Automakers Still Don't Get It

It's official: The U.S. Government is investing in more fuel-efficient cars. Unfortunately, its efforts don't seem to be creating smarter automakers in the process.

Last week, the Department of Energy approved billions in loans to Nissan (Nasdaq: NSANY  ) , Ford (NYSE: F  ) , and California's privately held Tesla, maker of pricey high-end electric-powered sports cars. In each case, the loans aim to help increase the available supply of electric cars. Whether demand will follow is anyone's guess.

But let's have a round of golf-clap applause for the feds anyway. Someone had to lead in this area, and the Obama Administration had already made a pledge to invest as much as $150 billion in clean energy, and put 1 million plug-in hybrid cars on the road by 2015.

Why it may not work
There's just one problem: We have precious little evidence that Americans want hybrid cars. Sure, Toyota's (NYSE: TM  ) Prius is popular, and Honda's (NYSE: HMC  ) Insight has captured the attention of observers and reviewers for its relatively low price tag.

Both vehicles are waging a war for supremacy in Japan, where hybrids have now topped the sales charts for two months in a row. Americans aren't likely to follow suit; the Japanese government gives tax breaks to consumers who buy green cars like the Prius and Insight. Here, Prius buyers are no longer eligible for tax credits. (Some less popular hybrids still are, however.)

There's also no refueling network equivalent for plug-ins -- no Valero (NYSE: VLO  ) for electrics. Start-up Better Place is working to remedy that, and it's attracted some $300 million in equity capital as a result, but we're far from a national network of hybrid service stations. Refiners aren't likely to rush to fill the gap.

Nevertheless, flush with cash, we can expect automakers to begin churning out electrics the way farmers pull in subsidies for growing crops for which the feds will pay.

Dig deeper, Detroit
This isn't a push to transform the auto industry; it's a money grab. If automakers really wanted to build smarter, more efficient cars -- autos that we'd really prize -- they'd spend more time on making their cars, well, smarter.

Most of the work -- work that can help cut back fuel consumption without an electric battery -- is already done. Trouble is, you often have to spend big money on a luxury sedan or SUV to get the goodies. Here are two such fuel-saving features.

1. More smarts
Even modern cars borrow from the archaic idea of a maintenance schedule. Rotate the tires every 5,000 miles, change the oil every 5,000 or 10,000 miles, change the spark plugs every 100,000 miles, and so on. But these are merely best practices, and every one of them is determined by mileage -- not by the condition of the vehicle or style of driving.

Smarter cars do more. The Cadillac Escalade and even modern versions of Toyota's Sienna minivan feature sensors that determine when tire pressure is running low. An even more intelligent vehicle would use the sorts of sensors that IBM (NYSE: IBM  ) employs to help businesses manage electricity usage. A dashboard indicator would replace warning lights. In real time, you'd know that your tires were 5% underinflated, thus costing you a specific amount in miles per gallon of wasted fuel.

2. More help
Many new GM cars ship with the OnStar system. Ford is working with Microsoft (Nasdaq: MSFT  ) on Sync. In each case, autos are connected to wider networks that can help when there's an emergency. But what about simpler needs?

Shouldn't a smarter car be able to supply real-time data about road and weather conditions? Luxury brands such as Lexus and BMW offer these features in the name of safety and convenience, but restricting those figures to the priciest models is short-sighed. The car whose onboard computer is able to reconcile my most common destinations with what it knows about the road could help me to take the best route every time, and -- wait for it -- save fuel.

Fuel economy is important, if only because automobiles are a large and high-profile source of carbon emissions. But if General Motors, Chrysler, and others really want to reinvent themselves -- if they really want to be relevant again -- they need to get beyond the battery and Think Bigger.

An electric engine does not a high-tech car make.

Accelerate your thinking with related Foolishness:

Nissan is a Global Gains recommendation. Microsoft is an Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers owned shares of IBM at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy has passed its driver's test, thank you.


Read/Post Comments (8) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 30, 2009, at 5:45 PM, Azcherrie wrote:

    Just talk Ford UP, Motley. Everytime you write something not nice, I get stuck with a stock that goes DOWN. Stop it, please.

  • Report this Comment On June 30, 2009, at 6:07 PM, 954joer wrote:

    Dude - some pretty irresponsible journalism here.....you need to do some leg work (just some - you've done virtually none on this topic) and investigate what all the manufacturers are doing to be smarter.....OnStar is in contact with you vehicle constantly and sends you emails when something falls below acceptable......

    Please be more responsible in your reporting...

  • Report this Comment On June 30, 2009, at 6:13 PM, MellowGuy1 wrote:

    Last week, I picked up my new hybrid SUV. It comes with tire pressure sensors, but I have been able to keep the pressure up in my other vehicle.

    The local power company is going to provide charging stations for electric vehicles. My hybrid isn't plug-in, so it doesn't help me. I did notice a Zenn parked in a driveway a few blocks away from my house.

    Why would anyone want to rely on MSFT software for their transportation needs?

  • Report this Comment On June 30, 2009, at 6:33 PM, mitchjl wrote:

    More people should be responsible for the routine maintance of thier autos.

  • Report this Comment On June 30, 2009, at 7:47 PM, nikos2708 wrote:

    The author knows NOTHING about the technology in todays automobiles! The author obviously did little research and has no idea how modern cars work. First of all, almost all automobiles and ALL Ford, Toyotas, GM, Honda, etc currently have all the technology that the author is talking about. All of these vehicles have electronic engine controls that in miliseconds measure and adjust the autombile to outside road and weather conditions. These same controls, again in miliseconds, adjust the engine, transmission, brakes, and drive train componets for conditions as well as driving patterns of the driver. Almost all cars have tire sensors, even the lower priced models, and they all immediately let you know if tire pressure is not at optimal levels. Ford thru its sync system does NOW do exactly wht the author is talking about even in its lower price models like the ford focus and it is NOT connected through a $2500 navigation system like the lexus system that he is bragging about is so advanced. Sync is $395 and most all Fords have it! Though Sync and Onstar - currently you can get real time reports and diagnostics that are sent to your email or given to you by voice. Lexus does NOT offer such technology - at any price. The technology in both Ford and GM dwarfs what both the Japenese and the Europeans offer! Hey has anyone herd of Microsoft - sync is a joint venture offering by Ford and Microsoft. Last I checked, Lexus/Toyota is generations behind waht Ford offers at a reasonable price on ALL its models.

  • Report this Comment On June 30, 2009, at 9:07 PM, gscott12 wrote:

    I subscribe to the Motley Fool.

    Articles like this make me question the thoroughness of your research.

    Please consult with someone that knows the industry. Most of the technologies you claim are needed, already exist and are sold in non-luxury cars, trucks, and SUVs.

  • Report this Comment On July 12, 2009, at 10:48 PM, herbs814 wrote:

    The government doesn't "invest" in anything. The government has no resources of its own. Everything the government spends is stolen from taxpayers, under threat of fines, seizure, or imprisonment.

    Investing would imply that it is their own money they're using; and that the government is actually concerned about getting an economic return, rather than a political benefit.

  • Report this Comment On July 13, 2009, at 1:27 PM, kingman48 wrote:

    The reason the demand is low is exacerbated by the fact it costs 5-8 grand more for a hybrid then a gas and the payback takes 5-10 years depending on the cost. If the govt rebated the difference you would see a massive surge in buying hybrids because now you are saving from day 1. This isn't rocket science , electric motors are the way to go , thats why diesel locomotives use the diesel to run generators and use traction motors to drive the trains. They are way more powerful , faster and can also help braking.

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