That Durn Gub’ment! Making Our Pickup Trucks Better and Saving Us Money…

So I should be writing trenchant commentary on the market or economy or something highbrow, but I find myself thinking about pickup trucks.  Partly because I’ve been in Florida this week visiting friends and family (Key West, Homestead, Ocala so far – Miami Beach to come).  And I’ve seen a whole lot of pickup trucks.  Especially the paradoxical pickup.

Pickups seem to be most favored vehicle by people who can least afford to drive them.  Not questioning their utility for a whole lot of people, but you get the feeling that many of those behind the wheel of a big, 17mpg beast would be better served by a 30+ MPG hatchback.  You look at a pinched face on the highway and wonder how they’ll pay for that next fill-up…

And then the government comes along and intervenes in the market.   Driving up fuel economy regulations.  Forcing Ford to mess with their iconic F150 – the best-selling vehicle of all time.  The culmination of this nanny-state, socialistic, probably French-inspired, community-organizer-cum-commissar interventionism?

A new model F150 pickup that…

  • …will cost about $800 more for an all aluminum body.
  • …will get somewhere close to 30 EPA mpg versus 17-19 mpg today.
  • …will save that owner about $1,200 a year (based on US average of 15,000 miles driven annually).
  • …will reduce gasoline consumption by 300+ gallons/year.
  • …get @30 freaking mpg?!?!  FOR A FULL SIZE AMERICAN TRUCK NOT SOME NAMBY-PAMBY ARUGULA-MOBILE?!?!?!

The end result is an unalloyed economic good for America.  A 30 MPG full size pickup is really pretty mind bending.  A tremendous victory of American ingenuity.  Delivered courtesy of those pesky government regulations we all love to fulminate against.

The government’s role here is irreplaceable.  The car companies by themselves have ZERO independent incentive to deliver these sort of big leaps on their own.   Much better to just tweak around the edges – add tailfins! – and keep selling the same basic bucket of bolts.  But the government’s diktat ensures that all car companies face the same challenge on the same terms.   So the competitive dynamic remains fair and healthy.  The Feds re-shaped the playing field.  The players responded.  Brilliantly.

So who wins?

  • The consumer wins.  Trading higher capital costs for lower operating costs is a no-brainer – the up–front difference can and will be financed on the strength of that longer-term affordability.
  • The economy wins.  That is $1,200 a year that can go on other consumption or investment with a higher multiplier (which is pretty true of anything besides gasoline).
  • The environment wins.  Lower emissions etc. etc.

So who loses?

  • Ford’s long-term shareholders?  Not really.  Assuming it isn’t a quality disaster, the F150 should be a huge hit.  And Ford’s gasoline engine technology advantage will remain viable for a few more years of profitability  (before electrics probably disrupt the market).
  • Ford’s short-term share-renters?  Possibly.   Every dollar that Ford spent on R&D to deliver this breakthrough could have been spent on buybacks or dividends or some other sort of short-term chicanery.

And in that last point lies the seeds for the sickness that ails so much of this economy.  The share-renters class has disproportionate representation in the debate, to the detriment of the consumer, macro-economy, and long-term shareholders.  I’d love to think the example of the F150 would somehow help chip away at this dynamic.  But at least it’ll save us all a lot of gas and gas money.

Share
This entry was posted in tech-telecom-markets-macro. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.