How to Fix the Auto Industry

tesla Exhibit A:  The Tesla Model S

There’s a lot of talk these days about how to fix the U.S. auto industry.  It’s a tough problem to solve because the industry is such a big part of our economy — we’re talking about millions of jobs and hundreds of billions of dollars of GDP.  But the big automakers are so bloated and broken it’s hard to see how they get fixed without becoming a lot smaller.

I’m a firm believer that the only sustainable way to grow a business or a whole economy is through innovation and entrprepreneurism.  Create new technologies, products, and services that provide real value to consumers (and capture their imagination) and you’ll stimulate spending and create new jobs.  The good news is that this is what America is best at.  It’s why we have the world’s most powerful economy.

The bad news is that the U.S. auto industry is the exception to this rule.  Case in point:  I’m in the market for not one but two cars right now, but there’s not a single vehicle out there that provides the combination of design, utility, and fuel economy that I’m looking for.  I’ve talked to lots of other folks that feel the same way.

Thank goodness for Silicon Valley…

So how do you fix the auto industry?  Allow me to submit Exhibit A, the Model S from Tesla.  It’s an all-electric 4-door sedan that will do 0-60 in 5.6 seconds and has a 300 mile range.  The base price is around $50,000, but the fuel cost will be about one tenth of a comparable gasoline-powered sedan.  For a typical 12,000 mile a year driver this translates into about $800 a year in fuel savings.

The only problem is that the Model S won’t be available for another year.  But that hasn’t stopped over 500 people (in the first week alone) from paying a $5,000 fee to get on the waiting list.  If Tesla’s claims are accurate, this car will be a hit and their biggest problem will be production capacity — which, ironically, is one thing the big auto makers have in spades.

Our country is struggling with lots of big economic issues:  Failing industries, rising unemployment, dependence on foreign oil, a growing national deficit.  I’m not saying that Tesla Motors is the solution for any of these problems, but it’s a metaphor for the type of forward-looking, game-changing moves we should be making to get our economy back on track.   I’d rather invest my tax dollars in defining the future of the auto industry rather than salvaging the past. 

Why can’t the U.S. become the “Saudi Arabia” of alternative fuel and the “Apple” of automobiles?

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3 thoughts on “How to Fix the Auto Industry

  1. Pingback: Exhibit B « Finding Balance

  2. A couple of problems with the Tesla S. First Elon Musk’s first Tesla roadster is going to cost over $100K, and the range in road tests has been about half of what’s advertised. Second the price since deposit has jumped significantly, and items that were listed as “standard” originally are now expensive options.

    The “quick charger” is now $3000. Without it, the roadster takes over 30 hours to charge.

    On top of that, while the electric car is very efficient, coal power production has roughly the same efficiency as the modern gasoline engine. Gasoline engines also don’t produce the mercury that coal plants (~70+% of US electricity) produces.

    here’s my take on the REAL future:
    http://automobiles.honda.com/fcx-clarity/

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