[Scotsman]

Very very interesting read you all should take a close look at.

Wednesday, April 16, 2008
Americans unwilling to pay for big fuel economy gains, carmakers say
David Shepardson / Detroit News Washington Bureau

DETROIT -- Automakers will shoulder most of the costs of making vehicles more fuel-efficient, as many Americans aren't willing to pay for higher fuel economy, a panel of industry officials said today at the SAE International World Congress.

One problem, they say, is that consumers don't understand new technologies or are unwilling to pay a high upfront cost for hybrids, diesels or eventually plug-in hybrids.

"The automaker is taking this risk, this cost burden, until consumers will decide to pay for it," said Robert Lee, vice president for powertrain product engineering at Chrysler LLC. "I am in this game of making something consumers may not pay for for the good of us all."

In the long-term, Lee said "costs will eventually be borne by the consumer with the price of vehicles representing, frankly, a much larger portion of their income than it ever has before." General Motors Corp. has said fuel economy regulations will add $6,000 to the price of an average vehicle by 2020.

Scott Bailey, Delphi Corp.'s vice president of gasoline engine management systems, said it will cost at least $1,800 per vehicle to meet the new energy bill requirements that mandate a 40 percent increase in industry-wide fuel economy to an average of 35 miles per gallon by 2020 -- or about $45 for each percentage point increase.

"It is our job to make it affordable," Bailey said.

Bailey also said that he expected the costs of hybrid engines would continue to decline by 4 percent to 6 percent annually.

Fuel economy is a growing factor in customer decisions. In 2007, 43 percent of prospective buyers said it was a significant factor in their vehicle choice, up from 34 percent in 2004, said Scott Miller, CEO of Synovate Motoresearch. But it is still far down the list.

"If fuel efficiency was really the driving force that I think a lot of the media make it out to be today, then we'd see somewhere in neighborhood of two to three million Kias being sold every year," Miller said. "Vehicle size, particularly in the United States, is a very important purchase consideration ... fuel economy by itself is simply not a sales factor. It may be a differentiator if all things are equal."

Miller said a very small percentage of people are simply going to go out and seek out the most fuel efficiency vehicle.

Half of Americans still aren't willing to spend more than $1,000 for improved fuel economy, he said.

"More than 50 percent of consumers are saying give me all those great things and I am still not willing to pay for it," Miller said.

About 20 percent of Americans over the next two years will be willing to consider buying a vehicle other than traditional internal combustion engines. Still, many consumers are completely bewildered by the choices. Fully 30 percent of car buyers don't know they own a vehicle with a traditional gasoline-powered engine.

"We do have to educate consumers," Lee said.

Ford Motor Co.'s chief enigineer Andreas Schamel noted that many technologies still don't have a fast payback. Hybrids still have a more than 10-year payback period.

"The customer is not willing to pay for (fuel economy improvements), and not willing to up any of the attributes," Schamel said. Ford said in the short term it will add more six-speed engines, more hybrids and more vehicles with its EcoBoost engines, which get up to 20 percent improvement in engines. After 2012, Ford will gain "significant weight savings" in vehicles, along with an increase in diesels to meet fuel economy mandates.

"What we need short-term is actually something that moves the needle and is affordable to the customer," Schamel said.

Toyota has sold 1.3 million hybrids worldwide since it started selling the Prius in Japan in 1999 and hybrids now account for 10 percent of annual U.S. sales, said Tom Stricker, director of Toyota Motor Co. regulatory affairs in Washington. Stricker said Toyota had reduced the cost of hybrid systems by 70 percent since introducing them.

Also this week, experts at SAE have been looking at ways of weaning Americans off foreign oil.

Dale Gardner, associate director of renewable fuels science and technology at the National Renewable Energy Laboratory, said the Department of Energy and the Environmental Protection Agency are conducting studies to determine the impact of growing use of biofuels on the world's food supply and environment.

Garder said the Energy department hopes to see $1.31-a-gallon cellulosic ethanol by 2012, which is the equivalent of $2-a-gallon gasoline, since ethanol is less energy intensive and doesn't travel as far as gasoline.

General Motors Corp. has taken an equity stake in Coskata, a biofuels reseach start-up firm in Illinois, that hopes to produce 100 million gallons of cellulosic ethanol by 2010 at similar prices.

Gardner noted that just 500 million gallons of biodiesel were produced in 2007, out of about 40 billion gallons of diesel used by the nation's trucks. Overall, the U.S. used about 60 billion gallons of diesel last year.

Even if the United States used all of its soybeans for biodiesel, it would only produce enough to cut 10-15 percent of diesel use. "We still have a lot of work to do," Gardner said.

On Monday, an SAE panel said diesel-powered vehicles could account for 20 percent of U.S. vehicles. Diesels account for about half of all vehicles in Europe, in part because diesel fuel is taxed much.

Oil consumption worldwide is expected to climb from 85 million barrels a day to 120 million barrels a day by 2030. The International Energy Agency said Tuesday demand is expected to rise to 87.2 million barrels in 2008, down about 500,000 barrels over a prior forecast.

The discussion came as oil futures hit an all-time high Wednesday above $114 a barrel. Oil prices are up 18 percent this year, while Arizona Sen. John McCain called for a temporary rollback of gasoline taxes for the summer driving season.

Rep. John Dingell, D-Dearborn, said he was taking a proposal he made last year to hike gasoline taxes by $0.50 a gallon "off the table."

"When I initially began looking at this proposal, the price of a gallon of gas was significantly lower than it is today and the economy was not in recession. Times have changed; our economy has taken a hard downward turn and now is not the time for us to put any additional financial burden on the working families of Michigan or this nation," Dingell said, who is chairman of the House Energy and Commerce Committee.

The Energy Department is researching the feasibility of using pipelines to move ethanol. Currently, ethanol has to move by rail, truck or barge, much less efficient than moving oil by pipeline. Last month, two companies formed a joint venture to create the world's first ethanol pipeline to ship it from western Brazil to the Atlantic, making it easier to export Brazilian-made ethanol from sugar cane.

Gardner said the Energy Department and EPA are conducting a full analysis of the impact of ethanol. The Agriculture Department estimated ethanol would consume about 25 percent of the nation's forecasted 13.1 billion bushel corn production.

Some critics have blamed the increase in ethanol for the spike in food prices and inflation, though there are other factors like higher consumption of meat in China and other developing countries.

Food prices rose by 5 percent in 2007, the most in nearly two decades. High prices for staple foods have led to riots all over the world.

Congress in the energy bill passed in December required the use of 36 billion gallons of renewable fuels by 2022, including 16 billion gallons of cellulosic ethanol, even though it isn't commercially available.

To do, automakers will double the number of more efficient turbo-charged engines to 8 percent of the fleet by 2013, said Tim Manganello, BorgWarner's chairman and CEO. Hybrid sales could top 1.7 million in the United States by that year, as more automakers add them, in part, to meet new fuel economy standards.

By 2013, refiners will blend all gasoline with 10 percent ethanol, the EPA's director of the office of transportation and air quality, Margo Oge, said at the World Congress Monday.

The SAE International World Congress will discuss how automakers might retrofit powetrains to use other biofuels. In order to use different blends of ethanol -- like E20 or higher -- will require modifications to vehicles. Many automakers already made flex-fuel vehicles that can run on regulator blends or E85, a fuel made of 85 percent ethanol.

Automakers are also looking at ways of reducing weighty from vehicles to reduce the amount of fuel necessary.

Ford Motor Co.'s European research lab in Germany, is developing a thermally sprayed nano-coating that could replace heavier cast iron liners in aluminum block engines. Ford wants to reduce weight in vehicles by 250 to 750 pounds by 2020 to reduce fuel use without impacting safety.

http://www.detnews.com/apps/pbcs.dll...56/1148/AUTO01