WSJ and the future of Ferrari et. al.

think you live in America? (if you reside within the 50 or its territories)

EYES ON THE ROAD
By JOSEPH B. WHITE

Today's Gas-Guzzling Exotic Cars
May Get Zapped by New Fuel Rules
New CAFE Rules Mean a Ferrari 612 Scaglietti
Will Have to Meet Same Standard as a Camry
May 12, 2008
A Porsche 911 is a marvel of automotive engineering and an object of desire for people who've worked hard enough, and been lucky enough, to have $80,000 or more to drop on an exotic sports car. One thing a Porsche 911 doesn't do is get 41.3 miles per gallon in city and highway driving.


That could be a problem, because under the fuel-efficiency targets recently proposed by the federal government, Porsche cars sold in the 2015 model year (which begins in the fall of 2014) could be required to average 41.3 miles per gallon to avoid fines levied under the revised U.S. Corporate Average Fuel Economy (CAFE) rules.

Most of the discussion of federal efforts to boost the average fuel efficiency of new vehicles to 35 mpg by 2015 has focused on how the new standard will do in large sport-utility vehicles. But high-performance cars -- particularly those sold by relatively small manufacturers such as Porsche, Lotus, Ferrari and Subaru -- are also targets of the proposed reforms to the CAFE regime.

Overall, the new standards put a tougher burden on luxury and specialty manufacturers. By 2015, BMW AG, for example, is supposed to sell a fleet of cars that averages 37.7 mpg. Toyota, however, will have a fleet-wide passenger car target of 34.6 mpg, and General Motors Corp.'s car fleet will have to average 34.7 mpg.

The challenge to high-performance sports cars is a consequence of the government's move to regulate the fuel efficiency of cars and trucks according to "footprint," essentially the number of square feet a vehicle covers when parked in the driveway.

Consumers tend to distinguish cars and trucks by attributes such as body style, number of doors, resale value, brand image, engine displacement and functionality -- distinctions embedded in automotive marketing. A Toyota Camry and a Ferrari 612 Scaglietti are both categorized as "midsize cars" by the Environmental Protection Agency, but no one would seriously compare them.

But based on their footprints, the Camry and the Ferrari 612 are roughly in the same EPA class and by the middle of the next decade will be required to average more than 30 miles to the gallon. That might not be so tough on the Camry, but today's Ferrari 612 Scaglietti, with its 540 horsepower, 12-cylinder motor, is rated at just 9 miles in city driving, and 16 mpg on the highway.

The government's proposal plots footprints and mileage on a curve, with cars below 45 square feet in area required to average around 35 to 40 mpg by 2015, according to an analysis of the proposed CAFE rules by the Alliance of International Automobile Manufacturers. The mileage targets drop steeply for cars larger than 48 square feet. Light trucks have a much easier curve, with the maximum below 35 mpg for very small trucks, and roughly 25 mpg by 2015 for large trucks.

As far as the government is concerned, the Porsche 911 is a "minicompact car." As such, it should be capable of delivering about 40 mpg by the 2015 model year. Right now, the average for Porsche's fleet of sports cars is about 1 mpg under the current 27.5 mpg standard, and Porsche pays fines to the government to continue selling its cars here.

It's not just expensive sports cars that have a problem. My Subaru WRX is also in the crosshairs. The WRX, which has a turbocharged four-cylinder engine, is rated at just 18 mpg in the city, 25 on the highway, for a combined 20 mpg rating. By 2015, Subaru's fleet average will have to be 40.8 mpg under the rules. That means a lot fewer cars like my WRX.

"In choosing the footprint" as the basis for fuel-economy regulation, "smaller high performance cars get nailed," says Mike Stanton, president of the Alliance of International Automobile Manufacturers. "Maybe that's what they want to do."

Of course, nothing in Washington is over until it's over, and even then fights over regulation can drag on and on. The government hasn't made its CAFE proposals final, and is awaiting comments on its proposals. It will get plenty, including arguments that the law should allow an exemption for specialty cars made by low volume manufacturers such as Ferrari or Porsche.

Meanwhile, specialty car makers must weigh some difficult options. They can carry on offering the kinds of vehicles that have got them where they are today, and build the costs of fines into their pricing and profitability plans. They can try to re-engineer high performance cars to meet the standards -- which carries the risk that the resulting vehicles wouldn't be recognizable to their customers. One tactic could be to redesign cars so that they can qualify for the less stringent mileage targets offered to light trucks. (Porsche's already got a vehicle like this, the Cayenne, which has sold well but also outraged the sensibilities of some Porsche purists.)

They could seek shelter under the wings of larger, mass-market manufacturers, which sell lots of super-efficient cars to even out the fleet-wide averages, and perhaps cushion the costs of fines and high-tech fuel-economy fixes. (Porsche's expanding alliance with Volkswagen points in this direction.)

Tom Baloga, vice president of engineering for BMW's U.S. arm, says BMW has concluded it can meet the standards without compromising its image. But it won't be easy or cheap.

The way the government's proposed footprint/mileage curves work, a BMW 3-Series, at 45 square feet, will need to average 37 mpg. But a 5-Series, with a footprint four square feet larger, will be allowed to average 31 mpg. This steep curve puts a lot of pressure on high performance cars such as the M3.

Though it might appear tempting for BMW to simply make its future 3-Series cars as large as the current 5-Series, Mr. Baloga says that's not what BMW wants to do.

"We are going into this with the idea that we aren't going to compromise our ultimate driving machine characteristics. We are going to find a way to have the best of both worlds," Mr. Baloga says. That means, he says, more aggressive use of sophisticated engine technology, lighter weight materials, fuel-saving systems such as idle stop and further "electrification" of the car. BMW -- which has sold mainly six- or eight-cylinder cars in recent years -- will likely offer more four-cylinder engines, including diesels, going back to its roots as a high-performance, four-cylinder car company, he says.

"Everything will cost more," he says. "We have to do this more efficiently to keep costs from skyrocketing out of control."

• Send comments about Eyes on the Road to [email protected]

 

I believe every Ferrari sold already has these CAFE fines as well as a hefty gas guzzler tax rolled into the MSRP. Ultimately, gas is going to continue to increase in price, and you're going to have to pay and pay and pay to drive a performance car.

Still, might be time to stick some Fiat Pandas and 500s in the showroom next to the 612 Scaglietti.

 

Every Ferrari made has been subject to the gas guzzler tax since the late 1980's, maybe even well before that. It's been around since the late 1970's.

 

Hmm. Interesting idea. They're owned by a company that sells econo boxes--why not bring the manufacturer a little closer under the wing and make it a "part" of the company? Don't think it'd do too much to hurt the brand. A Ferrari is a Ferrari is a Ferrari.

 

This is a good article about different strategies for meeting CAFE standards:

http://www.econbrowser.com/archives/2007/03/cafe_standards.html

Overall, CAFE standards are a dumb idea, IMO. A higher gas tax is a much better idea, simpler, and would accomplish the same economic goals (but not the political goals-- CAFE allows politicians to avoid voting for a "tax increase" while still "doing something" about energy).

 

I mostly agree with you. NYT columnist Thomas Friedman has also written on this.

The proof is in the data: right now, small cars are racking up their best sales in years, and SUVs are in the toilet -- i.e., the real goal is being achieved.

The inherent problem with CAFE is that the real goal is the overall fuel economy of all vehicles on the road. Who cares whether Porsche gets worse fuel economy than Honda? The Porsche owner is paying thousands of dollars extra in fuel costs, and Porsche will have to sell cars in a world where gas is increasingly expensive. Result: fewer Porsches sold to casual shoppers, but Porsches remain available to the hardcore sports car guys who ante up at the pump.

CAFE isn't a bad idea -- racing cars are also on a constant quest for better fuel economy/efficiency, so it's not at cross purposes with Ferrari et al. And, no one will raise the gas tax, so we need something.

But raising the tax on gas is the right answer.

 

This is just another BS proposal that targets the middle class. It isn't only about hi-performance cars. Virtually no car on the road today would pass such standards. Not really.

This is a move to appease the Global Warming zealots who want everyone to drive electric cars as forced upon the public by the government without any such line of cars available for actual purchase.... and for petroleum companies to justify raising prices even higher (if you get better mileage, best to raise the gallon of gas higher to keep it in check ...those with efficient cars won't hurt as much... those who choose to keep their gas guzzling Ferrari ---well, F@ck them, they are rich anyway and will happily pay). So both camps can get what they want.

 

There is NO WAY Porsche only averages 1 mile per gallon. F1 cars can better than that.

Why was Subaru named in the same breath as Porsche, Lotus, Ferrari? Because this guy owns a Subaru.

QUOTE:
"That means a lot fewer cars like my WRX."

This guy is pounding his fist into a cup and we have to read about it?

Are the rest of his numbers accurate? I doubt it.

 

I wonder which uses more fuel and pollutes more in real terms. A Ferrari driven 2,000 miles per year or a huge pickup driven 20,000 miles per year getting barely 15 mpg at 75mph everyday.

Less is more in any case. The water company is raising rates owing to conservation, The electric company said it would be raising rates owing to reduced demand. Jurisdictions are raising tax rates because of the increases. Use less fuel and the price at the pump will rise even further. Why? They are monoplies and will make their profit regardless of demand. Supply and demand works only where there is competition in the marketplace. Utilities, fuel, government have no competition. You either pay more or do without.

 

Why does that really scare me?

 

I don't give a crap about global warming, could be true, might not be, cutting our gas consumption will have little effect regardless. However I am in favor of cutting our energy dependence when we can for national and global security reason. If this helps that out, I have no problem with you guys who can afford your Ferraris new to pay a little bit more. I don't think it will effect the very secondary market where I reside.

 

With each Scag you also have to buy 3 Fiat econoboxes at $10k each (which they buy from Tata for $3k) so that the sale of the Ferrari remains "CAFE neutral". The dealership will even arrange to store these three cars for you on Fiat's lot in outer Montana. All you do is pay for tags and minimal insurance each year on the cars. When it comes time to have your Ferrari's major service, you trade one of the no miles, "new" pre-owned cars back to the dealership which they then resell on Ebay for $3k.

 

I was under the impression the regulation was 35mpg by 2020, not 2015. Has there been an update?

And I agree, not sure why they mentioned the WRX, and I even own one. It won't be nearly as hard to make 4-bangers reach that target.

 

It says 1 MPG under the national standard of 27.5.

 

And they're fined for 1/ mpg? Why not tweek the car to fit the bill?

 

That would mean paring the car's weight to the bone, something modern drivers can't tolerate.

How would you, as a performance-oriented driver in a brand new Porsche, feel without a vibrating armrest, contrast-stitched spare tire cover, sueded tow hook, glove box fridge or moon-phase gauge on the dash?

 

+1 on Tom Freidman. His biggest gripe is not the price of gas/oil but where the money we spend on it goes and what it finances.
The biggest change in the proposed legislation is that there will be "no loop holes" I don't think anyone knows, at this point, what that means but it could mean no exceptions via "Gas Guzzler" taxes.

 

See what happens when you elect liberals to run congress! Just think what will happen if one gets in the White House as well. It took over 20 years to repeal the 55 mph speed limit these self rightous nuts imposed on the country.

Remember a Liberal with a cause is more dangerous than a Bible Thumper with bad hair.

 

doesn't sound like the manufacturer fines the article is talking about is the gas guzzler tax (which is paid by the consumer, not the manufacturer).

 

... meanwhile, I can continue to buy overpackaged plastic toys for my kids, and just keep throwing all that plastic, paper, aluminum, etc. in the landfill, with essentially no cost to me. What is worse for the environment? All my garbage, or my car that I drive occasionally that gets crappy gas mileage?
What about all the rest of the products made from petrol? Carpet? Plastics? when are the restrictions coming on those items?

 

Not sure the old blanket "liberal" label really explains much here. I think the 55 mph speed limit was a farce behind only prohibition or 'abstinence' sex education for teens. I also believe that anyone willing to pay up should have the right to drive whatever he/she wants.

I definitely agree with Friedman that a gas tax is appropriate, even though I'd be paying it, as long as the money goes to fund something useful like solar energy, maybe in conjunction with some kind of recharging network to gradually replace gas stations. We taxed cigarettes into oblivion, which has been a huge benefit. Even as a sports car fanatic, I can see that 11 mpg cars/trucks and traffic jams are bad.

I also think it's disgusting that Detroit is still fighting mileage standards in California, begging for protectionism, when it's clear their market in China will dry up if they are successful in defeating innovation. As a businessman, I suppose you can compete or you can whine. I'd like to see GM/Ford/Chrysler do more of the former.

So, am I a "liberal"?