The August 31 Edition of "The Wall Street Journal" (page B1) includes an article describing a proposed new labeling for passenger vehicles sold in the United States. On the proposed new window stickers, every new vehicle would include a prominently-displayed letter grade reflecting its fuel economy, emissions and estimated annual fuel costs.
There is a general consensus across the industry and among consumers that the current window sticker is not as reader-friendly as it could be; a new sticker that is simpler and easier to understand would therefore seem to face little opposition. However, an argument can be made that the proposed letter-grade change is going too far. Even though the letter grade would apply only to fuel economy and emissions, in my opinion there is no question that the consumer would perceive the letter grade as an overall assessment of the vehicle. The contractor who needs a fullsize pickup, and cannot adequately do his job with anything else, will be forced to buy a vehicle graded "C" or below. Similarly, buyers of large SUVs or midsize vehicles will be purchasing vehicles with a B or C grade. In contrast, a Volt, Leaf or Prius customer would be buying a "superior" vehicle because his car got an "A." To me it's clear this is saying to all that want to listen (and the Volt buyer hopes everyone is listening) that the Volt is "better" than the F-Series. Should the government be in this business? For that matter, should anyone be saying, even though indirectly, that one vehicle is superior to another? Again, even though an EPA spokesman may respond that the grade applies only to fuel economy and emissions, over time it is virtually inevitable that the grade will come to reflect a broader assessment of the car or light truck.
It's fair to say that the proposed letter grades are intended at least partially to move the consumer towards fuel-efficient hybrid, diesel or all-electric vehicles. However, these vehicles - in total - account for just 5% (3% hybrid, 2% diesel) of all retail new vehicle sales June 2010 CYTD. Therefore consumers are being urged to buy vehicles they currently are not buying. A simpler way to move the buying public towards more fuel-efficient vehicles, requiring no legislation restricting production or sales of any vehicle category whatsoever, would be to let gas prices rise.
However, if higher gas prices are not politically realistic, there is another solution, mentioned in the same Wall Street Journal article. It makes sense to compare vehicles within the same category, since by definition these vehicles are similar to one another on several factors including size. This type of assessment would accomplish the goals of moving the consumer towards higher-rated, more fuel-efficient vehicles while still allowing him to purchase a vehicle in his desired category with the specifications and features he wants.
Lastly, politically the proposed letter-grade change to new vehicle stickers plays right into the hands of the Tea Party and the conservative wing of the Republican Party. These two groups could not have asked for a better example of government intrusion in the individual's life and decision-making. Given this political situation, it is hard to see how the proposed changes (with the letter grade) will see the light of day.
Posted by Tom Libby, PolkInsight Advisor, Polk (09.01.2010)
Picture yourself driving a vehicle. The details of your vehicle will differ from person to person depending on the types of vehicles you own (or desire). But certain things are common. If you're driving in the U.S., you're sitting in the front left corner of the passenger cabin (aka, the driver's seat). You have one or both hands on a steering wheel. There is a gear shift, either on the steering wheel or the floor. The brake pedal is on the left and the accelerator is on the right.
Does it have to be that way? We're still using the same basic design for vehicles that Henry Ford used in his first cars more than a hundred years ago. It will be difficult to make quantum leaps in fuel efficiency, including hybrids and electric vehicles, without a fundamental change in our mental picture of a vehicle.
Consider the sub-compact segment, which includes cars like the Ford Fiesta, Toyota Yaris and Honda Fit. There's reasonable concern that these vehicles won't gain wide acceptance in the U.S. market, with comfort and safety being a major concern. Probably the most common use for these cars will be as a commuter car -- a car occupied only by a driver who uses it to commute to and from work with no passengers.
Why not design a minicar for this express purpose? Scrap the traditional car design and start over. Put a single seat in the middle of a small car, leaving open space around it for comfort and safety. Ditch the steering wheel – it takes up too much space and is a danger in crashes. Combine the functions of the steering wheel, gear shift and brake and accelerator pedals into a joystick instead. Borrow ideas from the space program to design a comfortable seat with the latest in safety restraints. Make it comfortable and safe, with really good fuel economy yet with sufficient power to drive on the freeway. And make it economical enough to justify buying and insuring a car strictly for commuting while leaving the SUV in the driveway for other uses. And fun to drive, of course - gotta love a joystick!
I'm no engineer, so I don’t even know if what I suggest is feasible. I describe it only as an example of what we might be able to come up with if we stop using the same basic design and completely reinvent the car.
Now picture yourself driving a vehicle. What does it look like?
Posted by Barbara Keys, Analytic Consultant, Polk (08.02.2010)
There are over 25 different hybrid (gas/electric) cars and trucks sold in the U.S right now (and more if you count some of the discontinued models you can still buy off of a dealer's lot). With so much talk about the forthcoming "onslaught" of electric vehicles, many have wondered what happened to the good 'ol hybrid vehicle segment. It's hanging on and actually doing better than last year.
Fact #1: For the first 5 months of this year, we saw over 106,000 new hybrid units enter the U.S. roadways. Our friends at HybridCars.com show just over 109,000 units for the same time period. Short story: the segment is up over 5 percent on a year-over-year basis based on new registrations.
Fact #2: California is still THE hybrid state. Better than 1 in 5 hybrids are registered in this state. A few years ago, California represented over 25% of the hybrid segment. Now they represent just over 20%. From a dealer network view or someone pulling together a regional automotive forecast on hybrids, you'd be a fool to ignore California. Buyers there are incented to "think green." Although one thing that really shocked me about their current legislation is that hybrids are disqualified from using high occupancy vehicle (HOV) lanes...yikes!
Fact #3: Prius is still king. Over half of all hybrids sold new are the Prius. Last year they accounted for 44% in the first five months; for the same time this year, they account for one of every two sold new. Good luck to the rest who merely want market share in this segment.
Prediction: Looking at the results for May and June of this year, our light vehicle forecast for the hybrid segment is between 254,000 to 260,000 new sales in the U.S. This would put us back at the levels we saw in 2006 (we saw 254,000 that year) and definitely below last year's 2009 total of around 290,000 units.
Go green! And if you're in California, enjoy your single occupant HOV lane privileges while they last.
Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (07.16.2010)
The EVs (electric vehicles) are coming and leaders throughout the auto industry are betting that you and I will relish the fact that we'll be stopping at a fuel station less frequently and thinking highly of ourselves for pumping fewer particles into the air. But will we trust these cars or trucks to get us back home on the battery power they will be equipped with? Have you heard of "range anxiety?"
For EVs to be successful and for the adoption of this new technology, consumers must be certain they can get from point A to point B and back on a single battery charge. The debate is whether EVs should be pure electric or whether they should be equipped with a fuel-assisted component that lets us drive, without fear of the battery dying and stranding us. This morning,
Automotive News shares different views held by GM, Nissan, BMW and Ford. The jury is still out.
So tell me: if you
had to buy an electric vehicle for your next purchase, would you want a back-up system for the battery or not? What do you trust based on what you know or have heard?
Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (06.21.2010)
Last week I had the pleasure of visiting Tesla's headquarters in Palo Alto, CA with a couple of colleagues. Personally, it was the highlight of my week-long business trip in California. To see individuals talking about and planning for the emergence of electric vehicles was very motivating and stimulating. The team we met was engaging, smart, and well-read on the market.
Tesla, for those who don't know much about them, is about building electric vehicles for today and tomorrow. And not golf carts, mind you. Really fast and attractive EVs. Right now, they have a Roadster which is one fun ride (see pic of a couple being "juiced up" - we rode in the orange one in the back of the line - too fun!). Later, they are planning for their Model S Sedan which will be built in the former NUUMI plant where Toyota and GM previously built vehicles.
As Tesla refines their technology to apply it to a global marketplace, their outreach efforts will grow. I've no doubt this enthusiastic company can delight owners and hopefully work the magic of social media, lead management to drive online and offline traffic to their dealer network. And once driven to a store, we understand owners will drive these models like no other vehicle they've had in their driveway. Can anyone say, "Yes I'll pay north of $100k for a plug-in!"?? They sell what they produce. Demand is good. Let's keep watching.
Posted by Lonnie Miller, Vice President, Marketing & Industry Analysis, Polk (06.04.2010)
At the American Truck Dealers Conference (ATD) there is revelry, exhibiting and palm pushing in an exhaustive 4-day event that covers all things a truck dealer could possibly be concerned with. This offshoot of the National Automobile Dealers Association (NADA) event boasts 'make' meetings, industry workshops and transportation industry banter.
This year, we found ourselves in sunny Orlando where the weather was hot, and so was the competition for
truck of the year. All entrants were worthy contenders, creating a heated competition. All of the entries are great trucks, so picking a winner is kind of like choosing between strawberry and chocolate ice cream. I say just go with Neopolitan! But my diplomatic ways have no pull with the ATD judging committee.
The medium duty truck competition was stiff. Kenworth entered the T-370 Diesel-Electric Hybrid which can boost emissions and fuel economy by up to 50%. Hino entered their market share machine, the 268, with Selective Catalytic Reduction (SCR) engine choices new for 2011. Freightliner entered its first ever gas-powered vehicle, the M2 112. Finally, Peterbilt rounded out the competition with its flagship 337 model truck. Given the amount of attention being paid to fuel economy and 2010 emissions standards, I was surprised the Kenworth T-370 Diesel Hybrid wasn't declared the winner.
Instead, the Hino 268 won. The Heavy Duty competition was also fierce. Kenworth entered the T660 Extended day cab, which does well with regional hub-and-spoke haulers while extending the day cab market for Kenworth. Peterbilt put its 384 model in this category - it is a leader in clean platform technology. The last truck in this segment was the Freightliner Coronado, a beast of a truck with optional front axle ratings of up to 22K lbs and rear axles of up to 70K lbs.
The Heavy Duty choice was the Peterbilt 384. The technology from the LNG and CNG power platforms - designed by Wesport - were recognized as fuel efficient and friendly by the Environmental Protection Agency (EPA). The distinction is great but the technology only makes the truck 2007 emissions compliant. Although it can use biofuel and natural gas, it is not 2010 ready. I can't help but think that it would be nice to award the Freightliner Coronado which is 2010 emissions compliant.
All of the trucks are of the highest quality, but I personally would have liked to see the judging committee reward the most energy efficient models, given the current state of the vehicle climate and need for fostering innovation to keep costs down for carriers.
Those are my thoughts. What are yours?
Posted by Therran Oliphant, Account Representative, Commercial Vehicle Market, Polk (04.29.2010)
Mass produced hybrids have come a long way since 2001 when the Prius was first launched in Japan. In 2009, 35 different hybrid models were offered accounting for just over 1 percent of the global market share. One percent (1.28% to be exact) may not seem like a big deal, but the emergence of hybrids is more than a vehicle purchase. It's a culture change. Hybrid sales are a direct results of multiple forces within a market coming together to drive a change in automotive purchase behavior.
These forces encourage consumers to include hybrids into their consideration set and ultimately buy a hybrid:
- High retail fuel prices
- Availability of hybrid supporting infrastructure (i.e. dealerships and service facilities)
- Consumer range and reliability confidence
- Government incentives
These hybrid selling forces have only been seen in more established markets such as Japan or the U.S., which represent 84% of the global hybrid market share. But will this continue with the emergence of new technology such as electric vehicles?
These topics and more are discussed in a new Polk View titled "Asia Pacific Region Propels Growth of Hybrid Market." I invite you to read the article and let me know your thoughts on the future of global hybrid sales including the adoption of hybrids within emerging markets and if Japan can sustain the hybrid sales trend growth experienced in 2009.
Posted by Margaret Zewatsky, Product Strategist, Polk (03.31.2010)
After the EuroCar Seminar on 20 January 2010, we posted the
top ten questions asked by OEM and OES delegates in attendance. Today I will be answering questions pertaining to hybrids. If you missed Norm Marks answers to the Marketing questions, you can find them
here. Tanja Linken will be answering questions aboout Network Planning in the next blog entry.
With regard to CO2 emissions, hybrids and zero emission vehicles, do you have any insight into vehicle whole life costs?This question targets the cost of vehicle construction, battery cost including disposal and the vehicle running costs. The variety of calculations regarding life costs is still quite large. While it is not yet clear whether the retail prices for hybrid vehicles allow for a financial break-even to occur, in some premium models the hybrid drive is extremely expensive which can prevent a break-even from happening. The highest costs in car driving appear to be the loss in value on the one hand and the running costs (mainly fuel). So very much depends on the residual values for alternative cars and their general acceptance and the price relationship between the different fuel types in the future. The term "zero emission vehicles" is also a bit misleading as EVs (electric vehicles) do not emit while driving, but they still need energy for battery recharging. Dependent on the energy mix used in the production process, EVs might emit more CO2 than small diesel or petrol engines.
Is the development of fuel efficient vehicles dependent on the oil price going to $600 a barrel?There are different scenarios regarding the future oil price development. Polk expects a price of ~$130 towards 2020, others expect $300 or even $600 per barrel. During 2008, oil became quite expensive with almost $150/barrel by the middle of that year. The pressure to develop alternative drives for cars increased. New regulations (e.g., those related to fleet consumption and CO2 emissions) force the public to reduce the fuel consumption of their vehicles. We expect to see both an improvement in conventional combustion technology by engine downsizing, optimized engines, start-stop systems, etc., as well as an expanded model offer in advanced technologies like hybrid or EV. With higher oil prices, there will be higher pressure to develop new technologies as well as pressure to reach financial break-even points for alternative energies.
What is the difference between plug-in hybrids, pure full hybrids and mild hybrids?A plug-in hybrid vehicle is similar to a conventional full hybrid vehicle—both use a combustion engine as well as an electric motor. However, a plug-in hybrid uses larger battery packs that can be recharged by connecting to common household electricity. In full hybrid vehicles, the electric motor and the internal combustion engine are installed so that they can both individually or jointly power the vehicle. For shorter distances the vehicle can be propelled in its EV mode solely, which eliminates emissions. Mild hybrids use a generally compact electric motor to give extra output during the acceleration, and to generate on the deceleration phase. With mild hybrids, the vehicle cannot be powered by the electric motor exclusively.
Do you have any evidence that customers are driving shorter distances as a result of economic conditions?At the moment we don't have any evidence for this development. The tightening of economic conditions has affected all kinds of industries dealing with transportation. Nevertheless private mobility is of common interest. With the overall trend of rising costs of ownership, the private driving behaviour might change and result in decreasing mileage, but this depends on the development of the costs of alternative means of transportation.
Thank you for taking the time to read my blog entry. If I left anything out that you would like answered, please submit a comment and I will be happy to address it!
Posted by Thomas Mawick, Manager, Automotive Studies, Europe, Polk (02.08.10)
I'm at the Detroit Auto Show today and there are hybrids and electric vehicles galore. I came to the show with an interest in super small cars and wanted to see and touch the cars I wrote about in my
Will Super Small Cars Generate Super Big Sales analysis. I had the opportunity to see the Chevy Spark (I was sorry to see the clam shell doors were replaced by a traditional rear passenger door), the Fiat 500 and the Toyota FT-EVII concept that sits four, but not much more.
I also had the opportunity to test drive a super small eZone from CT&T. CT&T is a Korean OEM with a fleet of electric vehicles that they are introducing to the U.S. market. This was my first test drive of an electric vehicle other than a golf cart. When I sat in the car I was surprised that I didn't feel cramped, but there wasn't room for my big auto show bag so the CT&T co-pilot held it at his feet. I sat down, was told to go slow and then reached for the gear shifter, but all I found was a button with D and R. I pushed the D for drive, stepped on the petal and away I silently went. You couldn't really tell the acceleration of the car in the basement of the Expo hall, but I don't think you'd win any races. It could be an ideal car for the urban commuter that has the opportunity to plug in or the golf cart community member looking for something different. What do you think? Is there a market for these super small electric vehicles in the U.S.?
Posted by Margaret Zewatsky, Global Market Analyst, Polk (1.12.2010)
I'm listening to the speakers at the SAA Outlook conference and one of the speakers, John Casesa, from Casesa Shapiro Group mentioned that there is research to support the demand for "clean cars" which is fueling new technologies such as those seen in Electric Vehicles (EVs). But the sales trend for EVs is predicted to be less than 1 percent of the market in the near term. With an anticipated price of $40K, the Chevy Volt's price may decrease the number of potential buyers. Meanwhile, the lack of supporting infrastructure for EVs may also scare off potential buyers.
This year's Detroit Auto Show is said to be all about electric vehicles, and EVs represent an exciting revolutionary way to create clean cars, but is there volume to support the new EV technology expenses? Bob Lutz (a speaker at tonight's SAA conference) said the Volt has future sales potential of 50-60,000 units a year, and serves as a symbol of the new GM. The Volt technology will work its way into future GM models, but will the volume of these and other OEM vehicles be enough to push EV sales past 1 percent?
Posted by Margaret Zewatsky, Global Market Analyst, Polk (01.10.2010)
If you're like me, you're probably wondering why Ford has come out with a new product in the Medium Duty Commercial Vehicle Market segment this fiscal year, when industry sales are expected to be weaker than original forecasts. If you did wonder, then you haven't seen the Ford Transit Connect. An unabashed, small (don't dare call it mini) van that promises to be the vehicle version of a multi-tasking child that is watching television, playing a computer game, and text messaging their friends all at the same time.
The six-foot six-inch height is surprising and creates a roomy, if not downright capacious space for whatever application the owner can imagine. Plus, Edmunds lists the vehicle with a 23 mpg fuel rating and 135 cu. ft. of cargo space all at a price tag of $20.8K - welcome specs for the small business owner looking to save, in all areas of their business, without sacrificing quality. If you need power, though, then this vehicle may not be for you. The 4 cylinder engine is only putting out 128 lbs. ft. of torque at 4750 rpm. The horsepower story isn't much better with 136 hp at 6300 rpm.
I still think this vehicle has the opportunity to be a game-changing crossover in the commercial and consumer vehicle markets alike. The large space gives contractors, small business owners and shuttle services the opportunity to use a smaller, more fuel efficient vehicle with enough room to handle all of their needs. For the consumer, the Transit Connect has an optional three-across bench style second row seat. This could mean a multitude of uses for drivers with wheelchairs, families with an active lifestyle, small bands and folks who simply dig the quirkiness of the vehicle.
Ford has also reached out to the earth friendly crowd - they will be happy to know that Consumer Reports mentioned Ford's plans to come out with a battery-electric hybrid version this year. It seems as though the hits just keep on coming for Ford as they add to the ever-popular Mustang muscle car and F-Series trucks with the Connect, redesigned Fusion and Taurus. Suddenly Ford's vehicle lineup is looking quite strong and attractive. They may even prompt me to take the, "Have you driven a Ford lately" challenge to heart, and actually drive one instead of simply answering, "No."
I am excited to start seeing these vehicles on the road here in the U.S. instead of pictures from Europe but I'm even more excited to see what effect the vehicle will have on the industry trend to produce larger - more powerful and roomy - but less efficient vehicles. What effect do you think the new Ford Transit Connect will have on the market?
Posted by Therran Oliphant, Account Representative, Commercial Vehicle Truck Group, Polk (01.05.2010)
Look out E85 owners – you may have a vintage model in your driveway. At the 2009 SAA Strategic Planning Summit last week, two presenters spoke about regulatory issues that are being addressed by decision-makers in D.C. right now that will affect upcoming industry trends. The California Air Resource Board (CARB) approved the Low Carbon Fuel Standard earlier this year which forces fuel producers to lower their product's "carbon intensity" by 10 percent by 2020. This approval comes after a University of Minnesota ethanol research study that suggested corn-based ethanol, which much of the U.S. ethanol production is dependent upon, may be more harmful to the environment than gasoline. CARB is encouraging cleaner energy options such as cellulosic ethanol, electricity and hydrogen. This attention is at a national level and I think it is going to impact automakers and their decisions to produce certain types of alternatively fueled models.
In 1998 Congress passed the Alternative Motor Fuels Act providing OEMs with credits toward the Corporate Average Fuel Economy (CAFE) standards. This essentially kept automaker's fleet fuel economy within federal standards while still producing the big gas-guzzlers America loved. How big is this market segment? Flex fuel vehicles represent 7% of retail sales between January and July of this year. This is a 2% increase from 2008. GM has made the commitment to have one-half of its annual U.S. vehicle production be E85 or biodiesel capable by 2012. GM leads the pack with 18 flex fuel vehicles along with seven other OEMs currently offering flex fuel models. Despite all of this OEM activity around flex fuel offerings, there are still less than 2000 fueling stations across the U.S. That's a problem if an OEM wants to build natural (or "national") demand for these types of vehicles.
If corn-based ethanol as we know it today will not be supported, where does this leave the E85 investment the OEMs and fueling stations have made to date? Is E85 being scrapped for greener energy sources like electric vehicles? (For more on electric vehicles, see our latest Polk View, "Who Will Buy Tomorrow’s Electric Vehicles?") If you are an E85 owner today, where does that leave you and how will you be able to reap the rewards of having this type of flex fuel vehicle?
Posted by Margaret Zewatsky, Global Market Analyst, Polk (09.11.09)
The much talked about U.S. automotive industry trend towards smaller and cleaner engines is picking up speed this fall. A look at the next three months' product launches shows that customers looking for fuel-efficient vehicles will have a greater choice.
Smaller engines are being introduced in vehicles typically powered by six or eight cylinders. The Audi A5, Buick LaCrosse and Chevrolet Equinox/GMC Terrain will for the first time use 4-cylinder powerplants. Given the current market conditions, those trims should quickly grab a significant share of their respective product mix. So does it mean that the U.S. automotive market is headed towards a more "European-like" engine mix type? It is likely. As of calendar year to-date May 2009, 4 cylinder engines still make up only 41% of the U.S. car and light truck industry. That share is bound to increase.
Much has already been said about Ford’s new 6-cylinder Turbo 'Ecoboost' engine. It is Ford’s way of replacing thirsty V8s without compromising performance. The Ecoboost is now available in the Ford Flex, Lincoln MKS and MKT vehicle lines. Interesting from a technology point of view, the V6 Ecoboost should only account for a small part of those model mixes. Next in line will be Ford’s higher volume 4-cylinder 'Ecoboost'.
One other way for manufacturers to improve on gas mileage is to "de-content". Mazda and Volvo will both launch non-turbo versions of their already-on-sale CX-7 and XC60 compact turbo SUVs. This is a smart and inexpensive way to offer customers a greener and cheaper alternative.
Acura will go a slightly different route to improve on its crossover's fuel efficiency. The RDX, on sale since 2006, will for the first time be available as a two-wheel drive and consequently get an additional two miles per gallon. It should be a success especially in the Sun Belt region where many luxury crossover customers do not need four-wheel drive vehicles.
Finally, a European manufacturer (a first!) is entering the hybrid vehicle market. Mercedes-Benz is adding new electric-gasoline powertrains to its S and M luxury vehicle lines. The ML450 will compete head-to-head with Lexus' new RX450h. If properly priced, and if the RX is any indication, we can expect the ML hybrid rate to quickly reach 20%. As for the S400 hybrid, it will be a unique proposition for customers looking for an environmental Über-Sedan; getting close to 30 mpg in a full-size luxury car is a first in the U.S.
As manufacturers venture into new niches, as more diversified powertrains become available and as customers ask for more trims, model launch frequency will keep rising. Who's next to the party?
Posted by Francois Gravigny, Senior PolkInsight Advisor, Polk (08.06.2009)
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