Are green cars a boon to the Big Three, or a millstone tied around their necks? I say the former, though The National Automobile Dealers Association (NADA) is out with a report that, because of the federal 54.5 mpg requirement for 2025, the average cost of a car will go up nearly $3,000. And that means, says David Wagner, a NADA analyst, that "millions of people will no longer be able to finance a new vehicle." What a shame, considering that the domestic industry, fielding the greenest fleet in its history, is now going through a sales renaissance.
In March, Chrysler saw a 34.2 percent rise compared to the same month a year ago, Ford's sales were up five percent and GM's 11.8 percent. Sales of light trucks were up, too. NADA acknowledges that consumers will see a big benefit from the fuel economy of these cars — an $8,000 savings over the lifetime of the car — but because people won't be able to afford the payments to buy the vehicles it doesn't much matter.
I don't believe we really have a problem here. Taking on NADA is another acronym, Ceres, the green investment group. Working with Citi Investment Research and Analysis, Ceres concludes that American automakers are likely to see a big 6.3 percent rise in profits because of those same federal rules. Under what's known as Corporate Average Fuel Economy, or CAFE, Ford, Chrysler and General Motors will take in an additional $2.44 billion by 2020. "Automakers who invest in more efficient vehicles are investing wisely," says Carol Lee Rawn, transportation director at Ceres.
Since 2008, the sales of cars getting 30 mpg or better on the highway have increased from 20 percent then to 48.3 percent now, says a TrueCar analysis. As the Harvard Business Review concludes, "American automakers are gaining market share and Japanese manufacturers are losing ground in this portion of the market." Imagine where the Big Three would be now if they hadn't, in response to rising gas prices and CAFE, dramatically expanded their lines of compact and subcompact cars?
Let's name names: Ford Fiesta and Focus, Chevrolet Cruze and Sonic, Dodge Dart. All new or revamped, all in the 30 mpg club, and all selling like ice cream cones in August. U.S. auto sales could reach 15 million units in 2012, up from 12.8 million last year.
NADA represents the nation's auto dealers. I think it could better use its resources by helping them sell the green cars that the Big Three are producing and customers increasingly want.
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