When we get to the age of self-driving cars, will there still even be cars?
The price of gasoline is heading back to economic reality and we’re about to see the effect of Americans’ appetite for not learning lessons about trucks and SUVs. They’re really expensive to drive when the price of gasoline lives in economic reality.
So Ford’s announcement that it’s eliminating a line of cars in favor of trucks and SUVs seems like a typical case of bad timing by an American car company.
Ford built a reputation as a “green” car company, perhaps one of the reasons why it was the only auto company not to go bankrupt the last time a recession came calling. Since then, it’s lobbied to undo the government’s fuel economy standards, just nine years after accepting a handout from the Department of Energy to help develop more fuel efficient engines.
What changed? You. You’ll pay more for an SUV and truck even though it’s essentially the same vehicle as the more fuel efficient models, and even though it doesn’t cost Ford any more to build, Jamie Lincoln Kitman, a bureau chief for Automobile Magazine writes in today’s New York Times.
The unwillingness of Congress to tax gasoline more heavily did not help. Nor did the readiness of the Obama administration to accommodate so much of Detroit’s pro-S.U.V. agenda in its regulations. Though they did raise federal mileage standards, the rule makers rewarded companies that built bigger vehicles by setting standards matched to vehicle size, with large cars allowed to burn more gas and pollute more. And now the Trump administration is moving to reduce even those standards.
Even in times of robust, S.U.V.-fueled profit, carmakers have not seen their share prices rise much, especially compared with the tech companies that may, in the era of self-driving cars, become their competitors. Last October, Ford proclaimed it would cut its future spending by $14 billion. Its stock did nothing. Last week, it announced it would trim an additional $11 billion. “We’re going to feed the healthy parts of our business,” Ford’s chief executive, Jim Hackett, told analysts, “and deal decisively with the parts that destroy value.”
It’s a stunning moment: The head of a great American car company is calling the great American family sedan a value destroyer and walking away from 35 percent of the vehicle-buying population and hundreds of thousands of passenger car sales a year.
What’s more, the move effectively cedes the passenger car market in North America to competitors old (Japanese, Korean) and new (Chinese).
Ford doesn’t know what the future holds, he says. Self-driving cars could put it out of business. So it wants to make as much money as it can while it can.
Consumers don’t have a strategy for the future in mind, blindly making the same mistakes they’ve made before and — once the gasoline price returns to its higher level — asking someone else to fix their mistake.