Why can't the automobile industry get a handle on low-carbon cars?

| 19th February 2009
A hub of invention, why can't the automobile industry get a handle on low-carbon cars? The answer's in the profit margins - which is why the credit crunch offers hope for the future, says Harriet Williams

Last summer, Friends of the Earth Europe parked an old-style 1948 VW Beetle next to the brand-new model in front of the European Parliament in Brussels. The human genome has been sequenced and man has walked on the moon in between the building of these two cars, but as far as guzzling gas goes, time has stood still: the 1948 and 2008 Beetles both travel exactly the same distance on any given volume of petrol – 38 miles per gallon, to be precise.

As environmentalists accosted MEPs filing into Parliament to vote on minimum standards of fuel economy, a banner fluttering in the blue sky above asks, ‘60 years of progress?’

The energy efficiency of car design has actually taken great leaps forwards in the past decades. Leaner burn engine technologies such as direct fuel injection are now widespread. Friction and drag – two great enemies of fuel conservation – have been reduced through the use of lightweight materials such as carbon fibre, the development of lower-resistance tyres, plus thinner engine oils. Cumulatively, these modest improvements amount to a revolution in vehicle efficiency. So what has become of all this progress, if it is not being used to pack more miles to the gallon?

We return to FoE’s temporary forecourt in Brussels for answers. Side by side, the 2008 Beetle dwarfs its postwar brother. If the two were to engage in a cross-town race, the new car should leave the old one for dead thanks to a beefier engine. Climbing inside, the front seats offer more legroom, with air conditioning fitted as standard. And convertible fans can forget about wrestling the lid off at kerbside – in the latest model, the roof opens up at the flick of a switch.

An industry dragging its wheels

The new Beetle, like the new Mini, is marketed as a cute blast from the past, but in truth these cars have more in common with a truck than the nifty ziparounds of the 1960s. The Mini’s transformation from bijou to behemoth is even more striking, having grown 2ft in length and sprouted two new back doors. Drivers would save a lot of carbon and money if automakers applied their technological know-how to reducing fuel consumption. Instead, it has been used to add power and bulk, as well as peripheral accessories such as aircon or seat-back LCD screens – each one comprising a ‘parasitic’ fuel loss, in the language of auto engineers.

For an industry synonymous with innovation, automakers are pretty coy about fuel efficiency. In the US, carmakers were able to increase average horsepower 90 per cent between 1981 and 2001, and drop 0-to-60mph time by a third. But ask the same auto executives to build you a cleaner car, and they will cry all the way to Congress.

Automakers deliberately associate low-carbon vehicles with futuristic technologies such as hydrogen fuel cells or so-called ‘second-generation’ biofuels – neat idea, but decades from commercial reality. In other words, don’t come calling for it today. The truth is more prosaic. Clean cars are already among us, some of them well-known – the gasoline-electric hybrid Toyota Prius in particular – but mostly less exotic species such as small Renaults and Citroens, which rarely grace the advertising hoardings but travel upwards of 60 miles per gallon without a murmur.


Clearly the auto industry is capable of building efficient cars, begging the question: why it isn’t making more? Given that road transport racks up one-fifth of Europe’s carbon emissions, not to mention huge oil-import bills, it seems pretty perverse to be fiddling around with heated wing mirrors instead of focusing upon saving fuel. But the pursuit of speed, sinew and accessories makes perfect sense to a sector that has deliberately aligned performance with profit.

At the turn of the millennium, profit margins on fully specified SUVs could easily double or triple those on a family sedan. Many automakers offer small cars in the spirit of a loss leader: entry-level vehicles designed to win customers to the brand, in the hope they will trade-up for larger models in the future. Hefty advertising budgets are deployed to keep customers moving along the ladder. Large, powerful cars have been endowed with all manner of desirable connotations, from good taste to sexual prowess. A remarkable PR job on what is, at the end of the day, a mobile metal box.

The upside to the downturn

The industry’s fierce battle against regulations to improve fuel efficiency and reduce carbon emissions is explained by this context. For more than three decades, automakers have weakened and delayed attempts to improve the fuel consumption of cars in Europe and the US. The oil supply shocks of the 1970s brought about the first bid to slim cars down, as the US required carmakers to meet an average level of fuel economy. Similar policies are now widespread, but their targets remain remarkably timid, trailing well behind the limits of technological possibility.

As a study in corporate lobbying, the automakers’ campaign against fuel economy is a masterpiece. Industry representatives tour the circuit of political committees and high-level advisory groups, always willing to discuss fuel economy but delivering little but greenwash. Overzealous legislators are slapped down by grimly painted prospects of economic annihilation for the struggling manufacturing sector. Mandates for more efficient cars will increase costs, send thousands of jobs abroad and enrage consumers through higher price tags in the showroom.

Every one of these arguments has been debunked repeatedly, even by the industry’s own analysts, who are urging investors to back cleaner cars as energy security and climate change concerns intensify. A leading auto business school based in Michigan – the no-nonsense backyard of Detroit’s automakers – has found that increasing fuel economy would actually improve the bottom line, a result the authors describe as ‘surprising, even to us’.

A greater surprise is how resilient the higher costs argument has proven as a shield against regulation, despite a stack of evidence showing that carmakers routinely exaggerate compliance costs. In the early 1990s, the auto lobby estimated that compulsory catalytic converters would cost a prohibitive £600 per vehicle. The final bill was less than £50. The same story is repeated with compulsory airbags, seatbelts and now with fuel efficiency too.

It is a measure of how forcefully the industry holds the ear of government that such arguments continue to be heard at all. In Europe’s recent battle over fuel economy, German chancellor Angela Merkel cast green sensibilities aside to cook up a deal that enables Mercedes, VW and other German automakers to carry on building some of the most polluting car fleets in the world. Other nations sought and received similar leniencies for their own domestic industries, and the final deal that limped off the negotiating table in Brussels last December reads more like a love letter to the car industry than a manifesto for tackling transport emissions.

Auto lobbyists have embellished the standard zeitgeist of economic competitiveness with imaginative flourishes over the years. In the US, the industry claims that smaller cars discriminate against obese people. One group of consultants even calculated the extra fuel-burn associated with ferrying overweight passengers, the suggestion being that the road to fuel savings lies in tackling obesity, rather than building more efficient cars. The industry has also tried to pass the buck on to tyre manufacturers, road planners and motorists.

With deep pockets and decades of lobbying experience, it is little wonder that carmakers have managed to hold tough fuel economy targets at bay. Ironically, the same business model they fought to protect may prove their undoing.

When oil prices were low and the economy was on the up, gas-guzzlers flew off the forecourts. Then along came two mighty blows: soaring oil prices and the credit crunch. Both shook the complacency of motorists and governments on fuel economy. Even before the economic slowdown, sales of large cars and SUVs were sliding, as consumers began to opt for smaller, cheaper-to-run models. Now sales are in free fall.

Carmakers such as General Motors and Chrysler, whose love affair with the SUV now looks suicidal, are close to bankruptcy, reduced to going cap-in-hand for government bail-outs. Having developed gas-guzzlers at the expense of investing in smaller cars, GM was recently forced to close a number of its plants and seek a buyer for the Hummer – a monster SUV that does only 9mpg – after sales dropped 40 per cent in the first six months of 2008.

Amid this turmoil comes the opportunity fundamentally to restructure the industry in favour of higher fuel efficiency. Belatedly, automakers are starting to walk the talk on cleaner cars, shifting investment into realistic technologies such as plug-in electric cars, and pushing low-carbon models in their adverts.

It is important that these changes are followed through when the economy picks up. Governments must take responsibility for steering the market in the direction of low-carbon cars through tax and regulation, and consumers must actively choose cleaner cars for environmental or money-saving purposes. Only by doing so will the car industry learn to turn a profit on higher fuel economy, and motorists get the choice of cars the world genuinely needs.

Harriet Williams is an environmental consultant and freelance journalist


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