Some auto execs say expensive gas might be a good thing
Picture the following scenario: as soaring gas prices force consumers to tighten their belts even further, dealer lots begin piling up with unwanted gas guzzlers, and the large SUVs that were once such cash cows become so unpopular that used models lose all value. Clearly automakers would view this as bad news, right? Well apparently not — in a surprise response to proposals that the federal gas tax be suspended to help consumers, several auto executives including Chrysler big wigs Bob Nardelli and Jim Press argued that prices at the pump should stay high.
It may seem confusing that members of the company currently trying to sell 300s, Challengers, and Grand Cherokees wouldn’t be in favor of cheap gas, but the reasoning is simple: if the new interim CAFE fuel-economy standards proposed this past Earth Day go into effect, automakers will be forced to build smaller, more efficient vehicles. But if gas is cheap, consumers won’t have much incentive to buy them. Mike Jackson, CEO of Auto Nation, agrees, saying “I’ve never heard of a plan that says ‘I want you to use less of something but I’m going to reduce the price.’”
Chrysler CEO Nardelli has said he empathizes with drivers struggling to fill their tanks, and suggested the government create incentives encouraging consumers to buy fuel-efficient cars made in the U.S. Federal tax credits currently exist for hybrid cars, while equally efficient cars with traditional powertrains don’t get any break from the IRS.
Though GM and Ford haven’t commented on the current situation, in the past both Bill Ford and Bob Lutz have said that raising gas taxes made more sense than increasing fuel-economy standards, because forcing automakers to build small cars will have little effect if the public isn’t interested. Meanwhile, with gas prices continuing to rise, in March small car sales rose by 3.4 percent, and sales of subcompacts getting over 30 mpg increased by a whopping 32 percent.
With CAFE rules forcing automakers to build more efficient cars (though some more than others), lowering gas prices back to the levels that made Hummers and Escalades so popular would seem to make little sense. Maybe a system like Europe’s, where heavily-taxed gas means that small economy cars rule the road, would work here. Of course if gas on the continent were cheaper, that wouldn’t necessarily mean drivers would suddenly ditch their Fiat 500s for Camaros and Mustangs (or E55 AMGs, for that matter).
Nardelli, Jackson, and the other auto executives may be right: keeping gas expensive could be the only way to truly move America away from its dependency on foreign oil. Then again, if prices dropped by 50 cents tomorrow, here’s guessing that not many drivers would be too upset about it.
Source: The Detroit Free Press
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