile industry isn't just continuing to shrink, it's on the brink of total collapse, and it threatens to bring the economy, and the nation down with it.
MSNBC puts it in the most emphatic terms possible: GM and Ford are National Security Risks
Why has is the auto industry doing so badly? They'd like to point at the workers. Give GM's Bob Lutz or Ford's Bill Ford a chance, and they'll bemoan the high wages given to American auto workers and the restrictions given by the unions. But that's not the problem.
Management will blame this on intractable labor costs. While labor costs are definitely a problem, it's time to consider a larger problem: intractable bonehead management.
Remember what we've been told about Japanese management style? They seek consensus. They favor conformity over innovation. Japan may be good at mass-production, but they don't really innovate. Well, pardon my French, but Bull and Shit.
The same Japanese managements that are derided for their conformity and slow decision-making are eating Detroit's breakfast, lunch and dinner. That's a management problem.
Ford and GM are consistently designing their vehicles for a market that's five years or ten years in the past, and pointedly refusing to look at what's ahead. Why are "retro" vehicles so common on the drawing boards and showroom floors of Detroit? Because these guys have equipped their offices with giant rearview mirrors in place of windshields. Instead of designing vehicles that consumers of today will want, they're still trying to ride trends that are dying, or looking back to the "glory days" for old ideas.
The industry has focused its profitability on gas guzzlers that are either supersized -- like the Hummer H2 (10/13 mpg), the Lincoln Navigator (13/18 mpg), the Chevrolet Suburban (14/18 mpg) and the Cadillac Escalade ESV (13/17 mpg) --- or on an array of super-muscle cars that are remarkably fuel efficient relative to their forebears but still send plenty of money to bomb-throwers in the Middle East.
Ominously, Ford is even seeing a greater than 20% decline in sales of its F150 pickup - the bestselling vehicle in the United States since the 50's.
When congress or pressure from the competition tries to sway Detroit from it's path toward destruction, do they view this as a wakeup call? No. They may not be willing to expend the energy needed to engineer themselves out of this trap, but they seem to have unlimited budget for lobbyists.
The industry has consistently lobbied against any changes to the Corporate Average Fuel Efficiency (CAFE) rules, even as our dependence on imported energy has increased. The domestic car makers talk about a global industry but have acted as though the United States was peculiarly immune to rising energy costs. One side effect is that domestic cars are unsuited for foreign markets because foreign markets are geared to fuel efficiency.
The result has left even the most adamant supporter of the American auto industry with a very painful choice -- a choice that is directly connected with idiocy like that now going on in Iraq.
Rather than innovate and invest in hybrid technology, as Toyota and Honda have done, the industry has repeatedly labeled the most successful new car introduction in a decade as a "niche market" car. When fuel efficiency becomes crucial, American consumers will have two ugly choices: Send enormous amounts of money to the Middle East for oil, or send enormous amounts of money to Japan for efficient cars.
Again and again, GM in particular has gone out of it's way to deride improved mileage and hybrid technology. They trash-talked improved mileage of any sort, and poured money into the campaigns of
"clown car" Kit Bond, who maintains that SUVs are safer than other vehicles against all statistics. So much money that Bond now controls a PAC which plans to share the wealth with other Detroit-friendly Republicans. When anyone tried to confront GM on their mileage ratings - which for several years actually got worse year over year - they pointed to their hydrogen fuel cell powered
Autonomy as the future of cars. Unfortunately, the Autonomy was, and is, still a dream. Analysts at Motor Trend put the roll-out of fuel cell cars as 25 years away. Toyota says we won't see fuel cells in the showrooms until 2050.
Even conservatives are starting to wake up to the fact that there are few international threats that can match up to the internal threat represented by our regressive auto industry.
Conservatives have regularly defeated efforts to raise the CAFE standards, arguing against government intrusion in the private economy. I consider myself a conservative, but it's time to recognize that our national security is being threatened by Detroit.
While the US industry is spinning its wheels trying to recapture past glory and wondering why retreads of ten year old designs aren't good enough, Japan is turning over models faster than ever and adding hybrids up and down the line. They've not only displaced American makes in the mid-range, they've successfully captured the majority of sales in the luxury markets. Beyond Japan, South Korean manufacturers have vastly improved their quality and moved into the lower coast and middle priced ranks once held by the Japanese. American makers continued to be plagued by unattractive cars offering lesser quality and unappealing mileage.
The Big Two automobile giants offer plenty of explanations, from soaring health care costs to rising gas prices and creeping interest rates. But consumers and industry specialists say G.M. and Ford have swerved off course for a more basic reason: not enough people like their cars.
If Japan and South Korea have already eaten American's automotive lunch, that was just a warm up for what's coming. Right now, China is gearing up to take on both the US and the rest of the world as an automaker. The first Chinese cars to reach the US market will be here in 2007, brought in by the same man who brought us the Yugo, Malcolm Bricklin.
The deal to import up to 250,000 Chinese-made cars annually beginning in 2007 was finalized Dec. 16 at Chery's corporate headquarters in Anhui Province in eastern China, Bricklin told The Detroit News in an interview.
While Bricklin's promotion of Chinese entry into the American market may be looked on with derision, China is already two steps ahead. Their current models mimic autos that are already out from other makers (boy, can these guys build a
Honda CRV clone), but their next generation is going to be
radically different. China is moving rapidly toward the production of hybrid vehicles, plug in hybrids (
my personal favorite), and straight electric vehicles. They've already started making inroads with smaller scooters and electric bikes, and they'll move up from there.
The idea is to start small -- as in electric scooters and bikes -- and then advance to large -- as in electric buses -- while at the same time applying improved battery technology to gas-electric hybrids and even hydrogen-powered fuel cell cars.
China already produces the bulk of the world's lithium batteries. Buoyed by
recent improvements that allow lithium batteries to be recharged very quickly and to be recharged as often as NiCad batteries without losing capacity, these companies are charging ahead into electric vehicle and plug-in hybrid production. They expect to hit the streets with vehicles that are just as reliable, higher mileage, and
30% cheaper than anything else on the market. Even the Japanese designer of the world's
fastest electric car expects China to dominate the market with low-cost electrics that get cheaper over time, like electronics, rather than rising year over year, as we've come to expect from cars.
So, is the American industry absolutely doomed? Will the bones be gnawed by the Japanese and South Koreans, then finally crushed by the rising Chinese juggernaut? It's still possible to save our industry, but to do so it's going to have to be two things that have seemed more elusive in recent years than cold fusion: nimble and fast. GMs Lutz has recently admitted that he made a mistake in ignoring hybrid technology and putting all the eggs in the distant hydrogen basket. That's a good step. Ford is already rolling out hybrid Escape SUVs, and is expected to bring the first American hybrid sedan to market sometime in 2006. But it's likely to be too little, too late. If they want to survive, they need to leapfrog the current technologies and move straight to the plug-in hybrid. Plug-in hybrids, which can be treated as "regular" hybrids like a Prius or plugged in to recharge their batteries from the electrical grid, offer the equivalent of 180mpg and a drastic reduction in our need for imported oil. They're our number one chance to ward off the loss of jobs caused by a collapsing auto industry, the foreign policy demands of an economy dependent on foreign oil, and the environmental damage of our stuck-in-reverse policies. Chrysler is already rolling out plug-in hybrid versions of its boxy Sprinter delivery van - but only in Europe.
Plug-in hybrids can save the American auto industry (oh yeah, some decent looking designs wouldn't hut a thing, either). But to get these dinosaurs moving, we all have to line up at the tail end and push. That means putting in place major incentives to give this technology a boost.