Mar 25, 2008

U.S. automakers were powerless to stop new fuel-efficiency legislation

...Whether they like it or not, the new 35-mpg standard should nudge Detroit's Big Three to become more aggressive in pursuing green technologies. But the question remains: Will Americans be willing to pay thousands of dollars extra for these cars? Consider, for example, that Honda scrapped the hybrid version of its Accord because it didn't offer enough fuel savings to justify the premium price that had to be charged for the technology. Similarly, sales of the big hybrid SUVs from GM and Chrysler aren't expected to make much of a dent, perhaps just 5,000 or 6,000 per year, because of their high costs.

If U.S. politicians were really serious about improving fuel efficiency, they might follow Europe's example. Thanks to steep excise taxes, prices at the pump in some European countries now top $7 a gallon. That's helped drive demand for smaller, more fuel-efficient vehicles over the long term. But the conventional wisdom is that in America, where driving a car, as well as a pickup and SUV, is seen as an inalienable right, a gas tax, which consumers are reminded of every time they visit the pump, would never fly. Says Chrysler CEO Robert Nardelli: "That, of course, is political suicide."