Automotive Purchasing Weekly 19 February 2015 - page 2

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E. & O.E.
The automotive industry has made incredible technological progress
since the last couple of decades; while some of this technology aims
to enhance our driving experience, some others focus on reducing the
impact that cars have on our environment.
Carmakers are constantly exploring alternative fuel possibilities for
mass market cars, and as a result we have cars powered by electricity,
hydrogen fuel cell (FCVs) and even by sea-water! So why are our streets
not full of these vehicles already?
This debate has three key players - the consumer, the carmaker and
the government. The switch from petrol or diesel to electricity or a hydrogen is a tough one
for consumers, which means that this will be extremely slow. Consumers are deterred by the
fact that there isn’t adequate infrastructure available to support the use of such vehicles.
Taking the debate further, there has always been a tussle between governments and
carmakers on this subject. While carmakers were always afraid to produce such vehicles for
the mass market due to lack of infrastructure, governments argued that there weren’t enough
vehicles to encourage investment to develop and broaden the existing infrastructure.
I have always felt that governments needed to take the first step to ensure that the
infrastructure existed to encourage carmakers to produce these vehicles and consumers to
buy them. And to my surprise, this week showed two instances where this has successfully
manifested in Japan and the United Kingdom.
While the UK government’s grants to consumers has significantly boosted electric vehicle
sales in the country, the Japanese government has partnered with Toyota, Nissan and Honda
to develop Japan’s FCV infrastructure.
This, in my opinion, is a great example of the role that the government can play in ensuring
the implementation of good environmental practices. While levying additional penalties on
high emissions is the easy way out, these countries went out of their way to ensure that
they incentivised the technology and developed the right infrastructure to nurture its growth.
Hopefully, the world follows their lead.
Trisha Chowdhury -
USwest coast ports facing imminent gridlock
The long-running impasse between waterfront employers and
longshore labour has disrupted global supply chains, including those
of the automotive industry says Sam Ogle.
It’s getting beyond a joke. Ports along the US west coast such as
Los Angeles, Long Beach and Oakland have been experiencing severe
delays since October due largely to lengthy labour negotiations
between dockworkers represented by the International Longshore and
Warehouse Union (ILWU) and the Pacific Maritime Association (PMA),
the group of ocean carriers and marine terminal operators which hires
longshore labour on the west coast.
Last week, the PMA called a halt to night-time and weekend working to avoid paying
overtime rates. The move followed an unsatisfactory response to what the PMA called its
“final offer” to the ILWU. The impact is being felt worldwide but particularly by supply chains
between Asia and the US.
Japanese carmakers are being forced to ship car parts to the US by expensive air freight,
to eliminate overtime working at some plants. Subaru, the fastest-growing brand in the
United States, said last week that it is paying an extra $60 million a month for air freight, the
cost of which is rocketing as the extra demand grows. Honda, which is cutting production at
six plants, and Nissan are also using air transportation and Toyota has cut back on overtime
at some of its factories.
Last week, the chief PMA labour negotiator warned that ports were just days away from
complete gridlock, which could result in port, and ultimately plant, shutdowns. Already, the
loading and unloading of cargo vessels has been suspended from last Thursday until today.
The gravity of the situation is not to be understated. Small business owners, unable to obtain
goods in time for long-planned merchandising programmes, are being particularly hard-hit.
Californian growers of fresh produce are starting to see it rot, trucking lines are doing less
business and companies are beginning to lay-off workers.
The answer lies with President Obama’s administration, which cannot afford to sit on its
hands and wait while the economy suffers. It must now step in and implement the Taft-
Hartley law of 1947, which restricts the activities and power of labour unions, as President
Bush did in 2002 when the ILWU called a strike. The consequences of doing nothing will
seriously harm US economic growth.
Sam Ogle -
Peter Wooding
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Talking Points
Thediesel backlashhasbegun
Is it acceptable to spend many years encouraging people to do
something, then stage a U-turn and tax them for following your
In the UK, successive Chancellors of the Exchequer (Ministers of
Finance or Secretaries of the Treasury in other countries) have pushed
people to buy diesel cars, from 1979 until 1997, by reducing taxation on
the fuel. It was typically 15% cheaper than petrol (gasoline) and in 2007,
biodiesel (and bioethanol ‘petrol’) was priced at 50% less than fossil-
derived fuels, to encourage customer switch-over.
These chancellors had cited the encouragement of heavy road transport and construction
as the reasoning behind keeping taxes lower on diesel fuel (off-highway and farming fuel has
always been effectively tax-free and retails for about 20% of road fuel).
But in 1997 a new Labour government came to power and Chancellor Gordon Brown
slowly raised the levy to bring it in line with the tax on petrol thus negating the cost advantage
and, due to the higher base stock cost, actually raising diesel prices to around 8% more than
petrol at the pumps. He did this because he saw the large take-up of diesel ownership as a
tax-raising opportunity.
The billions of euros spent on diesel engine development (most of this was done in
Europe, for the European car parc) started to look like a terrible waste of resources and, as
improving petrol engine technology brought fuel consumption almost into line with diesel
engines, so the mileage threshold for economically-viable diesel car ownership rose. Now,
it is calculated that, given the extra purchase and maintenance cost of running a diesel-
engined car, a car must run at least 30,000 miles before the diesel car ‘breaks even’ with its
petrol-engined counterpart.
And local councils in the UK, who had encouraged diesel usage by discounting parking for
low CO2-emitting cars (typically small efficient diesels), are now adding a hefty surcharge; an
extra 100% for many small diesel cars in the popular, mainly middle-class borough of Islington
in London. And why has this come about? Because the particulate and other pollutants of
diesel engines are being blamed for health problems among the cities’ populations.
Wouldn’t it be better for both the Chancellor and the councils to discount petrol car
ownership through lower taxes and parking charges? Don’t punish the drivers that were
led to buy diesel-engined cars now that the engine is seen as a dirty choice - reward the
new generation of high-efficiency petrol-engine owners - and encourage people to switch
through the carrot and not the stick.
Simon Duval Smith -
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