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.
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