Detroit Shoots Itself in the Foot on Fuel Efficiency

One of the things which is sure to strike any American visitor to Japan is the cars on the streets. They're not what most Americans think of as Japanese cars: Accords, Camrys, Lexuses, that sort of thing. Rather, they look like no cars in America. They are much smaller than the vast majority of US cars, they're much more fuel-efficient, and there seems to be no premium put on power, size, and other gas-guzzling features. On the other hand, there is a huge premium put on cars being new: you almost never see an old car in Japan.

Detroit knows this: its comparitive advantage, insofar as there is one, is in making fuel-inefficient vehicles like the Hummer. And so it's railing against proposed laws which would increase US fuel efficiency.

The problem is that Detroit is, slowly, dying. If it wants its cars to continue to sell around the world, it will have to make them more fuel-efficient no matter what the US legislates. And if it doesn't improve fuel efficiency, it will continue to lose market share to foreign competitors who know how to make great cars which don't guzzle gas.

So rather than complain about fuel-efficiency standards which wouldn't even come into force until 2020, it would be much better were Detroit to embrace them. Without such standards, any given Big Three company can get a short-term profit boost by making automobiles which guzzle insane amounts of gas. (See: the Hummer.) So there's not much incentive for the other two to miss out on those profits by moving towards the side of the angels.

With tougher standards, on the other hand, the Big Three will no longer need to worry about being out-competed on the gas-guzzling side of things, and they can invest more money in more earth-friendly cars. They should be lobbying for this bill, not against it.