In the grand old days of the European auto industry, rival houses would battle for supremacy in endurance, road, rally and formula racing, the results of which were treated as far more important than (or, at least the basis for) such prosaic concerns as sales volume or profitability. In the modern era, this fierce competition slacked, as racing became about brand-building and competition moved into the arenas of sales and profits.  Now, however, a new competition has erupted between every brand with a presence in the European market, only this time participation is compulsory and the stakes are survival in a super-competitive, mature market. And neither speed nor endurance will win this race against time: only reaching an EU-mandated carbon emissions goal by 2015 will do.

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American auto enthusiasts often bemoan the lack of diesel options offered on the US market, looking to Europe as the promised land of oil-burning efficiency. But Europe’s love affair with diesel, which has been manifested in a 50%+ diesel sales mix for years, may be coming to a close. The WSJ reports

The European Commission–which has executive powers in the European Union–will propose to levy a minimum EUR20 per metric ton of carbon dioxide emitted on products like gasoline, diesel, natural gas and coal starting in 2013. But it will also propose adjusting the existing legislation by gradually increasing a minimum levy on the energy content of diesel to bring it to the same level as that of gasoline starting in 2018

Here’s the key: in addition to basing taxes on C02 emissions, the EU tax structure shift will result in fuel taxation based on energy content rather than volume alone. Accordingly, diesel’s higher energy content means it will see a more dramatic increase in taxation levels. And this single common-sense proposal is unleashing an intense debate in Europe about energy, taxation and the future of the auto industry.

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This is the first in an infrequent series of pieces that take a step back from breathless blogging. They look at a phenomenon over the longer term, they have more in-depth research, they are hence a bit longer. We will run them on weekends, when some may have the time for 1,200 or more words.

Imagine, if you dare, you live in China’s capital, Beijing. It’s a nice place, actually. The population of Australia crammed into one sprawling city. Good food. Nice people. Great nightlife. As cities go, it covers a lot of space. Beijing proper is a bit less the size of Kuwait.

Now imagine you have your eyes set on a new car. Chery QQ, Chevy Escalade, whatever. What do you have to do to get behind the wheel? You have to win the lottery. Not to buy the car, a QQ goes for a few grand. You need to win the lottery for the same thing that keeps felons employed back home: A small piece of blue and white tin, a license plate.

Your chances of winning are rotten. Imagine you go to Vegas, you put a chip on a single number. If that number comes up on the first spin of the wheel, you may buy a car. If not: Better luck next month, ta-dah!

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How things change in a few years! Just a few short orbits of the sun ago, automakers like GM were some of the biggest boosters of ethanol subsidies. Now, the Detroit News reports

The Alliance of Automobile Manufacturers – the trade association representing General Motors Co., Ford Motor Co., Chrysler Group LLC, Toyota Motor Corp. and eight others – opposes a bill sponsored by Sen. Tom Harkin, D-Iowa, that would require 90 percent of all vehicles to run on E85 – a blend of 85 percent ethanol – by the 2016 model year.

Shane Karr, vice president for government affairs, said the mandate “would cost consumers more than $2 billion per year” for flex fuel vehicles if automakers passed on the full cost “even though consumers will have little or no access to alternative fuels. Therefore, such a mandate is essentially a tax with little consumer benefit.”

In the face of this new opposition, the Renewable Fuels Association has even taken to employing the rhetoric of market economics to justify market-manipulating ethanol subsidies. And it doesn’t seem to be convincing anyone. If anything, Harkin’s bill may just hasten the death of existing subsidies, which are under pressure as both Democrats and Republicans seek to trim the federal budget.

The NYT reports:

The Environmental Protection Agency has revised its alternative-fuel conversion regulations for light and heavy-duty vehicles, making it easier for manufacturers to sell conversions that are compliant with clean-air laws. The 186-page ruling provides an exemption from a Clean Air Act prohibition against tampering when converting an engine to run on alternative fuel.

In the past, a manufacturer of alternative-fuel conversion systems was required to certify its products in the same manner that a vehicle manufacturer certified its vehicles — an expensive and difficult process. The new regulations provide a way to comply with clean-air standards through streamlined testing.

In essence, the rule change creates a graded compliance structure, depending on the age of the converted vehicle, making it easier to retrofit older vehicles. Read all about it at the EPA’s website.

Compared to March 2010, Ford enjoyed the greatest improvement in sales-weighted fleet MPG in the US market on an adjusted (EPA) basis. But the new king of efficiency, Hyundai, also saw its fleetwide efficiency improve, rising to 26 MPG, some 1.9 MPG better than the next closest competitor, Honda. No wonder the Koreans are the first (and only) automaker to disclose its CAFE fuel economy (as well as the first automaker to publicize the difference between CAFE ratings and the adjusted numbers you see here). For the first quarter of this year, Hyundai’s CAFE rating (as calculated by the automaker) stands at 35.8 MPG, with some 22 percent of its sales mix coming from vehicles rated at 40 MPG on the highway (28% for March). [chart courtesy of TrueCar]

Somebody must have slipped Fiat-Chrysler CEO Sergio Marchionne some Sodium Pentothal as an April Fools joke, as he’s just topped his previous high-water mark for ill-advised candor (set earlier this week). Automotive News [sub] quotes the feisty CEO admitting

The economics of EVs simply don’t work. On the 500 that (Chrysler) will begin selling in the U.S. next year, we will lose over $10,000 (per unit) despite the retail price being three times higher [than the gas version].

It’s been a bad week for the Department of Energy’s Advanced Technology Vehicle Manufacturing Loan program. First, the GAO slammed the program for weak oversight and a lack of performance metrics and professional expertise, and now the Center for Public Integrity and ABC News are unwinding a web of patronage that appears to be taking advantage of the program’s many shortcomings.

The investigation centers around Steve Westly, a fundraiser who “bundled” half a million dollars in donations to the Obama campaign, only to be given a spot on the DOE’s Energy Advisory Committee. From there, the CPI report alleges, Westly was instrumental in acquiring ATVM access for Tesla, a company that Westly sat on the board of from March 2007 until December 2009. Loans were given to Tesla when Westly was still serving on the board, and his firm, The Westly Group, has made millions on the sale of Tesla stock since the firm’s IPO. And it seems that most of the DOE loan recipients have some kind of connection to one Obama fundraiser or another, like John Doerr, who backs Fisker, another ATVM loan recipient. Meanwhile, smaller firms allege that their requests for loans were simply ignored, and with the GAO knocking the program for treating applicants “inconsistently,” it seems that some kind of favoritism is afoot. But then, isn’t that how Washington works?

A new report [full PDF here] from the Government Accountability Office tears into the Department of Energy’s Advanced Technology Vehicle Manuacturing Loan (ATVML) program, the $25b “retooling loan” package that was the subject of TTAC’s first-ever Bailout Watch.

Although the loans represent about a third of the $25 billion authorized by law, the program has used 44 percent of the $7.5 billion allocated to pay credit subsidy costs, which is more than was initially anticipated. These higher credit subsidy costs were, in part, a reflection of the risky financial situation of the automotive industry at the time the loans were made. As a result of the higher credit subsidy costs, the program may be unable to loan the full $25 billion allowed by statute.

Well, no wonder GM pulled out of the program… it and Chrysler were asking for more than the remainder of $25b would have supported anyway, so if there is actually less than $25b to be spent, the high road away from the “Government Motors” image makes a lot more sense. But a lack of available funding isn’t the only problem with the program…

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President Obama’s goal of having a million plug-in vehicles sold in the US by 2015, like almost every other political goal these days, has become a divisive issue. For ever American who sees it as a courageous step away from oil addiction or ecological disaster, another sees it as market manipulation or a fool’s errand. But like most political debates, the row over government encouragement for plug-in vehicles serves more as a venue for other political cold wars (typically global warming and fiscal policy) than as a way to move towards a sane, equitable strategy. And, argue to the authors of a report that points out the poor chances of success for Obama’s goal, the political discussion over EV subsidies will stay stuck there until we figure out a lot more about who buys EVs and why. The problem: there is no national demonstration program to collect the data on which a real conversation about EV subsidies could be based.

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From Hybrids and plug-ins to direct-injection and HCCI, a number of new technologies hold the promise of ever-cleaner automobiles. But what if, by solving existing pollution problems with these new technologies, we create new pollution problems? That’s what the Health Effects Institute’s Special Committee on Emerging Technologies (SCET) looked into in its “Communication 16,” titled The Future of Vehicle Fuels and Technologies: Anticipating Health Benefits and Challenges [via GreenCarCongress, PDF here]. The findings? Gas Direct Injection (GDI) may improve efficiency, but particulate matter (PM) emissions are still a serious concern. Urea exhaust treatment systems for “clean diesel” engines

gives rise to concerns regarding the formation of nitrogen-containing compounds, including nitro-PAHs, in emissions and possibly other toxic compounds.

EVs have their own issues, including electromagnetic field (EMF) radiation and the possible introduction of battery materials into the environment through production or crashes. Both fuels with more than ten percent ethanol (E15, E20, E85) and biodiesel (B20) have not been sufficiently studied for exhaust pollutants. And even in “regular” gas, the use of metallic additives has not yet been fully tested for health risks. As a result of all of these untested effects of new automotive technologies, the HEI’s Research Committee will begin study of tailpipe emissions from vehicles using GDI, Urea exhaust treatment and biofuels, and will also study the toxicity of lithium and other battery components used in hybrid and electric vehicles. hopefully they’ll find that the cure isn’t worse than the disease…

Having struggled to launch and expand its Smart brand, Daimler might be forgiven for being a bit gunshy about investing in brands other than its globally-recognized Mercedes-Benz marque. And it seems the German outfit is currently agonizing over not just one but two big brand choices on the opposite ends of the automotive spectrum. First, Auto Motor und Sport reports that Daimler’s bosses are still undecided about the fate of the über-luxury Maybach brand, noting

“We have to do this year, because the model cycle is not endless,”  Daimler CEO Dieter Zetsche tells Auto Motor und Sport. Here, the decision is open, even though the Maybach models are profitable. “I hope for a positive decision as long as we can create the proper conditions. We have invested heavily in the brand, but that is past. On the other hand, we now enjoy a very attractive profit margin on a per-car basis.”

If there’s one major challenge facing Maybach, Zetsche admits, it’s European emissions standards. Which is where Daimler’s other branding problem comes in…

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House Republicans took the first steps towards banning the EPA’s regulation of greenhouse gases, as the Energy and Power Subcommittee of the House Energy and Commerce Committee approved HR 910, the Energy Tax Prevention Act of 2011. In their statements today, Republican committee leaders cited rising gas prices and negative impacts on American businesses as the main reasons for attempting to strip the EPA of its ability to regulate emissions of

Water vapor, Carbon dioxide, Methane, Nitrous oxide, Sulfur hexafluoride, Hydrofluorocarbons, Perfluorocarbon and any other substance subject to, or proposed to be subject to, regulation, action, or consideration under this Act to address climate change.

Intriguingly, subcomittee Chairman Ed Whitfield’s statement [PDF] names a number of industry groups who support HR910, including the National Association of Manufacturers, U.S. Chamber of Commerce, American Farm Bureau Federation, National Mining Association, National Cattlemen’s Beef Association, National Petrochemical and Refiners Association, and the National Association of Realtors… but no auto industry group was named as a supporter of the bill (current regulation of GHGs only cover power stations and large-scale emitters). HR910 has been fast-tracked to the full Energy and Commerce Committee, which will begin hearings on Monday. According to Bloomberg, Senate Democrats are vowing to block the bill, arguing that Republicans attempts to link the bill to gas prices are misleading and that if passed, it would increase harmful pollution.

The Spanish government’s crusade against cars continues this week as the national speed limit has been cut from 120 km/h (about 75MPH) to 110 km/h (about 68 MPH). The Spanish government claims the move is temporary (they say it will last until “at least” June), and that it will save some 15% on the country’s fuel bills. The opposition reckons the number is closer to five percent, asking Autocar the rhetorical question

What next? Will the government make people go to sleep earlier to reduce their consumption of light?

Spain’s many high-quality roads and relatively low traffic have made it something of a motoring destination for Northern Europeans (especially the British), but since most European nations allow speeds of up to 130 km/h on their freeways, some of that cachet could well be lost. The opposition reckons the government reduced Spain’s speed limit as much to raise revenue as save fuel. Could losses in the tourism sector cancel any revenue benefits?

Gas prices are getting into the area where they affect consumers’ buying decisions. According to a new Kelley Blue Book study, more than 80 percent of car shoppers say that gas prices have influenced their buying decisions. 58 percent already have downgraded.  But what about switching to diesel or hybrid instead? Be careful when you do that, says Edmunds: Choosing a green alternative can cost you a lot of green. Read More >