A friend at Ford Motor Co. told me cars are certain to get more expensive as automakers add technology to meet new fuel economy regulations. All the low-hanging fruit for fuel efficiency, he said, has been harvested. From now on, it's going to cost more moolah.
Well, I gave him a counter-argument: The automakers won't determine the price. The customer will.
And if a customer will pay $325 a month for a car, that'll be the price. Maybe the customer will settle for a smaller car or a slightly slower one. But the customer is not going to pay $500 a month just because the automaker's costs went up. The customer doesn't care about the automaker's costs.
Then another, more senior Ford friend walked by.
The winner, she said, will be the company that gives the customer the car he wants for $325 a month, without compromise. So we'd better come up with innovative ways to cut weight, cut costs and deliver the car the customer wants at the price he'll pay.
Who's right? We'll see.
A version of this column appeared on autonews.com last week. Here are a couple of responses.
-- CHRIS_LEMLEY wrote:
It is not a very smart question. To suggest that either customers or automakers on their own determine prices is simplistic and naive.
If an automaker's costs go up unilaterally, then of course that OEM is at a competitive disadvantage, and customers will migrate to companies with lower costs. But if the cost of new regulation affects all OEMs in a similar fashion on a unit basis, then customers will have to pay higher prices or keep driving their old rides -- unless manufacturers find other places to reduce cost.
-- ararebird wrote:
There will be US start-ups that aren't mired in UAW legacy costs that will fill the low end vehicle niche. They're out there in the aisles right now. We won't need China or India or Brazil.