Thursday, May 21, 2009

The next couple of years will be the last time you can choose your own new car

The new fuel mileage standards the Obama administration has imposed on America will effectively take away your choice of which kind of car you'll be able to buy. Obama has ordered that you will now have one choice - small, and expensive.

The 39 mile per gallon standard for cars scheduled to take effect in just 7 years can now be met by just a handful of the smallest cars sold in America. Light trucks and SUV's will also have to average 30 mpg by these regulations, so truck buyers can also look forward to small, underpowered vehicles.

While large SUV's may still exist, they will have to be made extremely expensive to keep many Americans from buying them, or the automakers won't be able to meet their fuel economy mandates. So only Obama, Gore, and their friends will be able to afford them.

So if you want a decent car, you should buy your last one before they become unavailable.

The loss of freedom of choice, that is, freedom itself, due to these regulations is staggering. The so called free market is now the government controlled market for automobiles, which after housing is the single most important purchase most people make.

These regulations have a host of apparently unintended consequences. The first is a reduction in safety. Insurance statistics show that small cars have 2 1/2 times the fatality rate of large SUV's. Thousands of people are going to die as a result of these regulations. The number of people estimated to have been killed as a result of the 1970's CAFE mileage standards is over 60,000 people. That's in addition to the hundreds of thousands of additional serious injuries.

The shift to all small cars will also put the final nails in the coffin of the American auto industry. American producers have lost money on small cars for the past 40 years. They've managed to survive by making money on the large cars that will now be banned. Now they're being required to make billions of dollars of investment using money they don't have to produce cars that they will lose money selling.

There is no way they can be viable economic entities without outsourcing virtually all car production overseas. Even then, they won't be able to afford the investments required. So it appears the American auto industry may become the next Amtrac, a massively government subsidized business which will lose billions every year producing cars people don't want.

Ford, the last American producer not under government control, will eventually be forced into bankruptcy or it won't be able to compete with its massively subsidized rivals.

It will be interesting to watch the agonies of American politicians debating whether to subsidize companies which are shifting production overseas, or funding the huge losses they would incur by continuing to build small cars here.

Decisions about which specific cars to build, and where to build them, will no longer be based on economic considerations, but rather political decisions about which powerful members of Congress would benefit from the choices they, and not auto industry executives, will make.

Automobile manufacturing has been the single largest American manufacturing industry for close to a hundred years. The new mileage standards will substantially reduce the size of that industry in America. Any savings on oil imports will be offset by increased auto imports.

So buy your next new car while you can still buy a car you want. After that, the only choice you'll have is an Obamobile.

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