TDIMeister
Phd of TDIClub Enthusiast, Moderator at Large
Reuters / June 03, 2004
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=5331406
FRANKFURT (Reuters) - European car makers can afford a wry smile as they watch the uproar that rising oil prices and $2-a-gallon gasoline have triggered in the United States.
Europeans' preference for smaller autos and their embrace of fuel-sipping diesel engines mean high oil prices are not such a big deal for car shoppers, especially when high taxes mask the impact of price changes at the pump.
"Because gas is so expensive here anyway, Europeans tend to drive around in smaller cars. I really don't think it's a major issue," Stephen Cheetham, an auto analyst at Sanford C. Bernstein Ltd., said of surging crude oil prices.
Georges Douin, executive vice president at France's Renault, told Reuters last week that European manufacturers would escape damage given the popularity of diesel, plus new speed limits in some places that were limiting fuel consumption.
European car makers have been able for years to boost the average mileage that their fleets get while U.S. peers' performance has been flat or weaker as demand for heavy, powerful cars, trucks and SUVs goes up.
Worried by prospects for a tax on carbon dioxide emissions, European manufactuers are churning out fuel-efficient cars in a bid to boost their fleets' average to around 40 miles per gallon (5.9 liters per 100 km) by 2008 from some 28 now -- still a third better than the average for U.S. models.
"The rise in pump prices in some ways even helps them because it does refocus the consumer back on small engines. There has definitely been a trend to higher power outputs recently" in all big markets, noted John Lawson at Smith Barney.
Britain's Daily Mail screamed in a front-page headline on Wednesday: "The 4-pound ($7.38) gallon and it may get worse!"
High oil prices may one day make Americans think twice about buying gas-guzzlers, but U.S. sales of new cars -- even of most SUVs and trucks -- continue to rise, helped in part by robust incentives. May sales were the strongest in nine months.
Should this trend falter, much as the 1970s oil shocks cracked open the U.S. market for thrifty Japanese cars, European carmakers have strong products at the ready.
They are already trying to dispel the American stereotype of diesel engines as noisy, smoky and hard to start in frigid weather with a new generation of smooth-running turbo-diesels. Volkswagen AG, for instance, says diesels now power around 10 percent of the cars it sells in the U.S. market.
ENTER THE HYBRID?
Even makers of hybrid cars -- whose power plants combine standard internal combustion engines, batteries and electric motors -- do not anticipate a huge boost from expensive gasoline.
"I would not say the current rise in oil prices is affecting consumer behavior in Europe in any way -- not for hybrid or for anything -- yet," said James Rosenstein, European spokesman for Japan's Toyota Motor Corp., the hybrid market leader.
Toyota has sold more than 2,500 of its Prius hybrids in Europe so far this year, and could probably double its annual sales target of 5,000 if it had enough supply, Rosenstein said, stressing they performed as well as diesels and were cleaner.
Others were less convinced that hybrids would put much of a dent in demand for diesels, which make up more than 40 percent of the European car market and whose market share is rising.
"In the U.S., hybrids tend to be outstanding relative to their peer group in terms of fuel economy, but in Europe that is not the case," Lawson said.
Cheetham said hybrids may be big in Califiornia, but -- barring a major breakthrough in battery technology -- would never become a dominant force in Europe despite tax breaks that governments dangle to encourage their use.
"Nobody makes money. They are loss leaders. They are environmental halo products," he said.
Number-two U.S. car maker Ford Motor Co. is rolling out a hybrid SUV in the U.S. market, but not in Europe for now.
European driving habits are much different than those in America so that "hybrid technology does not represent such a clear-cut advantage over other technologies," it noted.
Still far down the road are fuel cell cars that run on hydrogen and emit only water. Great in theory, they still don't enjoy the economy of scale that would make them affordable, and require vast investment to set up hydrogen tanking stations.
"Delivering large amounts of highly compressed hydrogen through a new infrastructure is technically demanding and may not be all that safe -- it obviously has got to be safe enough for Aunt Agatha to do it -- and it implies massive investment by the oil companies who have absolutely no economic incentives to put themselves out of business," Cheetham said.
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=5331406
FRANKFURT (Reuters) - European car makers can afford a wry smile as they watch the uproar that rising oil prices and $2-a-gallon gasoline have triggered in the United States.
Europeans' preference for smaller autos and their embrace of fuel-sipping diesel engines mean high oil prices are not such a big deal for car shoppers, especially when high taxes mask the impact of price changes at the pump.
"Because gas is so expensive here anyway, Europeans tend to drive around in smaller cars. I really don't think it's a major issue," Stephen Cheetham, an auto analyst at Sanford C. Bernstein Ltd., said of surging crude oil prices.
Georges Douin, executive vice president at France's Renault, told Reuters last week that European manufacturers would escape damage given the popularity of diesel, plus new speed limits in some places that were limiting fuel consumption.
European car makers have been able for years to boost the average mileage that their fleets get while U.S. peers' performance has been flat or weaker as demand for heavy, powerful cars, trucks and SUVs goes up.
Worried by prospects for a tax on carbon dioxide emissions, European manufactuers are churning out fuel-efficient cars in a bid to boost their fleets' average to around 40 miles per gallon (5.9 liters per 100 km) by 2008 from some 28 now -- still a third better than the average for U.S. models.
"The rise in pump prices in some ways even helps them because it does refocus the consumer back on small engines. There has definitely been a trend to higher power outputs recently" in all big markets, noted John Lawson at Smith Barney.
Britain's Daily Mail screamed in a front-page headline on Wednesday: "The 4-pound ($7.38) gallon and it may get worse!"
High oil prices may one day make Americans think twice about buying gas-guzzlers, but U.S. sales of new cars -- even of most SUVs and trucks -- continue to rise, helped in part by robust incentives. May sales were the strongest in nine months.
Should this trend falter, much as the 1970s oil shocks cracked open the U.S. market for thrifty Japanese cars, European carmakers have strong products at the ready.
They are already trying to dispel the American stereotype of diesel engines as noisy, smoky and hard to start in frigid weather with a new generation of smooth-running turbo-diesels. Volkswagen AG, for instance, says diesels now power around 10 percent of the cars it sells in the U.S. market.
ENTER THE HYBRID?
Even makers of hybrid cars -- whose power plants combine standard internal combustion engines, batteries and electric motors -- do not anticipate a huge boost from expensive gasoline.
"I would not say the current rise in oil prices is affecting consumer behavior in Europe in any way -- not for hybrid or for anything -- yet," said James Rosenstein, European spokesman for Japan's Toyota Motor Corp., the hybrid market leader.
Toyota has sold more than 2,500 of its Prius hybrids in Europe so far this year, and could probably double its annual sales target of 5,000 if it had enough supply, Rosenstein said, stressing they performed as well as diesels and were cleaner.
Others were less convinced that hybrids would put much of a dent in demand for diesels, which make up more than 40 percent of the European car market and whose market share is rising.
"In the U.S., hybrids tend to be outstanding relative to their peer group in terms of fuel economy, but in Europe that is not the case," Lawson said.
Cheetham said hybrids may be big in Califiornia, but -- barring a major breakthrough in battery technology -- would never become a dominant force in Europe despite tax breaks that governments dangle to encourage their use.
"Nobody makes money. They are loss leaders. They are environmental halo products," he said.
Number-two U.S. car maker Ford Motor Co. is rolling out a hybrid SUV in the U.S. market, but not in Europe for now.
European driving habits are much different than those in America so that "hybrid technology does not represent such a clear-cut advantage over other technologies," it noted.
Still far down the road are fuel cell cars that run on hydrogen and emit only water. Great in theory, they still don't enjoy the economy of scale that would make them affordable, and require vast investment to set up hydrogen tanking stations.
"Delivering large amounts of highly compressed hydrogen through a new infrastructure is technically demanding and may not be all that safe -- it obviously has got to be safe enough for Aunt Agatha to do it -- and it implies massive investment by the oil companies who have absolutely no economic incentives to put themselves out of business," Cheetham said.
