Future of Detroit automakers - car bundles?
April 25, 2008
I just read a comment over on a blog at BusinessWeek and it got me to thinking about the car industry. Being from Detroi, I still have some friends there involved in the car industry at the Big Three - Ford, GM and Chrysler. The Big Three are having their lunch eaten by foreign companies on (perceived) quality and price, but also on fuel economy. I know darn well that Ford produces cars in other markets (Europe and South America, for example) that easily get over 40mpg. Here’s an example. So why do they insist on continuing to pump out F150s getting 15mpg to the American market? Profit, of course. SUVs and pickups are far more profitable. And people love their pickups and SUVs - the driving height, power, supposed status and more have continued to drive their sales for far longer than I would have supposed. If Ford (for example) abandons the SUV market for smaller vehicles, even if they sell more cars, they make less profit. What to do?
Sell car/SUV bundles. The sad fact is most people finance cars anyway, so financing a small commuter car (like the ‘Ka’) on to the price of an SUV would be ideal. People would get their ‘play’ car, but also have a commuter car getting 40mpg for every day driving. They don’t even have to make a profit on the smaller car - just roll the actual cost of the car in to the SUV bundle price and let it go. Heck, perhaps they should even just resell the incoming Tata motors cars *at cost* and use that to keep the SUV market afloat. With enough finagling, they might even convince the government that this ‘bundle’ counts are one car for CAFE standards compliance.
Insurance might be an issue for regular drivers, but I’m sure a ’split usage’ schedule could be created, or the car companies could even subsidize that out of the SUV profits.
What do you think?
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April 25th, 2008 at 7:26 am
A free marijuana joint with every hit of heroin the dealers sell? Sounds like a winner! An alternative might be to get some kind of help to deal with that pesky drug addiction, but hey - I’m not an American, what do I know?
April 25th, 2008 at 8:20 am
I’m not suggesting it’s the best holistic approach to the problem, but from a business standpoint, it’d allow car makers to try the best of both worlds - keep the high profit vehicle, while promoting ‘green’ behaviour (cynically speaking, of course). Given that the big SUVs would get driven less, their ‘end of lease’ value would be higher which might contribute to lower payments, or help offset the cost of bundling the second car. Yeah, everyone leases here as well, which is ultimately not a good consumer strategy, but people do it.
April 25th, 2008 at 8:25 am
I’m all for better fuel economy (I drive a hybrid myself)
Note: Although European cars do get much better mileage, MPG figures need to be normalized for comparison. A UK gallon is significantly bigger than a US gallon so will show better apparent MPG
Anyway….
I would like to see more development of plug-in hybrids where the electric motor gets you the first 40-50 miles and the gas/petrol motor only kicks in after that, or is only used to recharge the battery. Most local journeys would never use the gas/petrol motor and the negative effects of producing most of the electricity are shifted to a central location (the power company) where economies of scale, technology etc can have a bigger impact.
And don’t even get me started on the current ’strategy’ of using a food source (corn) to power cars (E85) !!!
April 25th, 2008 at 1:06 pm
Oh go on, get started.