Concept of Lexus LF-Ch.

The downfall comes into play when choosing the market for the vehicle. Unlike the HS 250h which was marketed in both Europe and the United States, the LF-Ch is aimed primarily at Europeans because Americans typically don’t like hatchbacks which the LF-Ch is. Then adding the fact that hybrid vehicles are typically more expensive and it is obvious that Lexus is hitting an uphill battle in regards to their American market.

Europeans are used to the higher priced vehicles, so there is more room for a luxury vehicle’s cost. Because Lexus is competing with a lot of the favorite diesel cars in Europe, they understood that they needed a unique approach to guarantee that their vehicles would sell. The answer came with the compact hybrid.

The fundamental issue for Lexus is finding a way to get into America. Because Lexus is typically more expensive to start with, then the hybrid component makes it more, and then Americans dislike hatchbacks.

Lexus is hoping that because the driving comfort of the hatchback appeals to city people, they might be able to sell the cars in an American market. In the end, though, it will require fine tuning of the price to ensure that it is set at the right amount. If Lexus charges too much, no amount of driving comfort will make it appealing to Americans.

The hybrid aspect is appealing to Americans and that may be the selling point. As much as the cost is higher than what people like, Americans are afraid of the constant fluctuating of oil prices and therefore are looking to buy hybrids in larger amounts because they want safety. So, Lexus may have a chance to sell a typically undesirable vehicle in a constantly changing environment.

‘Cash for clunkers’ effect on pollution? A blip

While the focus of the story is that this won’t do much for climate change, this is the piece that attracted my interest:

America will be using nearly 72 million fewer gallons of gasoline a year because of the program, based on the first quarter-million vehicles replaced. U.S. drivers go through that amount of gas every 4 1/2 hours, according to the Department of Energy.

In the context of the amount of gasoline we use – 140 billion or so gallons per year (a bit less now because of the recession) – this amounts to only 0.05% of our annual gas usage. Experts have suggested that making sure tires are properly inflated could save 3% on gas usage, or 60 times the amount saved by “Cash for Clunkers” if the majority of people are driving around on under-inflated tires.

So, for $1 billion invested in the program, a savings of 72 million gallons means we taxpayers paid $13.89 for each gallon of gasoline/yr saved. Readers know that I am a big fan of much higher fuel efficiency, but $13.89 to save a gallon of gasoline per year? While this benefit will be spread over several years of gasoline savings, surely we can do better than this.

Even if – as one reader suggested – those cars would have been on the road for another 10 years, you are still paying over a buck a gallon for the savings. No doubt that stimulus funds can stimulate in the short term, but what happens when the tax bill comes due? Will we look back on that as a wise use of those funds?

While in Europe

It is really a tale of two continents. In large parts of Europe, one can get along reasonably well without a car. In the past year, I have worked at my company’s Accoya factory in the Netherlands most of the time. I fly in to Amsterdam, and there is a train station right in the airport. I catch a direct, 1 hour and 15 minute train to the Arnhem Central Train Station. From there, it’s a 15-minute cab ride to my apartment. (If you want to argue that my international flights more than offset any fuel savings from biking to work, you won’t get any argument from me. But in this economy, you do what you have to).

I secured an apartment that is only about half a mile from work, and I adopted the common Dutch habit of riding my bike to work. I certainly don’t feel safe all of the time with cars whizzing past me, and at times it has been an inconvenience, but the vast majority of the time the bike suits me just fine.

As for the inconvenience, if I want to go out to eat, I am around a mile from the nearest restaurant. When visitors come over to the factory to visit, I often find myself riding the bike in the dark, to a restaurant that may be 3 miles from my apartment. That may seem like a piece of cake, but I have done it in the snow, in freezing rain, and with a fierce wind in my face. It would certainly be more convenient to hop in a car and go.

The worst inconvenience to date was when I had a bad cold, and my secretary made me a doctor’s appointment on short notice. I hopped on my bike and rode a mile and a half in a freezing downpour. I could have probably bothered someone to take me, but I really try to be as low-maintenance as possible.

I do have other options, and I utilize them. There is a bus stop near my apartment, and I use it quite a lot. During the day the bus comes frequently, but later in the evening it only runs once an hour, and then stops altogether at about 10 p.m. (Incidentally, I learned one night while waiting for a bus at 10 that’s when the prostitutes come out and take over the bus stops).

For trips of intermediate length, a cab is another option I utilize from time to time. When I fly home, I have to catch a train at 6 a.m. That’s always a cab ride to the station. If I want to travel to another major European city, the train connections are superb. However, if you want to venture out into the countryside, it may be more difficult. My son wants me to take him to Normandy this summer, and that’s almost impossible to do without a car because the major points of interest are scattered over several miles, and there aren’t easy train connections to my knowledge. So this summer I expect to rent a car in Europe for the first time.

Meanwhile, Back in Texas

But as I said, it is a tale of two continents. When I fly back to Texas, it is hard to do without a car. I fly into the airport, and the first thing I have to do is catch a cab for the 35-mile drive to my house.

I bought a house 25 miles from my Dallas office, because 1). I hate cities, so I chose a house in the country; 2). I knew I wasn’t going to have to spend that much time in the office. 3). Because the housing bubble was imploding, I got a builder’s foreclosure for about half the appraised price. If I had to make that commute every day, I would have sucked it up and bought a house closer to the office, preferably close to some kind of public transportation. From where I live, public transportation isn’t an option, so I rent a compact car when I have to be in the office, or borrow my wife’s car if the kids are out of school.

How long can I keep this up? To be honest, I never thought I could keep it up for over a year. My initial assignment involved several straight months in the Netherlands, and I thought I would have to buy a car when I returned. But every time I do a cost benefit analysis, I can never justify it when I only need it one or two weeks a month. I have no registration fees or maintenance to pay, and I don’t have to keep insurance on it, because my insurance company covers me for a car rental at no extra cost. In the past six months, I have spent a total of $825 on car rentals. I don’t think a car purchase makes economic sense until I find myself spending 3-4 times this amount over a six month period. Given my current work arrangements, that is unlikely to happen any time soon.

Besides, I like the idea of living without a car. I will continue to put it off as long as possible, even if it occasionally means riding my bike to the doctor in the freezing rain.

Footnote

On an unrelated footnote, the 2009 EIA Energy Conference takes place on April 7th and 8th. The conference is free, so feel free to drop by if you are in the area. There are a number of topics that look interesting, including the following two plenary talks:

Energy and the Macroeconomy – William D. Nordhaus, Sterling Professor of Economics, Yale University

Energy in a Carbon-Constrained World – John W. Rowe, Chairman and Chief Executive Officer, Exelon Corporation

There are also a number of panel sessions, including:

The Future for Transport Demand

What’s Ahead for Natural Gas Markets?

Meeting the Growing Demand for Liquids

Financial Markets and Short-Term Energy Prices

Investing in Oil and Natural Gas – Opportunities and Barriers

I have been asked to participate on the panel Energy and the Media. The other panelists are Steven Mufson from the Washington Post and Eric Pooley from Harvard University (who was also former managing editor at Fortune). Mufson is the main energy reporter for the Post, and I think he does a good job of reporting the important stories. I have read a lot of his work, and have spoken to him on at least one occasion. Then there’s me, the energy blogger. Please humor me and let’s not play the game “Which One is not Like the Others?” :-)

Here’s where I could use some assistance. I have a general idea of the themes I would like to explore. Namely, I want to discuss the amount of energy misinformation, which I think stems from some reporters really not having the background to know when they are being misled. We as a nation have a low energy IQ, and that creeps into many of the stories in the media. The TDP fiasco is a perfect example. Had the reporters dug a bit more and been more critical, it would have been another possibly interesting next generation fuel experiment, instead of something that ultimately had a lot of taxpayer money thrown at it.

But what else? What other themes should be examined on a panel entitled Energy and the Media?

However, I want to call your attention to a new website that discussed solar thermal in depth. The site just went live, and the topic is covered in detail. The site is:

http://www.solar-thermal.com/

I have always found the prospect of solar energy very attractive. In fact, I once accidentally started a fire while playing around with solar energy. However, I must admit to being surprised that the recent IEA report projected that both solar PV and solar thermal technologies will still be very expensive relative to other renewable electricity options in 2030. (See the figure that I posted here). I certainly know that each time I look into getting a solar hot water heater (which really appeals to my environmental side), my inner tightwad balks at the cost.

Car Update

And speaking of inner tightwad, I still haven’t bought a car. I have been without one since March, only renting one for a week or two at a time while in Dallas. After weighing all of the various suggestions, I had narrowed my choice down to a small truck like a Ford Ranger (which I have owned before) or a Toyota Tacoma. I don’t need to haul stuff very often, but two or three times a year I find myself needing a little truck.

But I have run the numbers several times, and I keep coming up with a cost of ownership in the $500 month range (includes taxes, insurance, maintenance, and depreciation). For the month of December, I only need a car for 4 days (this week in fact) and it will cost me less than $150 (and my insurance company covers me for no extra cost). Until I am spending more than two weeks a month in the U.S. on a regular basis, I think I can justify continuing to rent.