Refreshing the Fleet -- How?

21 April 2004

Low-emission technologies, fuel-efficient engines, electric vehicles -- all are forseeable and almost tangible in many cases. But even if we had the bugs winkled out of all the new technologies, and even if we had an infrastructure to support them -- we still need to incorporate those new technologies into the fleet.

The fleet is the descriptor for the mass of vehicles in a specified region: national, state, municipal, corporate. The US fleet is large and growing. The problem of how to incorporate new technologies “into the fleet” is not trivial.

Certainly gas prices are one way. Recently some auto manufacturers have come out in favor of an increase in the gas tax rather than increased fuel efficiency regulations. Their stated rational is that they’d rather have customers clamoring for fuel efficient vehicles to mitigate their gas price pain than be forced by regulation to build fuel efficient vehicles which the bulk of buyers still apparently do not want. (See my earlier post on 1^st quarter sales in 2004.)

Let’s dig into some numbers. The US light duty vehicle fleet (passenger cars and two-axle, four wheel vehicles) was 221.8 million in 2001, according to the US Department of Transportation.

Growth has been strong. Here's a plot reflecting the last 40 years.

Additionally, we're hanging on to our cars longer than before, according to Polk Automotive Intelligence:

In 2003, the US purchased 16.7 million new cars and trucks, and probably will do about the same this year. As cars become more durable and reliable, we keep them active longer, whether new or used. The median age of 8.6 years in 2003 broke the record set the year before. As an expected corollary, the scrappage rate of cars is at an all time low (5.5% in 2003). Furthermore, the increasing age in the passenger car fleet also reflects a flattening of new passenger car sales in favor of the light trucks and SUVs. The popularity of those vehicles category pushes the median category age lower.

The net of all this is that -- absent some policy incentive to change -- it will take some time to refresh the fleet with the newest technologies. That’s the reasonable outlook.

It is time to be unreasonable.

I completely understand the manufacturers’ reluctance to be pushed into engineering and building vehicles for which there is little demonstrable demand. At the same time, the problems we face -- energy supply, climate change, health -- are real and pressing. Consumers need to buy the new technology, but the manufacturers need to have it. I do not think that we can wait for a more conventional demand cycle to take over. So regulations, yes.

At the same time, many consumers will need additional incentive to accelerate the purchase of a newer vehicle. That incentive could take a variety of forms, but would probably boil down to either an increased tax bite for hanging onto a less fuel-efficient, more polluting vehicle, or to some tax incentive for purchasing a more fuel-efficient, less polluting vehicle.

I’m leaning more toward a carbon tax on vehicles, but would love to have a discussion about it. In my experience, as your car ages, you end up paying a lower registration fee each year -- the fee is based on the value of the car. What if instead the registration fee was based on a factor of emissions and fuel consumption? The most polluting, most fuel-consuming cars would need to pay the highest fees. Change the baseline every year to reflect technology advances. We already have something along those lines with the gas guzzler tax -- just broaden it.