Truck and Barter

Do House Representatives Have Too Much Choice?

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

“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)

Piecework in Goss' Garage

How much is a good starting wage for a newly trained Volvo mechanic who lacks any experience? Pat Goss has a reality check for those who don't see the link between pay and productivity:

Washington, D.C.: Dear Pat,

My brother is 19. In February he will have completed a year of training at UTI (where he finished top of his class) and four months of specialized training at Volvo in Chicago (where he is also top of his class). Though Volvo guarantees placement somewhere after graduation, over Thanksgiving he met with a few Volvo dealerships in the area to see about securing a job before he is done with school. I was shocked to see that he was offered jobs that paid only $14 an hour. Do you feel he was low-balled by these dealerships? Is there room for negotiations? I know nothing about cars or garages ... just a big sister trying to get a little more info. Thoughts?

Pat Goss: Low-balled? What does he bring to the table? He has no real experience. He has no real training. In the outside world that would be a reasonably good starting point. Yeah I know the schools tell tales of enormous salaries but that does not usually happen unless the person has experience. Besides the hourly rate is not nearly as important as his ability to produce work. Most shops pay on hours completed which is then converted to an adjusted hourly wage. If he's good he can easily convert the $14 an hour into $35 or more simply by producing more work relative to book allowed hours.

[Emphasis added]

Senegal Forbids Cheap Cars

Have you ever wanted to race from the UK to Africa in a beat-up old car costing less than $200? Then the Plymouth-Dakar Challenge is the race for you! But watch out when you get to Senegal:

Senegal is now upholding laws that prohibit the import of cars more than 5 years old. This is a bit difficult for us as we need to cross Senegal to gain entry to The Gambia. Last year we made attempts to get official approval from Senegal to allow the PDC to pass through. It would be difficult to claim that those attempts were entirely successful, but with the persistence of Sad Steve and Andy Pag on the ground in Senegal all Groups were allowed to pass through... allbeit under the watchful eyes of the Senegalese Customs who insisted that the drivers paid an official to join them in the convoy to make sure no-one sold any cars! We are hoping to gain further assistance from the Senegal Natonal Olympic Committee this year to try to make the crossing of Senegal a little easier. If you ARE able to buy a car under 5 years old for £100, then you'll find Senegal much easier. If you cannot manage this, then you just need to be aware that Senegal is not going to be all that welcoming, but you should (eventually) be allowed through. There are NO GUARANTEES, however, and you might find yourself driving back home!

You'd better watch out when you get to The Gambia too, as they authorities there forbid right-hand drive cars.

Hat tip to Autoblog, and make sure you check your route map.

By the way, this journal by one set of participants is a riot.

Delphi is Collapsing

Delphi, the major auto parts supplier, is demanding wage cuts of up to 50% from the UAW, and billions in bailouts from GM, or it will file for bankruptcy:

DETROIT -- Delphi Corp., one of West Michigan's largest employers, wants United Auto Workers members to accept wage cuts of more than 50 percent and eliminate layoff pay to help the auto supplier effort to stave off bankruptcy, according to UAW leaders at an Indiana plant.

Delphi, with plants in Coopersville and Wyoming, seeks to slash wages from an average $27 an hour to $10-$12 an hour and eliminate a jobs bank that gives full pay to 4,000 laid-off workers, officials from UAW Local 292 said in a letter, which was posted Thursday on a union Web site.

That would mean a $35,360 cut for a worker currently earning more than $56,000 a year. At $10 an hour, it drops to $20,800.

Local workers contacted by The Press today said they are shocked by such a drastic cut that would put their pay below many of the nonunion plants in the area.

I don't know what's more incredible, that wages will be cut so drastically, or that union power managed to make them so much higher than those received by non-union workers:

S&P said Delphi suffers from an uncompetitive business structure because of the wages and benefits of its U.S. hourly workers, which were set by GM before it spun off Delphi. Delphi's hourly wages are twice that of competing auto suppliers, S&P said.

Of course, the stock is plunging:

Delphi's stock, which has traded above $9 during the last 12 months, fell 95 cents to $1.25 on the New York Stock Exchange. Earlier it fell as low as $1.03.

Meanwhile, shareholders and former executives are suing because of alleged sham transactions, and economists note that losing Delphi could cripple local government budgets.

Of course, the top 21 executives have been well taken care of so they don't jump ship... One presumes many rank-and-file employees facing the big cuts have already tried to retire or leave...

Also, the comments at autoblog are worth a look.

Am I Too Hard on GM?

The folks at the GM Fastlane blog don't understand people who don't wear seatbelts:

I know it is not just me. Many of my friends in safety, law enforcement, and public health cannot understand the view that a decision to not wear a safety belt is in some sense a personal "right."

Do you ever get the feeling that you must -- MUST -- comment on something? I did, and posted a few choice paragraphs below that:

[Y]our concern for safety rings utterly false to my ears.

If you were truly concerned for safety above all else, and you honestly want to reduce deaths, then you would put a regulator on your new cars that won't let them go above, say, 75mph.

No, you might object, consumers don't want to be told how fast they can drive! Well, fancy that! Maybe consumers don't want to be told when to wear seatbelts either...

Under GM's logic, a driver has no "right" to risk his own life by not wearing a seat-belt, but he does have a "right" to risk his life -- and the lives of others -- by speeding. How's that?

Long-Term Hybrid Use

The uncertainty arising from a lack of long-term use data has scared away many potential hybrid car drivers. But we do have one data point -- a taxi-cab driver in Vancouver who put 200,000 miles on his 2001 Prius:

Having had the opportunity to talk with Alain Lee, product training consultant for the Prius division at Toyota Canada, he stated the life expectance of the batteries would be a minimum of 15 years in normal use with the nickel metal hydride battery. This is based on 20,000 kms or 12,000 miles per/year.This claim is based on the information gathered from my 2001 Prius, which went back to Japan to be disassembled for technical information after 25 months use as a taxi, in exchange I received a 2003 Prius.

I'd say that was a very good deal for both sides.:

Fuel Economy by Speed

A while back I wrote Does Driving Slower Save Gas?. My dissertation prevented a more complete analysis, which is presented here. The main result of the previous post was that according to the Federal Government, driving at a steady speed of 55 mph maximizes fuel economy. I and my readers found this rather hard to believe, so I emailed the relevant authorities, who quickly responded that the basic chart is a distillation of data presented in tables 4.24-7, in Chapter 4 of the Transporation Energy Data Book. From there, we find that three studies were performed measuring fuel economy at steady speeds-- in 1973, 1984, and 1997. Each of these came back with different results, basically because they were using wildly different automobiles.

Let me say that it appears the tests of these vehicles are impeccable. Great care was taken to standardize the conditions and get real operating data on these models. That being said, it is very hard for me to justify using data from one 1993 Subaru Leagacy and one 1997 Toyota Celica as a basis for a generic 2005-6 model car.

The 73 study used

What if GM Shut Down?

Let's say GM can't get the unions to agree to have workers spend a greater share on the cost of their own medical care. The papers and pundits say GM will, eventually, go into bankruptcy. That's one way out. But that doesn't resolve the big issue: some GM brands are profitable and innovative, while others are still considered stodgy and unreliable.

It all leaves me wondering what is would take for GM to spin off its profitable lines as separate companies or as a new group, close its doors, and go out of business...

Last December, some folks at AutoWeek had a vivid debate on a related subject.

Buying a Fuel Efficient Car: A Cost-Benefit Analysis

s I indicated below, I'm considering replacing my 2000 Hyundai Elantra.

"Hazlitt" has been extremely reliable, and has only 48,000 miles, but I place a premium on a car not breaking down at inconvenient times -- like when my wife is driving our son across town. This has not yet happened, but I increasingly suspect, based solely on the age of the car, that it will.

My cost analysis training leads me to believe that if I do the math, I can come to a rational decision. Let's actually try to do the math, putting in subjective low, medium, and high values when good data are not available. In the end, we will have three estimates, a low end, a "best guess", and a high end estimate.

Model and Data

et's say I value not breaking down at a cost of $2000 (which includes the cost of repairs). What is the liklihood that in the next 5 years my 2000 Elantra will break down on the road? I haven't a clue to the real probability of BD(2000), actually. What is the liklihood that in the next 5 years a 2005 Elantra will break down on the road? No clue about BD(2005) either. Hence, my rough expected benefit from greater reliability is $2000*[BD(2005)-BD(2000)]. How in hell am I to determine this?

But I also want a car that is fuel efficient. My automatic Elantra has been averaging 30 MPG in mixed use. What are my automatic-transmission alternatives?

1. Honda Civic HX
2. Honda Civic Hybrid
3. Honda Insight
4. Hyundai Elantra (I don't fit into the front seat of the Accent), the
5. Toyota Prius
6. Scion Xa (The Xb is ruled out on asthetic grounds

Conclusion

on't bother with Cost-Benefit Analysis if your gut tells you that you really want something, and your wallet says that it is not a really big deal. If you're honest with probability within a CBA framework, it is unlikely that you will come to any clean, simple, high-probability, rational conclusion about which option is better.

Hyundai vs. Volkswagen

fter being told by a Hyundai car salesman that he had switched over from selling Volkswagens to selling Hyundais because the former were going downhill, I emailed Will Christie, a GMU Econ Ph.D. student who has an incredible knowledge of things automotive. He has given me permission to reprint his email:

[T]he dealer was (gasp!) probably on the level with you. If he's looking for hot sales on a commission, he made a smart move. Hyundai is in the process of repositioning themselves in the market, moving upscale. They are soon to bring out a new Sonata that makes the current model look positively ugly. The new Sonata will be larger with better features and will for the first time be aimed at the Camry and Accord. The XG350 is being replaced with a model called the Azera, which will compete with the Toyota Avalon and possibly the Lexus ES330. Both new models look considerably less Korean/Chinese and more Japanese (more "sophisticated," as Car and Driver put it). There is a new Accent on the way, and the Elantra will probably be redesigned next year (Hyundai's model life cycles are considerably shorter than industry average). The next Elantra will probably be poised to compete with the Corolla and the redesigned 2006 Civic. At any rate, Hyundai is a company on the move. Right now, in terms of reputation and position in the US market, they are probably where Toyota and Honda were in the mid 1980's, which isn't bad.

VW is a sinking ship. Years of bottom-rung reliability have caught up, and the reputation effect is beginning to impact business. Sales are down sharply over the past couple years, and the new products VW has brought to market have bombed, to put it mildly. Millions upon millions were wasted on the Phaeton luxury sedan, sales of which underperformed company expectations by about 80%. An entirely new (and expensive) plant was built for the Phaeton. Sales are so low that a Bentley sedan is being created on the same platform in order to utilize more of the plant's capacity. VW is trying desperately to refocus. A new Golf has been released, as has a new Jetta. A new Passat is on the way for next year. This is all probably too little to late. The GTI, the performance Golf, will probably continue to be a niche car, but VW owners are increasingly jumping ship, tiring of poor reliability. The fun factor of the cars simply isn't worth the hassle anymore.

Economists like numbers, however, and it is numbers you seek. There is no place where you can readily get the information... The auto industry does not use quarterly measurements for sales; data is kept monthly and summarized annually. An additional metric that is worth exploring is inventory time, the focus of my dissertation. Manufacturers collect sales data, but there is a lag of about three to five months between vehicle production and collection of the data. When you count the lead time for production scheduling, it can take eight or nine months for sales data to affect production. In the meantime inventory buildup is an additional sign that things are going wrong at the retail end.

It surprised both of us when I stumbled upon this data from Wards showing that in the first four months of this year, Hyundai sales in the US are up 14%, but VW sales are down 14%!

Private Roads in Northern VA

Well, I never thought I'd see this:

Construction of the first major expansion of the Capital Beltway in a generation could start as soon as next year, Virginia transportation officials said yesterday after signing a deal with two private firms to build toll lanes for a speedier ride on 14 miles of the chronically clogged highway.

The deal calls for adding two lanes in each direction of the Beltway, separated from other traffic... The high-occupancy toll -- or HOT -- lanes would be free for vehicles containing three or more people; other drivers would pay to use them. To keep the lanes from clogging, tolls would increase with the amount of traffic.

The state would not have to pay anything for the new lanes. The private companies would invest the entire $900 million cost of the project in exchange for all or part of the toll revenue....

Fluor Enterprises Inc. and Transurban Group will pay to build the lanes, which could open in 2010.

Of course the details might change, though not the lack of government money. It's a great day for federal and state taxpayers, as well as future DC beltway drivers.

Choice in the PRC

Warren Brown not so calmly voices his opinion about mandating high MPG vehicles:

I just left a country that tends to do that sort of thing--the People's Republic of China. They mandate lots of things there. Very efficient. No one complains. No one votes. No one wastes valuable time on town-hall meetings or anything like that. The government says: "Do it [or else]." And the people do it.

You want that?

I don't.

Not here.

Not ever.

Not for any reason under any circumstance.

Except of course, the federal government, through minimum fleet MPG requirements, already forces(?) car companies to make choices like this during planning and production. Hence, indirectly, the consumer choice set is limited... This is true regardless of your view of the relative costs and benefits of MPG requirements.

BLIS

The Washington Times notes that BLIS, Volvo's Blind Spot Information System, will be available in new mid-level models:

Instead, improvement has come as it always comes at Volvo � thoughtfully and carefully. There are design tweaks, mechanical updates and interior refinements. The most intriguing new feature will not be available until late winter or spring. It's the optional Blind Spot Information System.

A digital camera capable of taking 25 pictures per second will be mounted on each door mirror and will be able to warn the driver when a vehicle is entering the Volvo's blind spot. There is one limitation. Like all cameras, it will not function in times of poor visibility, such as fog or heavy snow.

A few more details at auto-innovations.com:

The technology employed: A digital camera is fitted on each door mirror and takes a large number of frames a second. By comparing the picture frames, the system can register when a vehicle is moving into the monitored zone, which is 9.5 metres long and 3 metres wide. The system is programmed to monitor cars as well as motorbikes, in both daylight and in the dark. It is also dimensioned not to react to parked cars, roadside fences, crash barriers, lampposts and so on.

Of those people who support the recent federal government requirement that new cars have child-proof window switches, how many would support a requirement of BLIS in all new cars? Note that the system will cost about US$600, and that adjusting your mirrors is free:

Though Volvo claims such a blind spot detection system is among the most asked-for features from drivers, we found a couple of BLIS�s characteristics questionable...

That a system like BLIS has come to fruition�and that reportedly people have demonstrated a desire for it�forces us to ask: Why aren�t drivers setting mirrors better? And what happened to the good ol� fashioned head-check?

Because ignorance, we surmise, is bliss. Or BLIS.

Front vs. Rear Wheel Drive

Over the lion's share of the automobile's history, most cars had an internal-combustion engine in front of the driver powering the wheels in back of him. But the fuel crises of the 1970s changed that. Manufacturers scrambled to save weight to save fuel, and they adopted assorted variations of the front-engine/front-drive layout...

Lately there has been a resurgence of rear-wheel-drive family cars. And, their makers claim better traction and handling than front-drive models, thanks to sophisticated electronics...

Popular mechanics performs a matched-pair experiment on a set of V-4, V-6, and V-8 powered cars:

One in each pair had front-wheel drive, the other rear. We ran them through our normal battery of performance tests. Then, we soaked the track and repeated all the tests to replicate the conditions you would face on a rain-slick road.

The reviewers conclude that computer control has eliminated the expected difference in power and handling between front and real drive:

Neither front-wheel drive nor rear-wheel drive is really better than the other. Today's sophisticated traction and stability control systems are so good they can mask or enhance the true driving dynamics of a vehicle. That said, through most of this test we found the effectiveness of these systems had more to do with a car's performance than which wheels were actually doing the driving.

One could quibble over the sample size of the test--in terms of cars and drivers--and insist that there must be some difference, but that would miss the point. Computers have made the difference between front and rear wheel drive so small that finding its exact level, or range of levels, is a waste of time...

Average Age of Automobiles in the US

Inspired by Buzzcut's comment on Steve Verdon post on smog, I would like to look at the mean age of autos in the US, and the median age of autos in the US. Since the mean is persistently greater than the median (as expected), the distribution is persistently skewed towards older cars. Is this distribution becoming less skewed over time?

Mean and Median Age of Automobiles and Trucks in Use, 1970-2003

Year	Mean	Median
1970	5.6	4.9
1975	6.0	5.4
1980	6.6	6.0
1985	7.6	6.9
1990	7.6	6.5
1991	7.8	6.7
1992	7.9	7.0
1993	8.1	7.3
1994	8.3	7.5
1995	8.4	7.7
1996	8.5	7.9
1997	8.6	8.1
1998	8.8	8.3
1999	8.9	8.3
2000	9.0	8.3
2001	NA	8.3
2002	NA	8.4
2003	NA	8.6

Up to 2000, it doesn't look like many of the oldest cars are dropping from the sample. The mean and median of the distribution are just shifting out. Increased durability lowering the scrapping rate is to blame for the average increase...

Public vs. Private Cars in Shanghai

The Chinese government's method of economic liberalization is slow release of control to the people--i.e. to the private sector. This unclenching of the fist is seen clearly in car ownership.

It is no surprise to find that the number of private cars still lags behind the number of public cars in most areas. But the slow, gradual transfer to private dominance uses different methods in different regions--an element of federalism I was surprised to find (being ignorant of Chinese history).

For instance, in Shanghai periodic sealed-bid auctions are held for a limited number of license plates--a regulation intended to limit the number of private cars bought:

Shanghai produces nearly one-third of the country's total sedans, but buying a car is still not easy for upwardly mobile Shanghainese due to increasing licence plate prices.

The city authority controls the number of new cars on the road by strictly limiting the issuance of new plates to the public through auctions.

Due to that policy, the average price of Shanghai's licence plates hit a record high of over 40,053 yuan (US$4,820) at the monthly auction over the weekend. In January, the average price stood at 39,516 yuan (US$4,770), also a historic high compared with last year's figures.

Just imagine such a restriction in Detroit in 1950! To ease some of the disparity, the local government has halted giving license plates to the government and associated industries, until it can set up a system of auctioning plates to institutions just like it does for private cars!

(Note that some people claim that license-auctioning violates Chinese law).

This might not seem like a big deal, but it is. Faced with a severe traffic constraint, this institiutional decision to 1) restrict a government perquisite, and 2) put the private and government sectors on an equal footing is both economically sound policy and something rarely seen in a "normal" developing country like Russia.

But of course, registration in Shanghai is only for the rich. However, cars seem to have been finding the path of least resistance onto the streets of Shaghai, as residents have taken to registering their cars in neighboring provinces:

The restrictive auction policy is obviously at odds with the central government's line to encourage car buying and in particular, foster domestic automakers who are mostly struggling for the low-end market...

Many Shanghai residents opted to turn to agencies which can manage to licence their cars in neighbouring cities such as Suzhou and Hangzhou. Despite various restrictions on cars licensed outside Shanghai, these licences have become a big lure to Shanghai people because the cost is mere peanuts compared to that of the local licences.

It is estimated that more than 2,000 cars owned by Shanghai residents have been licensed in the neighbouring town of Kunshan alone, not to mention other bigger cities. For each of these cars, Shanghai losses about 12,000 yuan (US$1,449) in road tolls and other charges each year.

The costs are so large that it's more like running a jitney in NYC than having your car registered in a different state. However, the governments seem to have unsuccessfully banned the practice of distant registration.

China, Autos, and Oil

Stanley Crouch insists that a fine way for the world to kick its oil dependency is for the Chinese government to greatly restrict the use of gasoline powered automobiles:

But rethinking is what we need, and we need it now. Even the Arab oil states are concerned about their ability to supply the world with enough oil, now that China has stepped into the industrial ring and needs that black gold like everybody else.

China can, therefore, do something that it has not had the actual power to do for hundreds of years. It could turn the entire world around and take the lead in settling this oil problem by relying on the profit motive to inspire a completely new direction.

How? The Chinese could turn to the automobile industry and say that since it has great pollution problems already, it would greatly prefer an automobile that did not use gasoline.

This would get an immediate response. Why? Because China could guarantee sales of at least 500 million automobiles over the next decade.

500 Million?

An estimate of 500 million new automobiles over the next decade seems rather high to me, considering the recent slowdown in sales.

In the first half of 2004, Daimler, GM, and others had record sales, with triple digit increases year-to-year. But auto sales in China have been declining for the past several months, hitting the small players more than Volkswagen or GM. That's because the big buys are selling the quality and luxury cars. See also this nonrespresentative sample of Chinese consumers who are not that confident:

In one of my speaking classes, the topic of car ownership came up. When I asked how many of the 20 students' families owned cars, two students very shyly raised their hands, clearly fearing they would appear boastful. When I asked who expected their families to have cars by the year 2010, two more students raised their hands. Now admittedly that's a doubling of the number of cars, but still only 20% of the families represented in my class.

Incentives and Cost Burden

Anyway, I won't contest his assertion that a no-gas or little-gas requirement will create massive incentives for automobile manufacturers to final alternative power sources--and right quickly.

But frankly, I'm dumbfounded that he seriously expects the Chinese to bear the tremendous cost of conversion for the entire world, while we enjoy cheap gasoline.

After all, the Chinese already have plans for tougher emissions standards than the U.S. does, and are already investing heavily in fuel cell technology. (I'm not certain how much of this is just a rip-off of other companies' ideas and technology).

Perhaps Crouch asumes that the benefits of lesser pollution will more than pay for the added costs of lower emissions automobiles; unilateral Chinese action would benefit them more than it would cost. But if this is true in China, why is it not also true in Europe, the US, Japan, or Korea? Since per-capita income in the relatively propserous regions of China is about $4,000 a year and far higher in the developed countries, why should those with lower incomes subsidize the gas-guzzlers and pay the costs of cleaning their air? Crouch writes: "At the moment, no one can imagine China being that farsighted or that bold. " Nor could I imagine them that generous or stupid. Their automobile production and consumption has already started expanding...

Partially Sunk Investment

The costs of conversion might seem to be lower in China, but American and European automakers have already sunk, and are planning to enter into, massive investment in plant and equipment to meet the growing effective demand for privately-owned automobiles in the coastal cities:

This acceleration in the adoption of privately owned cars has sparked a �gold-rush mentality� which manifests itself in tremendous investments on behalf of European and American car makers in on-the-ground production capacity through joint ventures with local manufacturers. These joint ventures are currently supplying roughly 90 percent of the new cars bought�largely due to import restrictions. Automotive trade publications in Europe and the U.S. expect China to be the world�s largest market for cars in years to come. Volkswagon for the first time sold more cars in China than in Germany this past year.

Credit Markets

Note also that credit markets are just getting started in China, so increasing the costs of production makes it even relatively harder for regular Chinese to afford non-gas cars:

Only 15 to 20 percent of all cars currently sold in China by General Motors are financed through car loans, with 15 percent being the national average. The remainder of the cars is paid in full at the time of purchase. This compares to a financing rate of roughly 85 percent for all GM cars sold in the U.S., 70-80 percent in Germany and the UK, and an average of 70 percent in the entire developing world. This low borrowing rate is simply due to the historical lack of a borrowing culture in China, both on the supply and demand side. Several insurers guaranteeing car loans to bank lenders
have recently suspended these policies, due to the large share of non-performing loans

Does Driving Slower Save Gas?

Michelle Singletary advises that to save on gasoline, we should, among other things, slow down.

Stop speeding. The faster you drive, the more gas you use, the more money you spend. Each 5 mph over 60 is equivalent to paying an extra 10 cents per gallon for gas....

Avoid aggressive driving and quick starts and stops. At highway speeds, you'll lower your gas mileage by about 33 percent. By maintaining a constant speed and driving sensibly, you could save as much as 50 cents a gallon.

I'm not going to discuss the time cost of slowing down. For arguments sake, assume that you're indifferent between sitting at home or sitting in your car. Is it true, regardless of your car make, model, and condition, that driving 65 instead of 60 increases average fuel cost by about 10 cents per gallon? I'd say yes, with anecdotal caution.

It seems about right, but only if gas prices are about $2.50 per gallon. This is confirmed by a casual analysis of the graphics provided by the government.

fueleconomy.gov reuses the following graphic without explanation of sources or methodology:

Assume this graph represents an average automobile. That line conveniently peaks at 55MPH, which seems to be the government's consensus estimate for "most efficient". But the government sometimes uses an extended graphic in it's reports:

This graph has the same long plateau, a drop in efficiency from 55 to 60, and a much smaller drop from 60 to 65. It looks to me like driving 60 MPH saves you 1 MPG compared to driving 65 MPH. 1 MPG/26 MPG = ~4% increase in efficiency, or about 4% less fuel needed to drive the same mile. At $2 a gallon, this saves us 8 cents per mile.

But including speeds from 0 to 15 on the left makes fast highway driving look very favorable to slow log-jam traffic. It's more fuel efficient to speed home early than to sit in rush hour parking lots.

But an honest examination of fuel efficiency must conclude that the optimum fuel efficiency speed is not easily calculated, although the "sweet spot" is usually somewhere between 40 and 60 miles an hour, depending on the type and configuration of each car, and weather conditions.

Confirming the chart's line: In my wife's Volvo V40, I averaged almost 30 MPG driving at 65 MPH up and down I-95. I found that there was no perceptible difference in fuel efficiency between cruising at 60 and cruising at 65.

No Fuel Efficiency for Americans

Just read two fun older news articles that take on the political economy of fuel efficiency.

Politics Keeps Great Cars Off Our Shores talks about CAFE, labor unions, and their link to the Sierra Club being against small-car imports.

and

U.S. automakers seem to avoid fuel efficiency -- only for Americans talks about turbochargers and diesel engines.

(I found the second linked here).

On the Accuracy of Odometers

All instruments have measurement error, independent of a human misreading their output. No yard stick is exactly a yard, no reasonably priced bathroom scale measures to the quarter pound, no chem lab balance is accurate to the microgram. Similarly for an odometer, which measures distance traveled.

Correct me if I'm wrong, but the United States has no federal or state regulation about speedometer or odometer accuracy; of course it is illegal to shift the odometer without posting a notice of having done so--even if the original odometer was reading wildly outside the design tolerance of the manufacturer. (Here are the federal regs.)

Tampering with automobile odometers is an extraordinarily costly problem. A while back the NHTSA studied 10,000 randomly selected automobiles to figure out how frequently used autos have their odometers rolled back.

NHTSA's study was requested by Congress and examined the title transfers of 10,000 vehicles and its own database of known odometer fraud. The researchers calculated that 3.47 percent of vehicles less than 11 years old have had their odometers rolled back, or about 452,000 vehicles sold each year.

From the full report:

The increased cost consumers pay to purchase passenger vehicles with odometer rollback of $1,056 million per year makes odometer fraud one of the top crimes against property in the United States. By comparison, the Federal Bureau of Investigations estimated that in the year 2000, auto theft resulted in direct losses of $2,900 million, arson $760 million, burglary $3,000 million, and shoplifting $200 million.

Even if you're buying a used car from a reputable person or dealer, there is still a very good chance that the odometer meter is wrong, even if it has not been tampered with. But the question when dealing with either an honest man or a crook is not "is the odometer wrong?", the question is "how wrong is the odometer?"

Even non-tampered odometers may wrong by a large amount, as tolerance levels for manufacturers differ; a consumer should know how this error tolerance effects their valuation of the car.

According to one calibrator merchant:

The speedometers and odometer on.... modern cars, are calibrated from the factory with a plus 1-2 percent error. This means that actual speed or recorded mileage is actually lower than that indicated on the speedometer and odometer.

Some organizations, when testing out cars, will examine speedometer/odometer error. Here are 5 foreign models tested in 2001:

Subaru Impreza WRX 3.2%
Ford Focus 2.1%
Chrysler PT Cruiser 1.07%
Toyota Condor 2400 1.54%
Volvo V70 T5 0.14%

One man claims the Porsche told him that 10% over (for a speedometer and apparently odometer) was with design tolderance. Another has a 2% overage.

Hence, if you're buying a car with 50,000 miles on it, the actual mileage can legitimately be 1,000 miles or more less than the odometer reads. Perhaps it's sellers, not buyers, who should be most concerned about this.

If this has amused you, see this longish treatment of mechanical and digital odometers.

Also note that the Iron Butt Association brings together those who motorbike long distances in short times--say 10,000 in ten days.

Their stringent rules require that applicants know their odometer error. One milestone has the following requirement:

WARNING: Unless your speedometer has been calibrated, do NOT depend on your own odometer readings for official readings! Most Japanese motorcycles register five to ten percent more kilometers than actually traveled. Over the course of a 24 hour period, this error can be quite severe - as much as 200 kilometers. IN ALL CASES, mileage will be verified with either paper or computer maps of the country you live in.

This man notes that race courses measured by auto odometers will be too short, yielding a who bunch of angry runners who really hadn't made personal bests...!

Should You Drive to a Cheaper Gas Station?

Mark Solheim of Kiplinger.com pojnts to a web page that will help you figure out if driving to a cheaper gas station will save you money.

The formula is easy, but it's nice to have the calculations done for you. Note that this doesn't include the opportunity cost of the time it takes you to drive the longer distance.

Civic Hybrid: Saving a Penny a Mile

In spring/summer of 2003, Popular Mechanics ran a 3000 mile, cross-country (Manhattan to LA), gas vs. hybrid test on the Honda Civic. Each car drove the same roads under the same conditions, presumably minutes apart.

The results were bad news for those hoping to justify a hybrid purchase on total-cost-of-ownership grounds. At 2003 gas prices, the team saved a penny a mile by using the hybrid. This means it would take driving 144,000 miles to recoup the $1440 additional cost of the hybrid. Discounting future gas prices would make this a much worse calculation, although higher recent gas prices will make this a better one.

The EPA rates the Hybrid at 46 mpg in the city and 51 on the highway. So, theoretically, with a 13-gal. tank, at 51 mpg, the Hybrid will yield 663 miles on one tank. And our 3000-mile journey should need only 4.5 tanks of gas.

By comparison, our Civic EX sedan is the top model in the Civic sedan lineup and features a 1.7-liter 4-cylinder with Honda's VTEC variable valve timing... The EPA average fuel mileage is 32 city and 38 highway. So in theory, the EX should get just under 500 miles per tankful and take about six fill-ups to get to California.

One thing the EPA doesn't take into account, however, is that speed limits of 70 and 75 mph have displaced the "double nickel" in many states. And assuming Buford T. Justice gives you a 5- to 10-mph window, it is not unlikely that traffic will be flowing normally at 80 mph....

The conclusion:

Over the entire trip, the Civic EX averaged 33.8 mpg. The Hybrid averaged 42.0 mpg. So, the hybrid technology was worth 8.2 mpg for our run. That's a 24 percent fuel economy gain. At New York and California prices (at the time we made the drive), we spent $168 to keep the EX in gas and $135 on the Hybrid, or a savings of $33 for 3065 miles--that's a penny a mile.

All said and done, if you were driving the same route, at the same speeds, in the same conditions, it would take roughly 144,000 miles before the Hybrid paid back its $1440 premium over the Civic EX.

News from the ROK

A couple of items from the East Asian Peninsula:

Hyundai is perhaps the hottest car maker out there. Fifteen to twenty years ago, they were very cheap and not well built. Times have changed, the article points out that they have high customer satisfaction with their quality. Of course, they are building a plant here in the U.S.. Also, Hyundai, Kia motors is the seventh largest carmaker in the world.

South Korea is experiencing what many here have called a jobless recovery. I had seen a better article the other day which captured this for the economy as a whole, but this will illustrate the point in one of the country's sectors:

According to the central bank, the elasticity of employment for manufacturers, or ``the increase rate of job offerings for each 1 percentage point in economic growth,�� stood at �0.18 in 2003.

It means that manufacturing jobs fell by 0.18 percent each time when the economy grows by 1 percent. In other words, labor productivity has increased but an economic growth would not automatically lead to creation of additional jobs, a BOK economist said.

The figure has been below zero for three consecutive years with -0.29 in 2001 and �0.08 in 2002.

South Korea, as many other countries have as well, is experiencing a decline in manufacturing employment. What's impressive about the article is that a journalist actually used the word "elasticity."

Edit: It should be noted that the trend here in the U.S. has appearantly stopped for the time being(via Instapundit). Korea has experienced strong GDP growth during this period, 2002's was above 6.0%(I would find the exact firgures, but the European exchanges are opening down to flattish and I have no idea why right now).

Not having to do with South Korea, but Powerline blogged the Miss Universe Pageant last night. If you didn't see it, there's a surpise upset.

Volvo Slightly More Popular in France

In France, the registration of Volvo automobiles increased 33% in 2004Q1 over the previous year, even as total sales dropped 2.8%. Granted, only 2,735 of 506,884 new registrations were for Volvos--a 0.5% market share! 87.3% of Volvos sold were diesel powered. The thread attached to the above article informs me that in France, diesel costs far less than regular gasoline due to inequitable taxation.