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Week of 5.18.07

Csaba Csere on the U.S. Car Market

Csaba Csere, editor-in-chief of Car and Driver magazine, talks to NOW about where the U.S. car market is headed and the role of gas prices in buying decisions.

NOW: What trends are auto makers seeing in the United States? Are we becoming a little bit more sensible in terms of fuel efficiency or are we still after performance and vitality?

Csaba Csere Csaba Csere (CC): The U.S. market hasn't really made such a big shift and it's very fickle. It actually is one of the problems of being a car maker. Because we sit here in 2007 and if you're a car maker, it takes you a minimum of three years to get something out on the road. Anyone selling cars in America has to sit here in 2007 and say, "what are fuel prices going to be in 2010?" And based on those fuel prices, "what vehicles are people going to want to buy?" And then, you've got to place your several hundred million dollar or billion dollar bets down on the factories and on the engineering areas to produce those cars. And that's why car makers often get it wrong, because they don't have a crystal ball either. They don't know what the market's going to want.

NOW: Is that because the crystal ball supplier is not turning out quality product?

CC: Well, the crystal ball supplier isn't very good and it's because fuel prices are unpredictable is the reality of it. And in the U.S., the buyers really are driven by the fuel prices.

NOW: Even though that's a short term consideration?

CC: Well, it is a short term consideration. But the buyers can actually change their minds in the short term. The car companies can't. We saw this in the 1970s when the American car makers were building these big V8 powered vehicles that had been selling very well. Gas prices skyrocket. A car buyer can change his mind overnight and decide I don't want that big V8 sedan. I want the small four cylinder sedan. But the car maker can't transform a factory overnight or within a month's time or even a year's time. It takes longer than that. And that's why they can be caught out.

NOW: But, according to one of your own surveys, fuel economy ranks nearly last in the list of car attributes that consumers desire. I think cup holders, sound systems are well above it.

CC: Fuel economy is not a huge consideration because gas is so cheap in America. The truth is, even at $2.50 and $3 dollars a gallon, gas is not terribly high relative to modern purchasing power. And people just don't worry about it. Last year when gas was over $3 dollars a gallon, you would drive by a McDonald's and still see a line of cars sitting there with their engines idling waiting to buy a cup of coffee. I mean, how serious can any of those drivers in those cars be about saving fuel when they can't be bothered to park their car and go in and pick up the cup of coffee on foot?

American vehicles, both cars and trucks have grown tremendously in size and weight over the last 20 years. Recently, the EPA [Environmental Protection Agency] did a study looking at this and found cars were at their lightest in about 1982, at roughly 3,000 pounds. And I think they're up to about 4,000 pounds on average, or 3,800 pounds. Similarly, trucks have gone from about 3,500 to 4,500 pounds. They've grown tremendously and horsepower has doubled. A lot of this horsepower does go to just driving the bigger vehicle. And today's population of vehicles is the fastest it's ever been. You know, we think about the muscle cars of the 1960s, the GTOs and Hemmies. The fastest vehicles today are way faster than they were in the 1960s

NOW:The gasoline powered internal combustion engine powered the economic global expansion of the 20th Century. Will it do the same in the 21st Century?

CC: It's hard to say. There are certainly alternatives to the gasoline powered internal combustion engine, both for transportation and for other power sources. But none of them are really imminent. I know we've got diesel internal combustion engines which are maybe thirty percent more efficient. And you certainly see a lot of them. And we're going to see more in the future. But really, replacing the internal combustion engine with something else is not going to happen for 20, 30, 40 years because there's nothing else on the horizon that's ready to go sooner than that.

NOW: But people are talking about hydrogen now and fuel cells. They're talking about ethanol as a replacement.

CC: Among the replacements some things are pretty easy, like ethanol. And we're starting to make some ethanol now and use it in vehicles. It's very easy to convert a car to run on E85, which is 85 percent ethanol. The problem is it really doesn't do that much good. When you go through the numbers and see how much energy is required to make ethanol, you don't really save that much petroleum with the ethanol economy.

When you look at things like fuel cells that run on hydrogen, boy, that's wonderful. The problem is the fuel cell today still costs about ten times as much as an internal combustion engine. So, it would mean a Ford Focus that's a fifty thousand dollar car, nobody's ready for that.

We don't have any filling stations that can dispense hydrogen. And by the way, we don't have any hydrogen. If you go out and buy hydrogen today, it's made from natural gas which is a fossil fuel. We think of hydrogen being the perfect fuel when you make it out of water, operate a fuel cell with it, and then it turns back into water; a beautiful, closed cycle, no pollution.

But it takes electricity to make hydrogen out of water, lots and lots and lots of electricity. So, to make the hydrogen economy work, you have to come up with a source of essentially cost free and pollution free electricity. And we don't have that either.

NOW: So what's a short term solution for our current fuel crisis?

CC: There is no short term solution. If we want to reduce fuel consumption in the short term, we basically have to conserve. We have to change buyers' motivations to use less fuel of all kinds. And the only way really to do that is with a pricing function, which means to raise the price of fuel.

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