A recent mini-scandal reveals what many drivers have long suspected: The gas mileage claims listed prominently on the windows of new cars can be overstated. Unfortunately, this may not be an isolated incident.
The acronym “EPA” is featured on the mpg ratings of new car stickers, but the Environmental Protection Agency does not conduct fuel economy tests on all vehicles. Instead, according to the Associated Press, how things work is that automakers do their own tests, and “the EPA enforces accuracy by auditing about 15 percent of vehicles annually.” Obviously, this system opens up the possibility that automakers could be inflating their vehicle mpg ratings, purposefully or “by accident.”
After receiving complaints from drivers about the fuel economy of the 2012 Hyundai Elantras, the EPA conducted an audit, which exposed the fact that the majority of 2012 and 2013 Hyundai and Kia models had inaccurate, inflated mileage ratings. For most of the affected cars, sticker ratings had to be lowered by a mere 1 mpg or 2 mpg. The Kia Soul Eco, however, is now rated at 29 mpg on the highway, down 6 mpg from the 35 mpg that used to be listed on the window. That’s quite a bump, one that’ll be noticed by drivers who take fuel economy into consideration when choosing a new car—and who doesn’t do so nowadays?
The average price of a new car has been climbing for years. Thanks to technological advances, better gas mileage, new features for comfort and safety, and higher production costs due to wage increases, inflation, and a host of other reasons, a typical new car today is selling for over $2,000 more than a year ago. Even as the mid-market vehicle creeps upward in price, competition at the far low end is heating up, especially in developing countries: Some new cars are expected to sell for under $5,000.
Before getting your hopes up, it looks like the cheapest of the world’s cheap cars won’t be sold in the U.S. anytime soon. Not too far off in the future, though, American drivers may get to test-drive and buy a car with a sticker price under $10,000.
Here are three automakers making news with plans to dramatically reshape the low-price car market:
Presidential hopeful Mitt Romney may be a Michigan-bred entrepreneur with a successful career in business, but the man knows little about the electric vehicle sector.
During his first debate with President Barack Obama, Romney labeled upstart automakers Fisker Automotive and Tesla Motors as “losers.” The commentary came as the Republican presidential candidate was railing against Department of Energy and other federal loans provided to green energy companies under the Obama administration, despite some of those loans being issued during the Bush administration. He specifically called out four companies as failures in the marketplace.
“You put $90 billion, like 50 years’ worth of breaks, into solar and wind, to Solyndra and Fisker and Tesla and Ener1,” Romney said to Obama. (Some transcripts have Romney saying “Tester” instead of “Tesla.”) “I mean, I had a friend who said you don’t just pick the winners and losers, you pick the losers, all right?”
“We don’t consider ourselves a loser having sold 1,500 cars already, raised over $1.2 billion of private equity and now expanding our export markets to GCC and China,” Fisker spokesman Roger Ormisher told Wired on Thursday. “We believe that is a quite an achievement for a small American business.”
Ford posted profits of $1 billion in its most recent quarter, but that’s down from $2.7 billion a year ago. That’s due to the slowdown in Europe, which is mired in bailout talks for countries from Spain to Greece.
Ford said it earned $1 billion in the quarter compared to $2.4 billion in the same period last year. While its core North American business continued to perform well, it reported a loss of $404 million in Europe.
The automaker now expects to lose more than $1 billion in Europe this year, as increasingly worse sales there drag down what is otherwise a turnaround.
‘The magnitude of this loss will be affected by a number of factors, including the overall economic environment, competitive actions, and Ford’s response to those developments,’ the company said in a statement.
European car sales have fallen to their lowest level in a decade, and most automakers are struggling with overcapacity there. Ford said the region’s problems are ‘more structural than cyclical’ and would not improve any time soon.
Ford’s chief financial officer, Robert Shanks, called the deteriorating market conditions in Europe ‘very, very serious.’
The company will cut production of vehicles in the third quarter in Europe, lay off temporary workers and slow the speed of its assembly lines, Mr. Shanks said at a news briefing at Ford headquarters.
But Ford is not ready to make major structural moves, such as closing a plant or cutting full-time workers in Europe. Mr. Shanks said management is considering longer-term plans ‘to address the situation.’
The bleak performance in Europe overshadowed Ford’s strong performance in North America, where it reported a $2 billion operating profit.
The company’s US profits remained strong ($2 billion in operating profits), which is an indicator of how the American economy has rebounded and how Ford has restructured to reduce its costs. However, it’s the problems in Europe that could spell trouble for US manufacturers in coming months as a slowdown there could affect exports and reduce demand for products, leading to another round of job cuts or production rollbacks.
Ford does appear to be in a strong position to weather its problems in Europe; it has $33.9 billion in cash and assets available, though the company admits that it didn’t anticipate how quickly the situation in Europe has deteriorated.
Cars are more expensive than ever, and experts say even higher prices are on the way.
The days of big cash-back offers and other incentives that automakers depended on to sell excess cars and trucks have gone the way of manual transmissions and roll-down windows.
“The industry has essentially cleansed itself of high incentives,” said Jeff Schuster, senior vice president of auto research firm LMC Automotive.
The deep cuts in production capacity during the restructuring of recent years, coupled with the recent rebound in demand for new cars from consumers, means that shoppers can’t find the deals they once did.
“You’re going to see pricing going overall higher,” said Jesse Toprak, analyst with sales and pricing tracker TrueCar. “The demand is higher and supply is more tightly controlled.”
TrueCar estimates the price of a typical car or light truck reached a record high of $30,748 in March, up nearly $2,000, or 7%, from a year earlier.
Prices have been steadily rising over the last three years, since sales and prices both plunged during the darkest days of the recession as General Motors (GM, Fortune 500) and Chrysler Group tumbled into bankruptcy.
“You’ll still see some summer sales, but we’ve been adding about $1,000 a year to prices over the last several years,” said Toprak. “There’s no reason to think that trend line is going to turn around, even if it slows down a little bit.”
Editor’s note: Jalopnik has started a petition urging the White House to require that automakers replace the “check engine” light with a display that tells you exactly what’s wrong. Here’s why.
By Jason Torchinsky, Jalopnik
It’s pretty easy to dismiss the “check engine” light as stupid, because it is. I suppose if you thought the smoke coming from under your hood had something to do with the floor mats, then, sure, the check engine light is handy. Beyond that, though, it is useless.
As it is, cars could, right now, do more than throw an error code at you. Cars have an advanced self-diagnosis system, but the results are not available to vehicle owners. You’ve got to pay a dealership or mechanic for those error codes and an explanation of what they mean.
This is absurd.