Road Closed! After eight years and billions of taxpayer and shareholder dollars, the Partnership for a New Generation of Vehicles (PNGV) has thrown in the keys. On August 13, the National Research Council, in its annual review of PNGV, finally admitted that, despite the best efforts of our government to help industry produce politically correct technology–this time an 80 mpg family car–the laws of physics and economics just won’t get out of the way. It’s not going to happen.
Remember when PNGV was started with all that ballyhoo by Vice President Gore in 1993? Remember when President Carter announced the “Energy Crisis” as the “Moral Equivalent of War,” only a few days after his partisans nearly froze in their solar‐heated Inaugural review stand? Remember when nuclear power would produce electricity “too cheap to meter”? These stories have something in common: When the government gets into the energy business, bad things usually happen.
There are several reasons. The first is why the feds are there to begin with. Governments only get involved in crash programs to build things when 1) they are very expensive, and/or 2) no one wants them. And PNGV may be the quintessence of this model, which should make everyone chary about the need for yet another “national energy plan.”
Last year, the Big Three participants–Ford, GM and Daimler‐Chrysler — got around to building their first hybrid gas‐electric prototypes. By then it was obvious that the technology would not work in anything approaching a cost‐effective fashion. Why did they continue? Two nonparticipants–Honda (Insight) and Toyota (Prius)–had already demonstrated the futility of trying to produce the impossible cheaply. And both were in the process of finding out that gas is so inexpensive in this country (despite its 40 cents per gallon tax) that no one except diehard technophiles and hyper‐greens are willing to shell out several thousand extra for a hybrid. But they do work. My Insight is averaging 69.5 mpg over its 18,000-mile life, with mechanical perfection (“it’s a Honda”). Prius owners average around 50mpg.
Honda’s prototype, the JV-X, was completed in 1997. Toyota’s was even earlier, as the Japanese Prius was first sold in 1997. Years before the Big Three bothered to finish their prototypes, both Toyota and Honda let it be known they were losing big bucks on these cars, and neither company, when pressed, would say if or when they would make a profit on them. That’s because the answers are no and never.
Amazingly, and in spite of largely glowing reviews and favorable articles by our green press, demand has been weak. Example: In July 2000, seven months after its debut, Honda sold a mere 354 Insights. A year later sales were actually down–to 323 units. Honda projected sales of 6,000 in calendar year 2000 and wound up with a mere 3,788. You can only special order the Prius, which is limited to 12,000 per year here. This saves Toyota from the embarrassing showroom backup that has plagued Honda.
More ominous news for gas‐efficient hybrids may be on the horizon. Honda recently announced that it will begin shipping its clever technology in a much more family‐friendly Civic platform next spring. They hope to sell a mere 12,000 a year. Why so few? Either they are losing money on them, few people will want them, or both.
The only way these cars will sell is if gas prices go through the roof, which is politically unacceptable. Honda did sell 903 Insights in May, when gas approached $2.00 per gallon. But, without additional fuel taxes, this is an unsustainable price. And what politician (besides the defeated vice president) will make more expensive gasoline a campaign promise?
At any rate, given Toyota and Honda’s history, PNGV had to know four years ago that the profitable, 80mpg family car was impossible, and that no one would buy it anyway unless we instituted politically impossible gasoline taxes. But what do you expect from the government when it’s busy spending your money, as happened for eight years of the Clinton administration’s PNGV. And doesn’t the notion of a new “national energy plan” give you, pardon the expression, the Willies?