Irrational Pessimism & Small Cars?

Gasoline is now around $4 per gallon. Full size SUV sales fell 26.9% between January to April 2007 compared with the same period in 2008. Likewise, compact car sales increased 36.7% in that same time frame. Does this make sense?

Assuming annual mileage of 15,000 miles and $4/gallon of gasoline, here are the operating costs of two hypothetical vehicles:

The more economical car would save $2,000 per year ($167/month). If mileage were reduced to 10,000 miles per year, here’s the difference:

The fuel sipper would save $1,332 ($111/month). Is it worth the extra cost of buying/trading into another vehicle that gets better mileage if you have to pay more for it?

It only makes sense if the fuel savings is not exceeded by the increased cost of the car. In other words, you’re not better off if it costs another $200/month to buy a more fuel efficient vehicle and you only save $150/month in fuel.

Compared with car prices ($16k to $22k for new small cars let’s say) it seems a lot of buyers are not going to save money if they’re switching vehicles purely on financial grounds – unless fuel prices continue skyrocket. Then again, people who bought gas-guzzling SUVs probably weren’t rational to begin with.

The fact that the market for small and large vehicles has changed so quickly in favor of smaller cars indicates that buyers are pessimistic, and the market believes fuel prices will continue to rise, much like when snow starts to fall, milk and bread start flying off the grocery store shelves.

F1: French Grand Prix

Qualifying

Not that interesting of a session other than the unofficial rule (?!) that cars cannot put all 4 wheels onto the green strip approaching the finish line. Apparently drivers (e.g. Bruno Senna in GP2) are using the last lap of their sessions to gain a time advantage by passing the line there without slowing down, and risking impact with the wall.

How silly is this? If it's been a problem for over 15 years then either move the finish line further up or extend the wall back like Montreal's "Wall of Champions" to discourage such driver behavior. It's not that hard to change.

The other item from qualifying is that "Quick" Nick Heidfeld now appears to be just Nick Heidfeld. He didn't do too well and ended up 12th, and has struggled mightily to keep up with his teammate.

Race

The Ferraris were in a league of their own with Kimi Raikkonen leading Felipe Massa from the start, and probably would've finished that way instead of vice versa but for Raikkonen's exhaust breaking, slowing the car.

Jarno Trulli did well to bring the Toyota home 3rd after all the dicing he had throughout the event with Fernando Alonso, Heikki Kovalainen, and Robert Kubica. His race engineer also wins the award for "Most Obvious Advice" over the course of the season thus far, with gems like "Push! Push! Kovalainen is right behind you!"

Nelson Piquet finally started turning his season around. Qualifying wasn't great but he managed to finish the race ahead of his teammate and both were in the points.

Lewis Hamilton started 13th due to his 10 place penalty for causing the pitlane accident in Canada. His driving on this day can best be described as ragged, bumping his teammate in the early laps, missing the chicane when passing Sebastian Vettel (and earning a drive-through penalty for it), consistently locking the left front at the 180 hairpin, and generally sliding all over the road. He's a fast driver with good luck but has a tendency to compound his problems when things aren't going well.

Between the struggles of the two McLarens today, team principal Ron Dennis was sweating like a SWAT team bomb technician on the job.

Kovalainen also made a great move by going around Piquet at the pit exit. Surprisingly, he wasn't penalized for it as he crossed the white line to the right of the lane. This is something that has been enforced further up the exit "ramp" let's call it, but circumstances might have required such a move.

Honda has had the same story every year for about the past 2 years, no improvement. Ferrari is now well clear of its rivals in the Constructors Championship and Massa leads the Drivers Championship, with Raikkonen third.

Lithium Ion Knocking On the Door

It looks like lithium ion will be mainstream early next decade. Toyota already has a team looking for post-lithium technology, plug-In vehicles from OEMs will start coming on line around 2010 (Toyota, GM, Nissan, Mitsubishi, Nissan/Renault, etc), and a bunch of players are positioning themselves for when automotive Li-Ion batteries are big time. Note to industry: Make sure to build a recycling infrastructure as well.

Automotive News reported this week Bosch and Samsung have formed a joint venture to make lithium ion batteries for hybrid vehicles. The plan calls for investments of $20 million initially, and an additional $500 m over the next 4 to 5 years. The goal is to eventually capture 30% of the hybrid vehicle battery market.

The location for a plant has not been decided, though the plan is to initially produce battery cells and power packs by 2011.
Samsung presently makes li-ion batteries for computers and consumer electronics.

Front Camera System

Another step in the direction of autonomous vehicles. Next year GM Europe will launch a front camera system that can read road signs and help detect when the vehicle is drifting from its lane. The system works at 30 frames per seconds and can read signs up to 100 meters away. That means that at 100 km/h (62.5 mph) it can "see" about 3 seconds ahead.

F1: Canadian Grand Prix

Qualifying

The rule that does not allow teams to have spare cars needs to be changed. As Steve Matchett on Speed TV says, it doesn't save the teams any money and just prevents teams from going on track if there is trouble with a driver's primary car.

Jarno Trulli spun a whole bunch of times. The track is falling apart but.... he's spinning more than everyone else.

The pole lap was really amazing at the very last minute. Lewis Hamilton was really on it. Hamilton's driving reminds me of Michael Schumacher's driving circa 1994. He can pull off a fast lap when it counts, though he still stuffs it off the road more often.

Just thumbing through the April 1991 issue of Automobile Magazine (I have an extensive collection). There was a list of the F1 teams competing in 1990. There were 19! Only six of those teams are still with us in one form or another (Ferrari, McLaren, Williams, Benetton, Minardi, Tyrrell). Now there are only 10 teams total. Sure the sport's grown tremendously, but there needs to be more teams and cars on the grid.

Race

Wow. This race is nuts, and still going on. Felipe Massa has just made an awesome pass at the hairpin where we went by both a Honda and the McLaren of Heikki Kovalainen.

Anyway, the start was good and clean. The track has been falling apart this weekend, but so far so good. Nelson Piquet still making mistakes but looking a little more competitive. Don't know what happened to Alonso. Maybe he made a mistake, maybe his gearbox broke while chasing Nick Heidfeld.

Bonehead move of the race goes to Lewis Hamilton who took himself and Kimi Raikkonen out when he rearended him at the end of the pitlane. Lewis is fast (really fast) but he still makes a lot of mistakes. This one is being investigated by the race officials. He deserves a penalty for this.

But also, the rule should be changed or the FIA should come up with a better alternative than stopping race cars at the end of the pitlane during the safety car period.

Next, it seems to me Nick Heidfeld might have let Robert Kubica by at turn 1 because he had already made all his pitstops and Kubica needed to make another stop (thus was faster because of his lighter fuel load). If I were making the call, I'd have used team orders to let Kubica by.

Heikki Kovalanen not doing so well. He's been about as low key lately as Nick Heidfeld, and that is the last thing he needs considering his team mate Hamilton is leading the championship.

Hard to believe Massa didn't get his full fuel load during his first stop and had to make a second one. Sheesh. And then Kazuki Nakajima had awful bump into the pitwall when his broken front wing went under a front wheel and he lost steering.

Well, between Hamilton and Raikkonen the two of them look to be making this championship a matter of who survives their mistakes the best. Maybe Kubica will take his first win, take the points lead and not look back. BMW is definitely coming on strong. Maybe not the pace just yet, but the total package seems to have the potential to do so.

In the closing laps Kovalainen's right front wing looked a little flimsy through one of the chicanes. Kubica wins his first race and BMW's first as a constructor. And Heidfeld was second with David Coulthard 3rd! Never thought he'd ever get there again. This was a great race!

Steel Prices Rising Rapidly

Automotive News reported huge increases in steel prices, as well as those for aluminum and platinum (used in catalytic converters). The article says:

Steel prices are up roughly $500 per vehicle since January, says analyst John Hoffecker of AlixPartners LLC. According to the American Iron and Steel Institute, the average car contained 2,400 pounds of steel last year, while the average pickup or SUV contained nearly 3,000 pounds.

As previously mentioned, the best way to combat the risk of rising commodity prices for manufacturing vehicles is to use less material. Next best is probably to use a variety of materials to further hedge against runaway price increases of any one particular material, though if they all trend up then the creek still gets further and the paddle gets smaller.

If about 1/4 of the steel used to make cars now is eliminated by building lighter cars, the average cost increase since January would be about $375. Sure, a 25% reduction would be a lot but any manufacturer that could do that would have a significant competitive advantage, not only on the financial side but the cars would probably do a lot better in the marketplace as well due improved fuel economy and the very real possibility of better performance.

Power of DC

On Saturday I took my electric kart to the Power of DC event in Hagerstown, Maryland. The event was an electric car show and autocross. The cars there were mostly conversions of existing vehicles (Ford, VW, Porsche, pick ups, even a Fiero and a DeLorean) as well as a few ‘specials’ like a trike scooter.

It was amazing to see the work that so many people have done on their own, and the different ways they did it. Much of the talk was about battery technology. Most people seem to be waiting on better batteries. Performance is good but the range is still far from being competitive with gasoline.

My favorite car there, a Detroit EV roadster kit car, didn’t run as it was completed the night before and had some teething troubles with the drivetrain.

After the rain (it rained from the time we started until near the end of the day) I took the kart out and did a few runs. Lots of fun. Anyway, I hope someone took pictures (I didn’t) and will post them soon. Here’s the site, which also has pictures from years past:

http://www.powerofdc.com