Wednesday, January 18, 2012



Today’s (i.e., Wednesday, 1/18/12’s, page B3) Wall Street Journal contained a not at all surprising article on one of my former, and hopefully future, topics, the car industry. As the headline of the article, “Dealers Fight Mileage Rules” more or less encapsulates, car dealers contend that it will be difficult to sell people the higher mileage cars the EPA and NHTSA would like to mandate. The argument being made by the dealers is that the additional costs required to increase fuel economy to over 50 mpg by 2025 will scare away buyers, or, as one dealer so wryly put it

Doesn’t matter if beans are a nickel a bushel; if you can’t get the nickel you can’t get the bushel.”

Why don’t our politicians or Wall Street types talk like that…without trying, straining, really, to do so? But I digress.

The argument makes perfect sense to yours truly; if mandating a 5% annual increase in mileage (sounds doable unless one knows anything about compound interest) makes cars ridiculously expensive, not only will our car industry, broadly defined, suffer but we won’t substantially improve fuel economy, or clean up the environment, because people will hold onto their older, presumably lower mileage cars. But what caught my eye in the article was not the compelling nature of the dealers’ argument, but rather this sentence:

The EPA and the NHTSA estimate that the additional technology required on vehicles will cost consumers $2,030 toward the purchase price of vehicles, but that the lifetime fuel cost savings in 2025 would amount to more than $6,000, saving consumers a total of $4,400.

The dealers don’t agree with the analysis, and the placement of the phrase “in 2025” and the peculiar arithmetic (perhaps the bureaucrats are doing time value of money calculations using negative interest rates…or maybe somebody hit the wrong key on his or her calculator. I digress again, but at least I do so parenthetically.) do make the analysis look quite squirrelly to yours truly. But let’s assume the bureaucrats’ numbers are true. If that is the case, what need is there for a mandate? If the savings are so abundant, if the return on investment, if you will, is so clear and compelling, why would the government have to force the automakers to improve fuel economy at such a rapid and expensive clip? One would think that people would be banging down the doors of the dealers and the automakers, demanding that their money be tripled.

Either these numbers don’t hold up or the Bush/Obama administration thinks that people are just too dumb to recognize a compelling deal when they see one and therefore must be guided by their obvious betters to their obvious good. Even yours truly, whom no one has ever accused of overestimating the intelligence of the prime-time TV addled American public, cannot go along with the latter.

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