High Oil Driving Automotive Changes

By Allen Gibson

O lord, woncha buy mea hybrid reduced-emissions ve-hic-ule!

With oil touching $50 a barrel, as we predicted it might back in May, alternative-fuel and hybrid electric cars are once again looking more attractive as an alternative to a gas-guzzling SUV. Record gas prices slowed growth in consumer spending to a mere 1.6% annual rate in a 2nd quarter that Alan Greenspan recently called a soft patch. And auto sales were among the hardest hit. New incentives have driven up sales numbers for domestic makers recently, but have also eaten into corporate profits.

All this is good news for a fuel-cell industry which may finally be finding its feet, according to a new survey by PricewaterhouseCoopers (PwC) which says public companies in the fuel cell sector enjoyed a 20% increase in revenues in 2003 up to $243 million. For the first time in more than three years, revenues actually exceeded R&D spending. Market capitalization for the companies in the survey also increased, by 50%!, to $3.6 billion in 2003 outperforming the Dow Jones Industrial Average growth of 25% during the same time.

"While the financial results were mixed for 2003, there are encouraging signs that the industry may soon find its feet," says John Webster, co-author of PwCs 2004 Fuel Cell Industry Survey. "The next two or three years are critical for the sector to launch successful products, as micro fuel cells begin to trickle into the marketplace.

Micro fuel cells are widely expected to be among the big money winners in the industry, as consumers demand more power for their laptops and cell-phones. The military also likes the idea of more power with fewer batteries, and is funding extensive research as documented in our power tomorrows battlefield story.

Hybrid SUVs tomorrows dream car?

$50 a barrel oil today is not the disaster it once was for the economy.

Overall, our economy is far less energy dependant than it once was, as America has shifted away from manufacturing to more service industries. It takes around half the energy to produce a dollar of GDP today than it did 50 years ago, which means that todays oil price hasnt led directly to a recession, as it probably would have in the past. But on our nations highways, the hurt is more pronounced, and harder to avoid. Its good news, then, that on the vehicle front recent developments are making the economics of purchasing an alternative-fuel vehicle more attractive.

Congress in September passed a bill to restore the full tax deduction for alternative fuel and hybrid vehicles purchases. This year and next, buyers will continue to be able to deduct a full $2,000. from their taxes.

Hybrid sales are a bright spot for manufacturers. Every hybrid currently available has a waiting list of buyers prepared to purchase without even a test drive. And with Mays seasonally adjusted annual rate ( SAAR ) of vehicle sales of only 5.4 million, regular vehicle sales were at the lowest rate of sales since August of 1998.

Industry experts expect hybrid sales to accelerate sharply in the next few years. The reason? A flurry of new hybrid models, including pickup trucks and sport utility vehicles are just becoming available. And it may be the hybrid SUV that finally breaks into true mass-market appeal, as Americans seem unwilling to give up the size, style, and luxury that SUVs represent, no matter how high gas prices go, or how much emissions they pump into our air.

New Emissions Standards

California lawmakers just voted, unanimously, to demand much tougher emissions standards in vehicles. The new rules governing greenhouse gas emissions have already got automakers up in arms, and it is expected they will launch a lawsuit against the state, crying the rules will add $3,000. to the price of a new car, and that they do not have the technology to meet the requirements. Of course, the technology to get to the moon didnt exist either, when President Kennedy famously declared that America would go there by the end of the 60s.

The tough new rules may also be challenged by the Bush administration. Emissions standards are generally set by the feds through the EPA, but California has grandfather status because it began limiting emissions in the 1960s, before the EPA existed. And if California succeeds, other states, particularly in the Northeast corridor, are likely to follow suite, as they have the option of adapting either the federal or Ca. standards.

Allen R. Gibson

Allen R. Gibson has over twenty-five years of experience in media and corporate communications. He has been a reporter, television producer, and marketing communications consultant for public companies in both the US and Canada.