No matter how efficient and green cars become, they won’t sell if gas stays cheap. That was the message from Mike Jackson, CEO of AutoNation, the country’s largest auto retailer. “There’s never been a more exciting time from a technical point of view about what’s going to happen to our [automobile] products,” said Jackson, speaking at the wrap-up lunch at this week’s Electric Drive Transportation Association conference in Washington, DC. “We have the greatest chance ever to go in a different way, but I’m not sure it’s going to happen the way everybody thinks.”
As the CEO of a company that sells millions of vehicles a year, Jackson has access to a tremendous amount of data about real-world actual consumer behavior. “We are there at the moment of truth, when the consumer actually writes the check for the vehicle they are going to buy.” He said that as many as 75 percent of his company’s customers walk into dealerships talking about a desire to drive a hybrid—but only two percent drive out with one.
Broccoli and Doughnuts
Jackson outlined a persuasive argument for how Europe—with gas prices near $8 a gallon as a result of high gas taxes—achieved higher auto efficiency levels. He contrasted that approach with the contradictory energy policy in the United States where politicians talk about freedom from foreign oil, but choose incentives and mandates—such as Corporate Average Fuel Efficiency—rather than taxation to encourage consumers to adopt hybrids, diesels and electric cars.
According to Jackson, the single greatest determinant for the future of hybrids and plug-in cars is the price of gasoline. He pointed to the “stampede to fuel efficiency” that occurred when the price at the pump hit $4 a gallon in 2008. “That’s the inflection point where the whole thing changes.” When gas prices went back down, consumers retreated from hybrids and small cars and adopted faster, bigger and more comfortable vehicles.
Jackson encouraged the audience—comprised of the auto and utility industry’s biggest supporters of electric drive vehicles—to imagine running a small outdoor coffee stand:
“You’re selling the best doughnuts in the world and you’re selling broccoli. You’re selling 95 percent doughnuts and 5 percent broccoli. The government comes in one day and says that we have to get America healthy. We now require you to sell 50 percent broccoli. But don’t worry. We’re going to help you out. We’re reducing the price of doughnuts.
“It’s not the way it works. It’s disconnected from reality. There’s disconnect between what the government has mandated and the position that we should have the right to cheap gasoline.”
The current national average for a gallon of gas is $2.70 a gallon—almost $0.90 more than one year ago. An additional dollar per gallon might make all the difference. Jackson concluded:
“We don’t need European-level of taxes. We need just enough to get the American people over this threshold point to be willing to pay for fuel-efficient technologies. Then, we as a country and as an industry can genuinely go in a new way, and not be sitting here 10 years from now, importing 80 percent oil and transferring the wealth of the American people out of the US to other parts of the world.”