Jerry Flint: Why People Buy Cars
100% Jerry...
It's amazing how many auto executives don't understand why people buy cars. I could name two chief executives of General Motors that wasted hundred of billions of dollars of the company's money because they didn't understand.
I'm not surprised that government bureaucrats, academic economists, scoop-hungry journalists, and greenies don't understand. But auto men should. But as the talk of plug-in electrics grows, I'm beginning to see more quotes like, "Most people don't drive more than 40 miles a day, so this electric car, will suit them." I made that quote up, but it's close to what you hear people saying. And it is true that the average driver may drive just a few dozen miles each day, but that is a meaningless statistic.
So here's the explanation of why people buy cars, written especially for folks in this business.
An automobile is quite expensive; $30,000 is the average new car price. The reason people are willing to pay $30,000 for this thing is that it is a tool, a very versatile tool. This tool will take you 20 miles to work and back each day. This tool will carry you fromNew York to Los Angeles and back. It will climb to the top of Pike's Peak. It will take you across the Arizona desert at noon. It will carry 1000 pounds of people inside.
It will carry hundreds of pounds more of cargo in the truck and on the roof. It will tow at least 1500 pounds. It will be warm in the winter and cool in the summer. It will provide time to listen, to music, the talk shows, to sports, in privacy and comfort. And on the coldest night of the year, when your baby turns blue at 2 a.m., this tool will get you to the hospital.
That is why this thing, this automobile, is worth $30,000, because it is a tool that will do so many things. When you start subtracting the things that this tool can do, it loses value.
And when you get down to: "It will take you 20 miles to work and back each day," then the tool is worth only about $700. That's because for $700 I can get you a beater that will do just that but not much else. So when you think of an electric car, you must realize that to have serious value it must move 3000 pounds the way you have to move 3000 pounds to make it worth $30,000.
The Toyota Prius hybrid succeeds because it is does these things, not terribly well, but it does them. It's not really fast, but it's fast enough. It has a reasonable range and can carry a reasonable load for a small car. It's high priced -- $26,000 or so for such a small car is a high price. But then people get excited by its fuel economy, and its unique shape make it a rolling billboard for the owner's good intentions.
It's not just American auto people who don't understand. The leaders of Daimler in Germany missed the boat with the smart (lower case s if you want), too. This smart exercise has cost Daimler $5 billion or so in losses. The smart is cute, yes, but can only carry two people and very little else in the way of cargo and goes slow. You wouldn't want to drive it any distance -- like from Paris to the Riviera - on Europe 's superhighways where even I have driven at 100 miles per hour.
What the smart is good at is parking, but parking ranks relatively low on the reasons for buying a car, except in two cities, Paris and Rome. And for the price of this two-seater, a European could buy a small car, such as the Volkswagen Polo, that would carry four and stuff and be good for traveling anywhere.
So why hasn't DaimlerChrysler killed the smart as General Motors and Toyota killed their electric cars? Probably for political reasons: it would embarrass the Daimler board that approved the project, and the German foreign office, too. That's because the smart plant is in France, and it would mean Germans firing Frenchmen in a high unemployment area. Not good for foreign relations.
Does this mean that GM's latest electric car concept, the plug-in Volt, is doomed? Not yet, because the Volt doesn't exist. It's supposed to run on lithium-ion batteries and these don't exist for use in cars yet. When and if they do come, GM says the range problem will be solved by a small gasoline motor that will recharge the batteries when they weaken.
Maybe that will work. Maybe it won't. We'll just have to wait. Note that we haven't gotten into the issue of the cost of such a car yet. There are still those who insist that Toyota loses thousands of dollars on each Prius it sells - which Toyota denies.
Just remember, as you read in the future of other great answers to our oil problems, like the computer-controlled unicycle or the one-person three-wheeled bubble car, that they aren't going to happen if they aren't real cars, which means they must be versatile tools that can do many things that make them worth $30,000.
It's amazing how many auto executives don't understand why people buy cars. I could name two chief executives of General Motors that wasted hundred of billions of dollars of the company's money because they didn't understand.
I'm not surprised that government bureaucrats, academic economists, scoop-hungry journalists, and greenies don't understand. But auto men should. But as the talk of plug-in electrics grows, I'm beginning to see more quotes like, "Most people don't drive more than 40 miles a day, so this electric car, will suit them." I made that quote up, but it's close to what you hear people saying. And it is true that the average driver may drive just a few dozen miles each day, but that is a meaningless statistic.
So here's the explanation of why people buy cars, written especially for folks in this business.
An automobile is quite expensive; $30,000 is the average new car price. The reason people are willing to pay $30,000 for this thing is that it is a tool, a very versatile tool. This tool will take you 20 miles to work and back each day. This tool will carry you fromNew York to Los Angeles and back. It will climb to the top of Pike's Peak. It will take you across the Arizona desert at noon. It will carry 1000 pounds of people inside.
It will carry hundreds of pounds more of cargo in the truck and on the roof. It will tow at least 1500 pounds. It will be warm in the winter and cool in the summer. It will provide time to listen, to music, the talk shows, to sports, in privacy and comfort. And on the coldest night of the year, when your baby turns blue at 2 a.m., this tool will get you to the hospital.
That is why this thing, this automobile, is worth $30,000, because it is a tool that will do so many things. When you start subtracting the things that this tool can do, it loses value.
And when you get down to: "It will take you 20 miles to work and back each day," then the tool is worth only about $700. That's because for $700 I can get you a beater that will do just that but not much else. So when you think of an electric car, you must realize that to have serious value it must move 3000 pounds the way you have to move 3000 pounds to make it worth $30,000.
The Toyota Prius hybrid succeeds because it is does these things, not terribly well, but it does them. It's not really fast, but it's fast enough. It has a reasonable range and can carry a reasonable load for a small car. It's high priced -- $26,000 or so for such a small car is a high price. But then people get excited by its fuel economy, and its unique shape make it a rolling billboard for the owner's good intentions.
It's not just American auto people who don't understand. The leaders of Daimler in Germany missed the boat with the smart (lower case s if you want), too. This smart exercise has cost Daimler $5 billion or so in losses. The smart is cute, yes, but can only carry two people and very little else in the way of cargo and goes slow. You wouldn't want to drive it any distance -- like from Paris to the Riviera - on Europe 's superhighways where even I have driven at 100 miles per hour.
What the smart is good at is parking, but parking ranks relatively low on the reasons for buying a car, except in two cities, Paris and Rome. And for the price of this two-seater, a European could buy a small car, such as the Volkswagen Polo, that would carry four and stuff and be good for traveling anywhere.
So why hasn't DaimlerChrysler killed the smart as General Motors and Toyota killed their electric cars? Probably for political reasons: it would embarrass the Daimler board that approved the project, and the German foreign office, too. That's because the smart plant is in France, and it would mean Germans firing Frenchmen in a high unemployment area. Not good for foreign relations.
Does this mean that GM's latest electric car concept, the plug-in Volt, is doomed? Not yet, because the Volt doesn't exist. It's supposed to run on lithium-ion batteries and these don't exist for use in cars yet. When and if they do come, GM says the range problem will be solved by a small gasoline motor that will recharge the batteries when they weaken.
Maybe that will work. Maybe it won't. We'll just have to wait. Note that we haven't gotten into the issue of the cost of such a car yet. There are still those who insist that Toyota loses thousands of dollars on each Prius it sells - which Toyota denies.
Just remember, as you read in the future of other great answers to our oil problems, like the computer-controlled unicycle or the one-person three-wheeled bubble car, that they aren't going to happen if they aren't real cars, which means they must be versatile tools that can do many things that make them worth $30,000.
posted by sorgenfrei at 4:29 PM
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