In this August 2012 photo released by Ford Motor Co., a brand new car is checked by a worker at a new Ford/CFMA Chongqing Plant after its launching ceremony in Chongqing, China. A new study by Ford found that 95 percent of customers placed a high level of importance on fuel-efficient cars, Gordon-Bloomfield writes. (Ford Motor Co./AP/File)

How much will drivers pay for gas-saving cars?

By Nikki Gordon-Bloomfield, Guest blogger / 09.14.12

At the start of September, gas prices hit an all-time Labor Day average high of $3.80 per gallon. 

So it’s no surprise that a recent study commissioned by Ford says that 82 percent of Americans would be happy to pay a higher sticker price on cars that save them money in the long term. 

The study, carried out by Penn Schoen Berlandalso, asked an undisclosed number of drivers about their opinions on green driving, energy saving, and new car purchases. 

Among its findings, the report concluded that 95 percent of those questioned placed a high level of importance on fuel-efficient cars , while 70 percent of respondents admitted to changing their driving habits recently in order to save fuel.

While only 21 percent of those questioned said they had recently purchased a new car with improved fuel economy, most respondents said that saving money and helping the environment were important factors when making energy-efficient purchases. 

When asked what they would do with a $1,000 discretionary income to spend on energy saving, 25 percent of those questioned said they would invest in a car fitted with hybrid technology. 

As with any survey, without details of sample size, a full-list of questions asked, or further details about when and where it took place, this Ford-sponsored study doesn’t impart as much data as it could. 

Sadly too, the survey doesn’t answer the question we really want to see answered: how much more sticker price will consumers pay in order to get a gas-saving car? 

In this August 2012 file photo, a man fills his gas tank at a gas station in South Euclid, Ohio. Read predicts a freer flow of gasoline and lower gas prices over the next few weeks. (Tony Dejak/AP/File)

A drop in gas prices on the horizon? Maybe.

By Richard Read, Guest blogger / 09.13.12

Earlier this year, it looked as if the price of gasoline might cross the $5-a-gallon mark in the U.S. (In some places, it went well beyond that.) Analysts were screaming to the media, giving Cassandra-like interviews about fuel shortages and conflict in the Middle East. Gas-sipping rides became hugely popular, driving the average fuel economy of new cars sold to a record-high 24.1 mpg.

Then, it stopped. The change wasn't dramatic, but in April, gas prices began drifting down from their highs of around $3.90 a gallon. By July, they'd bottomed out at a national average of roughly $3.40. 

Since then, however, prices have soared. Today, Americans are paying an average of $3.86 per gallon -- up two cents from yesterday, 16 cents from a month ago, and 21 cents from a year ago.

What gives?

Unfortunately, two factors have combined to make life difficult for drivers. 

Summer-blend shortages

For starters, we're at the end of of the season for summer blend gasoline. Summer blend debuted in 1995 as a result of amendments to the Clean Air Act. It's created with additives that maintain their integrity in the warmer months, making gas easier and more environmentally friendly to store when the mercury begins to climb. 

Summer blend isn't exorbitantly more expensive to manufacture than winter gasoline. However, before the changeover from winter to summer gas -- which starts in April and is complete by June 1 -- refineries slow production of winter gasoline, meaning that supply gets tighter. That explains, in part, why we saw a price spike in the spring, which relented once stores of winter gas had been used up and summer blend began shipping.

Now, we're on the flip side: refineries have stopped producing summer blend, meaning that supply is more limited than it was a couple of months ago. Complicating matters is the fact that according to federal law, winter-blend gasoline can't be sold before September 15, meaning that we're not likely to see any relief until after this weekend.

Summer storms

So, short supply of summer gas is one problem. The other is a certain hurricane by the name of Isaac -- or, more specifically, analysts' reactions to Isaac.

Isaac was not what most people -- even those of us in its direct path -- would call a major hurricane. True, it caused plenty of damage to homes, farms, and businesses in outlying areas of southeastern Louisiana, but compared to a Katrina or Camille or Betsy, it was a modest meteorological event.

But that's not how analysts saw it. Analysts saw oil extraction in the Gulf of Mexico dry up; they saw refineries along the coast shut down; they saw gas production and distribution disrupted. To them, that spelled "shortage", and in financial markets, "shortage" means "price hike".

In other words, Americans have found themselves at the center of a perfect storm, buffeted by short supplies of summer-blend gasoline, which have been exacerbated by Hurricane Isaac.

When will it end?

Hurricane Isaac is long gone. Most oil rigs in the Gulf of Mexico have resumed pumping operations, and refineries have opened their doors again. 

Even better, as of Saturday, retailers can begin selling winter blend gasoline (formerly known as just "gasoline"). That means that gas stations across the country will have much more flexibility in what they stock and sell to customers.

Add those two together, and you should have a much freer flow of gasoline and much calmer analysts, which should precipitate a price drop over the next few weeks. 

Don't get too comfortable, though. The North Atlantic hurricane season doesn't end until November 30, so another storm system could come along to hobble oil extraction and gasoline production. Or Iran could go off its meds and start threatening to shut down the Strait of Hormuz again. And of course, spring will be here before you know it, causing another spike in gas prices. 

Enjoy it while you can.

This February 2012 file photo shows a line of 2012 Prius sedans at a Toyota dealership in the south Denver suburb of Littleton, Colo. The Prius Plug-in is rated at 95 MPGe in EV mode, and 50 MPG combined on gas only, Ingram writes. (David Zalubowski/AP/File)

Prius Plug-in off to a strong start

By Anthony Ingram, Guest blogger / 09.13.12

The 2012 Toyota Prius Plug-In hybrid has got off to a good start in its first six months on sale, with over 6,000 units sold so far.

That, says Toyota, is more than the first six months of Chevrolet Volt sales, at 2,745 units, and Nissan Leaf sales, which managed 3,875 cars in its first month.

Toyota is putting demand for the Prius Plug-In down to not just its fuel economy--rated at 95 MPGe in EV mode, and 50 MPG combined on gas only--but also for its relative value next to the Chevy Volt, and lack of range anxiety next to pure electrics like the Leaf.

The Prius name may also have something to do with those sales, as for previous Prius owners, familiarity with the existing model will go a long way--longer electric range aside, it feels no different to drive.

Owners seem pleased with the experience so far, too.

Just as buyers of the Chevy Volt are finding, the extra EV range is genuinely useful, even if it doesn't entirely cover an owner's commute. Naturally, the Volt handles this better than the Prius, thanks to its 35-mile electric range--the Prius Plug-In is rated at 11 miles by the EPA.

Even so, Prius owners are recording high MPG figures on the car's computer--one owner recording 136 MPG after 4,000 miles with a 31-mile each way commute, and another managing 120 MPG on his own commute, mostly done at low speeds in EV mode. We managed 104 MPG on our most recent drive in the car, and eked out 12 miles of EV range before the gasoline engine kicked in.

A full charge of the Plug-In's 4.4 kWh lithium-ion battery takes around 2.5 to 3 hours from a standard 120V outlet, or 1.5 hours from a 240V charging station.

It also qualifies for a $2,500 Federal Tax Credit if you're eligible, and a further $1,500 rebate as part of California's Clean Vehicle Rebate Program, taking the $32,000 Prius Plug-In down to as little as $28,000 for a select few.

The car is also eligible for California's HOV lane sticker.

Workers attend to Volkswagen Passat sedans on the line at the German automaker's plant in Chattanooga, Tenn., in this July 2012 file photo. Ingram writes that the 2012 Passat TDI tops the list of most fuel-efficient, non-hybrid cars for highway gas mileage. (Erik Schelzig/AP/File)

The most fuel-efficient cars that aren't hybrids

By Antony Ingram, Guest blogger / 09.12.12

Look to the top of the fuel economy charts and, if you're not in the market for a plug-in vehicle, it's hybrids that typically top the list.

Cars like the 2012 Toyota Prius C, which currently tops the list, sip gas whether in the city or on the highway, and ultimately they're the greenest way of getting about without going electric.

But what if you don't want a hybrid?

If that's the case, you might be interested in some of the vehicles below, which offer 40 mpg-plus gas mileage on the freeway without having to go down the hybrid path. They won't match hybrids in city driving, but if you typically drive longer distances, they could be the cars for you.

2012 Volkswagen Passat TDI

Topping the non-hybrid tree for highway gas mileage is the VW Passat TDI. Its 2.0-liter, turbocharged diesel can be found in several Volkswagen and Audi products, and in fact we've excluded the others here (the Jetta, Golf and A3 all top the list) just to prevent the list being a VW washout!

At 43 mpg on the highway and 35 combined it actually sips less diesel than its smaller counterparts, despite offering more space for passengers. That makes it a great choice for long freeway drives, where the strong low-down torque, quiet engine and great economy will raise a smile. It's not unknown for diesels to beat their EPA mileage estimates, either...

2012 Chevrolet Cruze Eco

The award for highest-placed non-diesel goes to Chevrolet, with the Cruze Eco. A few subtle tweaks to aerodynamics and gearing, plus an efficient 1.4-liter turbocharged gasoline engine, allow it to top 42 mpg on the highway. Even better, Cruze Eco owners are actually averaging over 41 mpg, to the EPA's 33 mpg combined mileage.

The Cruze Eco is a good example of what can be achieved with a downsized engine and an aerodynamic body, and proves that the Volt isn't the only efficient vehicle on Chevy's fleet.

2012 Honda Civic HF

Missing out to the Cruze Eco by 1 mpg on the highway, the Civic HF matches the Chevy's 33 mpg combined rating. And just like the Cruze, owners are actually averaging a much higher figure, judging by the EPA's fueleconomy.gov website. In fact, they're getting almost 40 mpg on average.

Less sophisticated than the Civic Hybrid, the HF instead makes tweaks to the regular 1.8-liter gasoline Civic. Some aerodynamic alterations allow it to slip through the air more cleanly, and low rolling resistance tires let it roll down the road easier too. It may lack excitement to drive, but it's a good alternative choice to the hybrid,

2013 Dodge Dart Aero

The Dart is very much the new kid on the block, and manages to sneak above the 40 mpg highway limit, with a Civic HF-matching 41 mpg. To achieve this it takes a similar route to its main rival, Chevy's Cruze Eco: A 1.4-liter, 160-horsepower turbocharged gasoline engine. In this instance, it's sourced from Chrysler's partner Fiat, which uses a similar engine in Fiats and Alfa Romeos.

The engine uses Fiat's "MultiAir" technology, which uses electro-hydraulic variable valve actuation to continually alter the fuel and air mixture for best performance and economy. In addition, the Dart Aero swaps some steel components for lightweight aluminum, electric grille shutters to reduce drag, and other aero aids.

2013 Fiat 500

Rounding out our top five non-hybrids, the cute Fiat 500 is one of the better minicars when it comes to highway mileage. It just sneaks onto our list at 40 mpg thanks to 2013 model-year tweaks, and at 34 combined it's second only to the Passat TDI in this list. Rather than being packed full of fuel-saving tech, the 500 actually employs a fairly low-tech, old-school way of improving mileage--a small engine and light body.

Provided you can live with the Fiat's retro image, you'll find a lot to like elsewhere too. It's fun to drive, attracts loads of attention, and can even be had as a roll-back convertible, for the more extroverted among us...

This February 2012 file photo, shows a 2012 Chevrolet Volt outside at a Chevrolet dealership in the south Denver suburb of Englewood, Colo. Ingram explores the fuzzy math behind Reuter's report that GM is losing up to $49,000 per Chevy Volt. (David Zalubowski/AP/File)

In defense of the Chevy Volt: How much does it really cost GM?

By Antony Ingram, Guest blogger / 09.11.12

Yesterday, we ran a story sourced through Reuters, asking how much money GM was losing on every Chevy Volt it builds.

The Reuters article was based on figures from several Michigan-based industry analysts, claiming that Chevy might be losing up to $49,000 on every Volt it makes.

Those figures were estimated by working out the total cost of development of the Volt project, divided by the number of cars so far--a method which we suggested ourselves was a little spurious:

"...it's worth remembering that this figure will go down with every Volt sold, and unit production cost can only truly be calculated over the course of a full production run."

Now, "father of the Volt" Bob Lutz has weighed in via Forbes to confirm just that--that the true cost of each Volt is nothing like the numbers estimated--and that the car is "doing exactly what it was designed to do."

The Reuters report explained that when dividing the $1.2 billion development costs, each of the 21,500 Volts sold so far has cost GM $56,000 per car. Throw in the actual cost of production and, depending on who you believe, the total per-car cost could be between $75,000 and $88,000. Minus the car's purchase price and--theoretically--you have your headline loss figure.

The article also suggested that due to the incredibly low lease deals being used to pull in customers, GM's losses could be even greater.

How to calculate unit cost...

Predictably, Lutz points out the same factor we did, which is that a product's true unit cost is based on to the total number produced over the product's lifetime. In other words, GM hasn't calculated its figures based on the 21,500 sold so far, but on a much greater number over the life of the vehicle.

What Lutz doesn't mention, but a commenter on our original article reminds us, is that the Volt's development costs are also shared with other variants of the Volt sold overseas--the Opel and Vauxhall Ampera in Europe, and the Holden Volt in Australia. Detail changes aside the cars are near-identical, so a true figure must include these vehicles.

Lutz throws together a few figures to show how in reality, the Volt doesn't cost a great deal more than a Chevy Cruze to produce. The electronic aspects of the car make up around $10,000 of the production costs, and Lutz suggests another $1,000 in labor costs, for 20 hours assembly.

With a dealer net price of around $37,000, that leaves as much as $26,000 to produce the rest of the car--more than a Chevy Cruze sells for. If the rest of the car cost that much to build then Chevy would be losing money hand over fist on the Cruze too--which isn't the case.

Loss-making, but not by much

In reality, Lutz says that the Volt is nearer to variable break-even, or maybe even on the cusp of positive gross profit margin.

That still doesn't cover other fixed costs, depreciation and amortization, so as GM's Doug Parks pointed out yesterday, the Volt is still making a loss--but it's a much, much smaller loss than some industry analysts have predicted.

And as we pointed out yesterday, Toyota's Prius has already set a precedent for disruptive technology in the same way the Volt is doing today--and Toyota has churned out over four million hybrids in the last decade or so.

In the interests of balance, it's still unclear how well the Volt will continue selling after incentives end, with many suggesting that $199 per month lease deals are unsustainable in the long term--but those figures don't seem as precariously "in the balance" as they might have if Chevy was making a huge loss on each car.

And, just as with all the Volt-bashing that took place last year, Lutz has proven that if you want to attack the Volt, it helps to get your math right...

Hat-tip to those readers who brought Bob Lutz's article to our attention.

United Auto Workers union member Carrie Attwood works on a Chevrolet Volt electric vehicle at General Motors plant in Hamtramck, Mich., in this file photo taken July 2011. Nearly two years after the introduction of the path-breaking plug-in hybrid, GM is still losing as much as $49,000 on each Volt it builds, according to estimates provided to Reuters by industry analysts and manufacturing experts. (Rebecca Cook/Reuters/File)

Chevy Volt: GM's green-guzzling green car?

By Antony Ingram, Guest blogger / 09.11.12

Compared to its electric contemporaries, Chevrolet's range-extended Volt is currently proving the most popular plug-in, posting its best-ever sales figures during August.

It's out-punching the Leaf consistently, and other electric cars aren't even getting a look-in. It's even outselling Toyota's Plug-In Prius.

But overall, Chevy is still a long way from meeting its projected 45,000 target for this year, with year-to-date figures around the 13,500 mark.

And, says Reuters, GM could be losing as much as $49,000 on every Volt it makes.

Packed with technology, the Volt is an expensive car to make, and GM isn't making a great deal of money back on each one, despite the $39,995 base price. With some lease deals allowing customers to drive around in a Volt for as little as $5,050 over two years, GM's return looks insignificant.

High production costs, low sales

Some industry analysts predict that each Volt costs at least $75,000 to manufacture, though some suggest this figure could be as high as $88,000.

The numbers are compiled by industry experts like Michigan-based Automotive Consulting Group and Munro & Associates, and factor in the Volt's total development and tooling costs to date, divided among the 21,500 Volts sold to date.

So far, it puts average costs at just shy of $56,000 per car--though it's worth remembering that this figure will go down with every Volt sold, and unit production cost can only truly be calculated over the course of a full production run.

On top of the current unit cost, it's estimated that manufacturing cost for each car is between $20,000-$32,000 per vehicle, resulting in the final figures.

By contrast, the standard gasoline Chevrolet Cruze is estimated to cost between $12,000-$15,000 to build. To bring the Volt down to around $10,000 per car to build, GM would have to sell around 120,000 per year--but in an effort to push up sales, the low-cost lease deals are part of the problem while volumes remain low.

Another part of the problem is thought to be the Volt's relatively low production volumes, resulting in some parts suppliers pushing up component costs. A high quantity of unique parts over other cars on GM's Delta II platform--such as batteries, the electric motor and power electronics--also pushes up the unit cost.

GM's Doug Parks confirms that GM isn't yet making money on the Volt, but declined to comment to Reuters on any specific costs.

Other benefits

GM isn't yet fazed by the loss-making Volt--at least outwardly--citing other benefits to the Volt project.

Firstly, the Voltec system will attract greater economies of scale when it sees further service in other GM vehicles down the line, such as the 2014 Cadillac ELR luxury coupe.

GM is also learning technological lessons from the Volt project, some of which can be used even on vehicles that don't use the Voltec drivetrain.

"It wasn't conceived as a way to make tons of money. It was a big dip in the technology pool for GM. We've learned a boatload of stuff that we're deploying on other models," explains Parks.

A similar strategy has paid dividents for Toyota, whose multi-million selling Prius line now consists of four models, despite being a slow initial seller. And the Volt is attracting the same sort of customers as Toyota's hybrid--dealers say the Prius is the number one trade-in for Volt customers.

It isn't hard to imagine Volt sales steadily increasing just as the Prius did--though this does hinge on how many GM will sell when incentives end--but while the competitive lease deals are making the Volt fantastic value for consumers, it could be a long while before the car makes any money for GM.

Congested traffic fills New York's Park Avenue, in this June 2007 file photo. City employees in Rochester, N.Y., can be disciplined by their superiors for receiving red-light tickets, but they're not liable for any fines resulting from the tickets. (Richard Drew/AP/File)

City workers fly under red-light radar

By Richard Read, Guest blogger / 09.10.12

Traffic cameras evoke conflicting emotions. On the one hand, none of us want to encourage speeding or red-light running. On the other hand, the idea of getting ticketed by a camera -- often, a camera run by a third-party, for-profit contractor, rather than the police -- seems like cheating.

Municipal employees in Rochester, New York have found an ingenious way around this dilemma: when they get ticketed by the city's red-light cameras, they simply don't pay for their mistakes.

According to the Democrat and Chronicle, Rochester employees driving city-owned vehicles have been ticketed 119 times over the past 18 months. Due to city policy, those drivers can be disciplined by their superiors, but they're not liable for any fines resulting from the tickets.

The Democrat and Chronicle is careful to point out that the 119 infractions don't involve cases of emergency vehicles blasting through red lights with their sirens on, which would clear them of any culpability. About one-third of them do involve police vehicles, which police chief James Sheppard says were responding to emergencies, but the remaining tickets were issued to vehicles from libraries, cemeteries, and other city offices.

Even though Rochester's workers aren't liable for traffic-cam fines, some city employees aren't happy about the possibility of being disciplined. Mike Mazzeo, the local police union president, has expressed frustration that police vehicles are ticketed at all -- whether or not they're in emergency mode.

He's also annoyed that folks outside the police department have to review each ticket for accuracy. In fact, it sounds as if Mazzeo thinks the whole project is a waste of time: "We are going to have to spend how much manpower evaluating every situation? And I’m not sure what the point is. A city employee is the same as any citizen … well, a citizen is not working." (Should we let that last bit slide? Probably so.)

Our take

In fairness to Rochester's employees, the city doles out about 9,000 red-light tickets each month (from cameras at 29 intersections), so the 119 violations racked up by Rochester employees is minuscule compared to those incurred by the general population. 

Then again, citations issued by Rochester's red-light cameras initially cost $50 -- far less than many other cities. We understand the principle of not charging municipal employees for infractions, but if a city were going to charge, $50 would seem a reasonable sum.

Hurl Lambert of Harrisonburg, Va., fills his SUV with gasoline at Liberty Gas Station in Harrisonburg, Va. in this August 2012 file photo. Read argues that average fuel economy rises and falls in direct relation to fuel prices. (Nikki Fox/Daily News-Record/AP/File)

Gas prices and fuel economy: What's the connection?

By Richard Read, Guest blogger / 09.09.12

Earlier this year, the average fuel economy of new cars sold in America hit a record high of 24.1 mpg. That was in March, when many analysts though that gas prices were preparing to cross the $5-per-gallon mark.

Then, gas prices relented. Oil values plummeted. The rhetoric around Iran and the Strait of Hormuz ratcheted down. And demand in Europe shrank, leaving America with more fuel on its hands. U.S. pumps returned to prices in the $3.60-per-gallon range, and drivers breathed sighs of relief.

But slowly, over the past few weeks, prices have edged up again. In fact, during the past 30 days, we've gone from an average of $3.65 per gallon to the current $3.82. 

Why? Some credit the recovering economy, which has led to increased demand for gas. Others point to summer travel, which has also put a strain on supply. And more than a few nod toward Hurricane Isaac, which shut down oil production in the Gulf of Mexico, sending high-strung speculators into a tizzy.

All we know for sure is that as gas prices have risen, so has the average fuel economy of cars sold in the U.S.

According to the University of Michigan's Transportation Research Institute, average fuel economy hit 23.8 mpg in August, after hovering at 23.6 mpg in June and July. And it's up considerably from the 20.1 mpg that TRI found when it first began tracking fuel economy in October 2007.

Those differences may not look dramatic, but the correlation seems clear and sensible: average fuel economy rises and falls in direct relation to fuel prices. That doesn't mean that there aren't gas-guzzlers sitting on dealers' lots, but they're not moving nearly as quickly as their fuel-efficient cousins.

What does it mean for you, the auto shopper? Most importantly, you can expect to pay a premium for fuel-efficient rides. For new cars, this generally means that dealers are handing out fewer incentives for vehicles like the Toyota Prius. For used cars, it means that gas-sippers depreciate more slowly, narrowing the gap between new- and used-car prices.

Are you shopping for a car? And if so, is fuel economy your top criteria, as it seems to be for most Americans?

This Feb. 2012 file photo shows a line of 2012 Focus sedans at a Ford dealership in the south Denver suburb of Littleton, Colo. Economic instability, urbanization and the rise of mobile devices have contributed to a disinterest in car ownership among Millennials, Read writes. (David Zalubowski/AP/File)

New stats drive home Millennials' aversion to cars

By Richard Read, Guest blogger / 09.07.12

We've spilled a lot of ink on Millennials and their aversion to buying cars. Some data indicates that folks born between 1981 and 2001 are so un- and under-employed that their parents are the only ones who can afford to shop the showrooms. Other studies suggest that Gen Y finds driving to be a distraction from other noble pursuits, like, you know, text-messaging. 

Today, Bloomberg posted some interesting statistics that both verify and complicate those theories. For example:

• Shoppers between the ages of 18 and 34 make up just 11% of today's auto market -- down from 17% in 2007, prior to the Great Recession.
• In 1983, roughly 92% of Americans between the ages of 20 and 24 had driver's licenses. As of 2010, that figure had dipped to 81%.
• Before the recession, college graduates landed entry-level salaries of about $30,000. Post-recession, the number has drifted closer to $27,000.
• Renting is hugely popular among Millennials: in the housing market, rental vacancy rates hover near historic lows. (This may explain the popularity of rental car services like Zipcar.)

Another crucial fact that bears mentioning is the increasing rate of urbanization in the U.S. In 2010, 81% of Americans lived in urban areas, and that figure has been growing.

What's it all mean?

The auto industry is going to have an increasingly tough time selling cars to young people -- even when they design those cars with young consumers in mind. That's because automakers have been hit by a perfect storm of unfortunate events:

• America's recovery from the Great Recession has been touch-and-go, hampered largely by economic troubles in Europe (though China has begun slipping, too). As a result, young people -- even college grads -- are having a tough time getting their financial footing, which puts a damper on their ability to buy big-ticket items like automobiles.
• As more people move to urban areas, car ownership becomes increasingly unnecessary. After all, why would anyone shell out for an automobile -- and a place to park it -- when there's decent mass transit available, as there is in many cities? 
• Smartphones and other mobile devices have given young people new ways to connect. Millennials don't need to travel to interact face-to-face: they can chat online or by text message. There's anecdotal evidence to suggest that this is having an effect on bars and nightclubs, so it's not unreasonable to think that cars may be affected, too.

So, the $64,000 question is: how does the auto industry adapt to meet these changing conditions?