Recently in Automobiles Category

When Intervention Creates Uncertainty

Michael Karesh warns:

Unless you must have a car now, if you are considering a domestic car–or even any car that directly competes with a domestic car–I would wait. Many proposed measures to save the domestic auto industry would have the effect of cutting car prices by thousands of dollars. If you buy a car now, you could pay thousands more.

Debates about bailing out automobile companies: Free

Same debates incentivizing people to stop buying cars: Priceless

The Volt

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Russ Roberts got me thinking about the Volt; here are some random thoughts:

1) I think we need to see this as one of the results of the increasing competition and opportunities brought about by globalization.

2) GM is taking an absolutely breathtaking risk -- the sort of risk I once believed only governments are willing and able to bear.

3) Massive private R&D projects do exist -- think Boeing 787 and Airbus A380. While they routinely fail to meet cost and schedule and performance, the private companies themselves must pay the penalty for failure.

4) But GM's situation is very much unlike a prime contractor in a military R&D project, in which a sensible profit rate is guaranteed, schedules routinely slip by years, costs can double or triple, and desired performance characteristics are flexible. If GM fails in any of these areas by wide margins, the brand will be badly, perhaps irreparably, damaged.

5) Both legacy and new media have greatly confused the COST of research, development, prototyping, testing, and initial lots of production of the Volt with the PRICE the market will bear. And GM managers -- even Bob Lutz -- are keeping their mouths shut about expected sale PRICE.

Raymond Hernandez notes that one perk of being a member of the House of Representatives is an all expenses paid car. In fact, Representatives are permitted to lease any car they damn well please:

There are few restrictions on what kind of car the members can choose, and there is no limit on how much they can spend....

Not only does the federal government pick up the cost of the lease and the gas, but also general maintenance, insurance, registration fees and excess mileage charges....

Congressional records show that about 125 members of the House make use of the benefit, which has been in place since at least the 1980s and is part of the allowance provided for their office operations.

I don't begrudge them their expensive cars; almost all of these folks would be driving luxury vehicles if they paid for them themselves.

But this leaves a politician with yet another decision to make: does he maximize status (as C. Rangel does), or minimize cost (as few seem to do), or maximize fuel economy, or minimize carbon emissions? Choices, choices! Clearly our House members need assistance in choosing between the bewildering array of choice! As we all supposed to know, people in current capitalist societies have way too much choice for their own good.

What rubbish! House members have implemented a set of rules that maximizes their own choices, their own freedom, and their own welfare. They know who they want to be and the image they want to portray to the world. They do not seem to find it hard to choose: they know if they must choose style or reliability or ruggedness.

However, I believe that Barry Schwartz could be vindicated with a simple experiment. Permit all House members only three fully-optioned choices: a Ford Escape Hybrid 4x4, a Ford Focus, or a Ford Taurus.

I bet you the take rate on cars would climb to near 100%.

Auto Makers Should Advertise on Blogs

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Two years ago, 10 percent of my advertising budget had an online component,...Today it’s 30 percent. Two years from now, it will be 50 percent. And overall budgets are not growing. It’s coming at the expense of television and print.”

- CMO of a U.S. auto company (cited in The Future of Advertising Is Now, an article from the latest edition of the magazine Strategy + Business, registration required)

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