Auto Dealers Resist Move to Hybrids and Higher Fuel Efficiency

Mercedes S400 Hybrid

Mercedes S400 hybrid.

The new federal fuel efficiency rules announced last week by the Environmental Protection Agency were hailed as a major success by the Obama administration and embraced by carmakers. But many car dealers—the folks closest to the consumer, and the point of sale—are still dragging their feet on hybrids and other fuel-efficient options.

“With tight family budgets and a shaky job outlook, consumers want to maximize their transportation dollars, not pay more for redundant rules and an unnecessary bureaucracy,” said Ed Tonkin, chairman of the National Automobile Dealers Association, in an official statement. “Under these new mandates, the price of new cars and light trucks will rise significantly, meaning fewer Americans will be able to buy the new vehicles of their choice.”

EPA and ROI

Based on the new rules, the average fuel economy for cars is estimated to be 37.8 mpg by 2016, while light trucks are expected to average 28.8 mpg. Automakers are expected to produce all kinds of hybrids in greater numbers to meet the targets—and will get bonus credits for building electric cars, plug-in hybrids and hydrogen fuel-cell models.

The cost of developing the more fuel-efficient fleet is pegged at $52 billion. Obama administration officials said the rules would raise the average price of a new vehicle by less than $1,000 in the 2016 model year and that many consumers would earn back the cost in fuel savings over three years.

For automakers, the new rules are an acceptable compromise that prevents California and other states from establishing even more stringent requirements. The new targets, which cover 2012 – 2016, help buy time for carmakers, which are now fighting the ability for California from drafting rules for 2017 and beyond. “America needs a road map to reduced dependence on foreign oil and greenhouse gases, and only the federal government can play this role,” said Dave McCurdy, president and CEO of the Alliance of Automobile Manufacturers.

Good for Europeans, But We’re Different

Dealers are not only at-odds with government officials, but with the car companies that provide the vehicles they sell. In fact, some Mercedes-Benz dealers are up in arms about the decision by Daimler executives to potentially make the flagship S-class a hybrid-only lineup. The dealers told Automotive News that the S-class switch to full hybrids—meaning no models offered with only internal combustion engines—could happen in Europe in 2013 and in the US by 2014. They believe it will undermine the perception of the Mercedes brand.

Tommy Baker, chairman of the Mercedes-Benz dealer board and a Charleston, SC, Mercedes dealer, said, “The most important thing in the American market—regardless of hybrid, lithium or electric cars—is that we Americans are different than any market and we are going to want those gasoline engines.” Baker said the goal of S-Class drivers is “not gas mileage.”

The Mercedes S400 Hybrid has been on the market since August 2009. US dealers said they wouldn’t be able to sell hybrid versions of the S550 V-8 model and S600 V-12 models, and the costly S63 AMG and S65 AMG. Yet, the luxury market is filling up with new hybrid models. Last year 10 percent of all Lexus models sold in the United States were hybrids.

Not all dealers are reluctant. Responding to last week’s new fuel rules, Adam Lee, President of Maine-based Lee Auto Malls, which consists of 20 dealerships selling domestic and foreign cars, said, “Today is a victory for American consumers and the auto industry.” Lee believes that higher fuel efficiency standards will help the US economy—by putting more US-built high mpg cars into dealerships. “Every day customers walk into my stores asking for the same thing—cars that go farther on a dollar.”

Lee sees higher mpg as the future. “My customers are already asking, when will we see 50 miles per gallon?”


  • Anonymous

    the same dealers (and most consumers) will probably moan and groan when fuel price sky rockets and forget the choices they made.

  • Michael H.

    NADA’s statement reads: “America’s new car and truck dealers support higher fuel economy standards…” How is that “resisting… higher fuel efficiency?”

    You can have more hybrids and higher fuel efficiency under one national fuel economy standard, which is what NADA supports. Your article fails to mention the point of NADA’s statement, which is that there will be unnecessarily higher costs for vehicles because automakers now have to build one fleet to comply with 3 different fuel economy standards.

  • Samie

    Not sure if cable news has hit the National Automobile Dealers Association or what, but lets get real here.

    We all know that monster V8 SUV’s and trucks along with V8 luxury vehicles have the highest profit margins of any vehicle and often hybrids and now electric vehicles are floor room models only, or artificially marked up as a way to get you to the dealership.

    Michael H. that may be their point for one regulation but if you say “With tight family budgets and a shaky job outlook, consumers want to maximize their transportation dollars, not pay more for redundant rules and an unnecessary bureaucracy”
    Sorry the National Automobile Dealers Association sounds political and narrow minded.

    I would ask Ed Tonkin about the hybrid mini-van that is not available
    I would also ask why cross-over SUV’s have been so popular and where I can find a car lot full of Prius’s that nobody wants.

    Fuel efficiency helps protect the economy in reduced freight costs and helps by providing more money to people for saving or consumption of goods and last I checked petroleum was still a inelastic good….

  • FamilyGuy

    Tommy Baker does not speak for me. I am an American and I do not necessarily “want those gasoline engines”.

    Mr Baker, please speak for yourself.

  • Walt

    The reason the dealers don’t like hybrids or all-electric is because they know they will lose money off repairs to gas engines. Many moving parts, lots of fluids, transmissions, etc means lots of costly repairs (with lots of dealer profits) when the car leaves warranty coverage after 36k. I am hypermiling my Civic until I pay it off next year then I am buying a hybrid…if the dealers can overcome their “internal combustion morals” and sell me one.

  • Dom

    I don’t “want those gasoline engines” either… I want diesel engines! Like the Europeans… that’s how I hope some of the automakers respond the the higher mpg goals.

  • veek

    Is your dealer one of the resistant ones?

    Let them know you appreciate their freedom of choice, shake their hands, and then move on to the other dealers who are happy to work with you. If a dealer or manufacturer does not offer a hybrid or fuel efficient choice, that’s their business.

    Our Ford hybrid salesman was happy to see us, partly because the demand allowed the markup to be higher than most cars on the lot. On the other hand, our service people were not as happy, both because the car does not need as much service, and because repairs have been nonexistent (so far). On the other other hand, the service people know you are more likely to take your vehicle to see them because not as many independent shops work on hybrids (that’s OK, since they are busy enough on the gas engines that some dealers in the article do not like).

    Looks like everyone wins.

  • ex-EV1 driver

    I gave rides in my Tesla Roadster to everyone at my local Nissan dealer. I figure it will:
    a) Get them excited about electric cars so they’ll push the Leaf.
    b) Ensure that they don’t blame the electric drivetrain if the Leaf ends up being dumbed down so much that its a lame performer.

  • Mr. Fusion

    I ain’t givin’ up me horse n’ buggy dealership. No sir.
    Them “auto-mobiles” is the work of the devil!

  • AP

    These dealerships are not backwards. They are merely pointing out that the initial costs of hybrids and electric vehicles (even with government subsidies) are too high for most families to handle, especially considering the low cost of fuel we allow.

    Right now, the only things that sell hybrids/EV’s are 1) excess income to spend on a hybrid, and 2) guilt about one’s carbon footprint. In other words, only people who are motivated and with means are in the market.

    I sincerely doubt that dealers are discouraging hybrids due to “lower maintenance/service” that they could provide. The amount of service work done on cars has dropped greatly in recent years, as their reliablility has improved.

  • ex-EV1 driver

    AP,
    I think you overestimate the amount of maintenance an EV takes. This was a huge lesson learned about the EV1.
    The only maintenance needed before 100K miles is tire and windshield washer fluid replacement. At around 7 years, the coolant and fluids need checked and perhaps flushed. Brakes should go 200 to 300K miles. Today, we can probably expect to need a new battery pack around 150K miles, depending on the chemistry and amount of range per charge (lower range per charge => more charge cycles => more frequent replacement).
    I have to take issue with your assessment of who is buying EVs. Today, I believe most EV buyers are motivated mainly the high performance and freedom from oil (both altruistic war-avoidance and not having to go to the gas station).

  • ex-EV1 driver

    I wish the auto industry would quit whining. They’re just getting the payback from the socialistically protected monopoly they’ve been enjoying for the past 40 years.
    I’ve tried to put a business case together to develop a new automobile for years. I’ve seen that that is impossible because of all the legally mandated insurmountable barriers put up by FMVSS. Government meddling has successfully kept competition out of the market.
    Now its coming back around to control what they build and the impact that may have on profit margins.
    In layman’s terms (that maybe even Bob Lutz can understand): If you (the US auto industry) are going to hide under your mommy’s skirt, you’re a momma’s boy and she’ll be telling you what you can and can’t do.
    Now we’ve told your mommy about your bad behavior so now its time for you to toe the line.

  • AP

    ex-EV1 driver, you make it sound like the Byzantine, draconian regulations on the automobile were something we asked for (to reduce competition), but which are now somehow coming back to bite us. Actually, without the regulations for safety, emissions, etc., etc., etc., cars would be thousands of dollars cheaper and hundreds of pounds lighter. We could charge almost the same, and make more money.

    I do agree that government regulations make it nearly impossible for new competitors – for example, the Tesla is really a Lotus, but we can’t take credit for the reg’s. Usually we are accused of fighting regulations, not encouraging them. I guess no matter what we do, we’re wrong?

  • ex-EV1 driver

    AP,
    I understand your frustration.
    I suspect that the lack of competition (until it came from outside the US) benefited the US automakers far more than a few $ extra for a few seatbelts and later airbags, EFIs, catalytic converters, and other stuff.
    Of course the industry fought these things: That forced the government to mandate them, thus making it illegal to sell vehicle without them.
    The legal mandate accomplished 2 things.
    First of all, it guaranteed that the competition also had to absorb the same incremental development costs.
    Second: What better barrier to entry can you put up than one backed by the legal might of the US government?
    If they had voluntarily implemented all of these things, a newcomer could have sold vehicles and people could have bought them, even if they weren’t as safe as they could be. If the newcomer offered something else that offset perceived safety (like cupholders :-( ), they could get a foothold in the market that might allow them to slowly add these incremental features, just as the incumbents had the luxury of doing.
    As you point out: Tesla did not design a new car from scratch. They licensed 50 years of know-how that Lotus had incrementally achieved starting with Chapman’s Mark I, a car that would be illegal to sell today. All car companies started out with cars that would be illegal to sell today.
    Back to your frustration: My advice to the US auto industry is to do what Tesla did. Build a class leading electric automobile in a class with a high profit margin using the knowledge you’ve gained over the past century. That way you don’t have to whine about not being able to make money off of it. You can then work it down the food chain into the higher volume, lower cost markets. This is what Lotus and Tesla are doing. Why not GM, Ford, Chrysler? Oops, I forgot, their preferred approach is to have their high-profile customers arrested for demanding that they don’t crush EVs after they realized that the electric drivetrain actually would work well and be popular with customers.

  • AP

    ex-EV1 driver,

    I know one better barrier than the US government, and that is the Japanese government. They are somewhat better now, but at one time would not class-certify imported cars: each vehicle had to be thoroughly inspected as it was shipped in (think added cost and time). Not only that, they outright banned GM for 10 years to let Toyota get started in production. No one in Japan would have bought a Toyota when the superior American product was available.

    In other words, Japan subjected their own consumers to junk for 10 years until Toyota got it right (think our government would do that for us?). Even then, the first Toyotas imported to the US were very unreliable. A planned Toyota tour around the US in a Toyota car in the mid-1960′s had to be completed in a US car (GM, I think), because the Toyota couldn’t be relied upon.

    Now, let’s suppose the industry HADN’T fought some safety regulations. What do you suppose cars would have cost, what they would have weighed, and how big would they have been?

    If ABS, air bags, etc., had been implemented as soon as they were invented, they would have doubled a car’s cost (you know how much computers cost back then). Many energy-absorbing materials did not exist yet, nor did the computer technology to make them efficiently used. Therefore, the weight and size of the cars would have been huge. I remember reading about “safety cars” back in the ’70′s that were about 5,000 pounds and 20+ feet long (for crush space).

    I hardly think that the kinds of cars that would have resulted if the industry immediately adopted every possible safety system would interest you or be affordable (unless you could afford a Tesla). It would have resulted in cars that were even worse gas-guzzlers than the ones they made then.

    Every thing in a car must be justified and the benefits weighed against the disadvantages. Making a Pinto/Vega twice as safe does little good if that doubles the cost and takes sales to zero.

    Cars aren’t made in Utopia. They have to be affordable and be able to get out of their own way.

    I’ll make you a deal: I’ll quit “whining” about every government agency and safety “advocacy group” wanting every possible gadget installed regardless of cost, when you quit whining about having to return a car you never owned, that cost $1 million each to build, and you leased for $400/month. At least you got to drive it for a couple of years.

    As far as Tesla’s accomplishments, they have managed to produce a very expensive vehicle by crudely wiring together thousands of laptop battery cells, packaging them in a Lotus chassis, putting a nice body on it (with poor build quality, I am told), and propelling it with an electric motor through a single-speed gear box. The only true breakthrough they tried to implement was a two-speed gearbox, but they failed. GM engineers could have done that in their sleep.

    Their astounding accomplisment, as I see it, is that they negotiated a $650,000,000 bail-out for their company, handily blowing away the “loser” domestics in the “bailout dollars per vehicle produced in their history” ratio. Assuming Tesla has made 1,000 cars, that would be $650,000/car, which is a tremendous accomplishment. GM would be lucky to have garnered anything more than $1,000/car (assuming $60 billion bailout and 60 million cars produced).

  • Rick Z

    Diversity is what makes America great place to live. I like to have many options to choose from. People need to start looking at the bigger picture and focus on diversity of products. It’s only through trial and error that you pin down a winner technology. This takes time, money, and patience but in the end the consumer wins.

  • ex-EV1 driver

    AP,
    I appreciate what you say about safety features and regulators and all but I believe that it is a 2-way street here and the auto manufacturers are just as wrong in refusing anything as the regulators and do-gooders are in demanding things. I’m not a Ralph Nader fan by any stretch.
    As far as whining goes. I don’t whine about having my car taken away. What I’m vocal about is reading lies from your industry about why they took the cars away, what they claim I thought, and why the cars shouldn’t be built. This has all become part of the mantra put out in Michigan that clearly you, that work there have internalized. I have plenty of friends who are engineers at GM and, during the time GM was taking away the EV1′s used to forward me the explanations about what was going on as it was being told to GM’s employees from the bottom to the top. They bore no resemblance with what we, in CA saw.
    Clearly, you and most Big 3 executives are being told a lot of nonsense about the Tesla today. What’s most appalling is that I’ve personally provided the first rides in a Tesla to some people in very key (top) positions in the development of electric vehicles. The hubris in Detroit is so great that they haven’t even purchased a Tesla to experience it, rather, they are happy with hearing the mantra of ‘put on a Lotus chassis’, ‘crudely wired batteries’, ‘poor build quality’, and ‘failed 2-speed transmissions’. Your forgot: ‘only a small boutique car maker’, ‘poor fit and finish’, and ‘management bickering’ above.
    I think, if you could get past your industry’s arrogance and actually look at a Tesla, you’d find the battery pack to be a masterpiece in terms of making something work (and it works great). It is actually assembled in a very simple, yet sophisticated manner to deal with fault isolation, economics, and thermal management. I’d also like to add that, while originally assembled in Taiwan, Tesla’s battery assembly has been optimized and streamlined so that is now economically done in the Silicon Valley (that’s in California, USA)
    A transmission is unnecessary in an electric vehicle unless you have a real need for insane acceleration AND insane top speeds. You’re probably right that GM engineers could have designed a 2-speed transmission that could reliably handle the heavy shifting loads of an electric motor. Could they have done so in 2 years? Either way, they didn’t and who cares? 0-60 in 3.7 sec and 125 mph top speed is quick enough to lay waste to almost any other production car on any road in the US and most in the rest of the world. Old school ‘vettes and Porche’s can still retain their bragging rights about top speeds but not much else. Transmission designers should consider going back to school and learning a new trade. Their skills are as useful for the future as a buggywhip maker’s. Note: One skill I developed in college and early in my career (DSP programming) was also rendered fairly obsolete (by cheap ASICS, low-power microprocessors, and FPGAs) so I can sympathize with having to retool but we need to buck up and get on with life.
    A single stage reduction gear certainly well exceeds the needs of regular driving. Even on closed tracks, the Tesla trounces nearly any production car that tries to take it on.
    All that and no breakthroughs required. Tesla just did it. Why can’t GM do it? They sell $100K cars that are seriously inferior to the Tesla Roadster. Why not use them to start the cost reduction for the future?
    I think you might want to examine the ‘bailout money’:
    (editorial note: I, personally am opposed to any government subsidy of Tesla, GM, Chrysler, or any other company)
    How come Tesla can put over 1000 roadsters on the road with less capital (~$15M) than GM paid their president over the same 3 year time period? Doesn’t that indicate that with $650M they might actually be able to come up with a Cadillac competitor that doesn’t consume oil?
    Tesla built the Roadster without any government money, thus earning themselves a place ahead of the big guys who have blown their lead in modernizing the automobile with the electric drivetrain.
    GM might as well get in line alongside Baldwin Locomotives, Smith Corona, Western Union, Conestoga Wagons and the rest of companies that refused to change when new technologies obsoleted their legacy products.
    You can sit around amongst yourselves and tell yourselves that you’re right. You can even beat up anyone within your group who disagrees. You can try to beat up those outside your group who disagree (good luck). Who knows, you might actually keep the new stuff out, at least long enough for you to retire.
    I, and many others are just not going to make it easy. We’re going to spread the truth through any means possible, be it in movies, web forums, showing up with our cars in person at events, or giving rides to as many people as possible in the electric vehicles we’ve worked to save, built, or stretched our resources to buy.
    It is good discussing this with you, even if we do get a bit heated. I’d love to show you an electric car for real so you could get past all the nonsense you’ve been fed.

  • AP

    ex-EV1 driver,

    I know that people outside the automotive industry see things much differently than those within it. Whenever you look at a car, there are many design features that are invisible to the consumer, but provide some value to them (safety, reduced cost, reliability, reduced mass, etc.). There are elegant designs that combine part functions and make the units more robust, and there are those that are obviously an adaptation of a product for another use, cobbled together to make things work.

    My point on the 2-speed transmission was not that it’s necessary (the EV1 didn’t have one either), but that Tesla underestimated the difficulty of it. They also had to open a facility in Pontiac, MI, to gain some expertise in other areas they had trouble with. Once they got what they needed, they closed the facility. This transmission would have significantly increased the battery range by reducing the electric motor speed and internal drag, as well as kept things cooler.

    There is, as you mentioned, a different (warped?) mentality in the Detroit area about the way things ought to be. I doubt you’d disagree there is just as warped a mentality in California about their role in “saving the world” from the evils of CO2. No doubt we need to have a sustainable environment/climate, but you need a sustainable economy before you can afford it. You’ll probably agree that California and Michigan are both places you don’t want economic advice from on how to run a state government.

    Since I wasn’t born in Michigan, I used to rail against (what I perceive as) the entitlement mentality of the American auto industry since I’ve hired in. I used to be very critical of GM as a whole, especially when Roger Smith was CEO. There was too much focus on “big moves” (like EDS, Hughes, Saturn, SUV’s, etc.) and too little on the basic product. I found few GM cars I liked in the ’80′s and ’90′s (I’ve always liked Corvettes, though).

    In the last 10 years, and especially in the last 5, I have become more impressed with our products, and very proud of most of them. We now have vehicles I’m excited to drive. There has been a true “renaissance”, but it came too late to avoid bankruptcy (aided by Katrina, the US’ economic collapse, etc.). Now, though, our debt burden is low, so we can put more content into the vehicle to compete with others (who have had economic advantages over us, some fair and some not).

    You would probably be shocked to see how much things have changed at GM in the last 15 years, how intelligent the engineers are, how driven we are by quality and reliability, and how extreme our standards are. Most of the “old guard” who thought the world revolved around them are gone (perhaps moving into California politics?). The people who are left realize the world owes us nothing, and with the bailouts, we owe the taxpayers (and want to go public ASAP – we do not enjoy it).

    I assure you that I don’t “parrot” the company line where I don’t agree with it. For instance, having electric vehicles classified as “zero-emission” make no sense to me. But where I see technical mistakes or exaggerations, I will challenge it. For instance, the “Detroit=bad, Japan=good” mantra is tired and incorrect. Toyota has been playing the US for years. We look at their products, and know they have cheapened products substantially over the last 10 years. They have been “cashing in” on their name, much like GM did in the 1980′s.

    I have great respect for Lotus (I’d like to own one), so I know that the Tesla has a good basic chassis. I just don’t consider Tesla’s contributions significant in what they provide. A limited production car that has that high a price is not difficult to make, and certainly not a consumer-justifiable product (of course, neither is a Corvette, but they are only half the price). AC electric motors are not new, and can be purchased from several manufacturers (although there is more variation in quality than you’d imagine!).

    That leaves the battery as the only remaining difference between the Tesla and a typical Lotus. Maybe clumsy was too harsh a word, but it is not elegant. The batteries I’ve seen under development, and not just by GM, are much more integrated, easier to trouble-shoot and cool, lighter, safer, and much less likely to fail.

    I really don’t intend to beat up anyone who disagrees with me, either (and certainly not for disagreeing with the industry). But you also have to admit that IC engines are not all bad, and that calling for their being eliminated is a bit extreme. Every mode of power-production has its disadvantages, and the IC engine currently has the best combination of price, weight, reliability, and range. To me, it’s like capitalism: the worst economic system in the world, except for everything else. IC engines have their faults, but all other devices have more, for the average consumer. My wager is that 50 years from now, a substantial percentage of vehicles will still be powered by them. They are by no means obselete (and they’re not fully developed yet either).

    I’m not surprised that when the EV1 program got shut down, that the reasons GM gave to the public were not accurate. It’s similar to Jack Nicholson’s character saying, when asked for the truth, “You can’t handle the truth!” It’s difficult for a large company like GM to publicly say something like “Yeah, California passed this law, we followed it, no one else did, so they changed the law, and we’re the ones losing our shirts over it. We had to pull the plug.” I’m not speaking for GM here, but that’s what I would have liked to say.

    If GM would have told that story, California politicians would have been embarrassed, and would likely have retaliated with some leglislative action aimed at GM. California took the wrong approach when it mandated a technology, rather than mandating a result.

    I will never promote a technology for its own sake, such as “electric only.” I would never say “IC engines only.” It depends on the usage, the cost of gasoline, the inefficiencies of electric transmission lines vs. the oil refinement process, etc. In 10-20 years, the balance will probably shift more toward electric, but I don’t know how much.

    As for Tesla, let’s see how successful their next car is, that has to compete against “reasonably priced” cars. The less a car car costs, the harder it is to compete against it. I don’t want them to fail. I just haven’t been very impressed yet. I’m all for them if they can do it.

  • AnUnidentifiedMale

    AP, I’m not concerned about my carbon footprint and I don’t have a lot of “excess income”. I am concerned about air pollution and our dependence on foreign oil. Those are the two biggest reasons to consider a hybrid, in my opinion.

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