Archive for May, 2010

No doubt Americans love their SUVs. SUVs have now replaced the mini-van and station wagon as the preferred family vehicle. SUVs are a favorite for those who need the extra cargo space for business and pleasure, or for those who just like driving big, muscle machines.

Chevy Tahoe Hybrid

Until recently, SUVs have also been known as major gas-guzzlers. SUV drivers have traditionally sacrificed serious cash at the pump in exchange for extra room and brawn. However, a wide variety of hybrid SUVs are available now that make it easier for you to live the great American green dream.

There are three major reasons why you should consider a hybrid SUV. The first and most obvious reason is to save money on gas. Hybrid SUVs use 25-50% less gas than their non-hybrid counterparts on average.

It is important to note, however, that the amount of fuel saved in a hybrid SUV depends on how you drive it. Hybrid vehicles achieve maximum fuel efficiency with a light foot on the gas pedal and on the brakes. If you drive hard and fast, you will lose most of your fuel saving potential. If you accelerate and brake smooth and easy, you can often get greater fuel savings than the EPA mpg rating for your new hybrid SUV.

While most hybrids cost a little more upfront, the overall payback period in fuel savings can be significant. This depends, of course, on the model you choose and on the current price of gas. For a 2010 Escalade Hybrid, for example, the current payback period is as short as two months. For other models, the payback period can be longer, but this assumes that the price of gas will remain steady at $3/gallon for years to come. Given current oil industry developments and projected petroleum supply, this is obviously a faulty assumption. If you plan on driving your new SUV for three years or longer, invest now and save later.

The second and less obvious reason to invest in a hybrid SUV is for the health of you, your family, and your community. Full hybrid SUVs come with an automatic start/stop function that turns off the engine when you come to a stop or when traveling at low speeds. The engine kicks back on when you accelerate. This means that you and your children can breathe easy when idling, or cruising through a drive-thru or school pick-up zone, instead of inhaling toxic fumes from your SUV’s tailpipe.

The third reason why you should consider a hybrid SUV is that these cars deliver on power just as well as the non-hybrid versions. The 2010 Chevy Tahoe Hybrid I test drove this past week, for example, has a V-8 engine that delivers 332 horsepower  and 367 pounds of torque.  This baby had no problem strategically jetting through aggressive New York City traffic or merging onto speeding highway traffic. This is quite significant, given that the car weighs almost 6000 pounds.

Finally, being a hybrid SUV driver is just plain cool. You get the space you need, the mpg you want, and thrill of electric drive as you cruise down the boulevard. Driving a hybrid SUV means you don’t have to sacrifice performance for efficiency. And it shows that you care enough to make intelligent choices when it comes to your wheels.

Dr. Shannon Arvizu is a clean tech educator and consultant in the transportation industry. You can read more at MissElectric.com.

In time, this may become known as the worst deal of the century.

Toyota and electric car maker, Tesla announced yesterday a new partnership to develop electric vehicles and the necessary engineering and manufacturing support to back them.  As part of the deal, Toyota will purchase $50 million of common stock in Tesla as soon as the fledgling automaker goes public.  Tesla also takes over Toyota’s recently shuttered NUMMI manufacturing plant in Fremont, California for an undisclosed sum.

This is great news for Tesla.  But what’s not clear is why Toyota would agree to such a hugely lopsided deal.

Akio Toyoda and Elon Musk pose with California Governor, Arnold Schwarzenegger at a press conference Thursday (Photo: SF Chronicle)

Tesla has burned through $236 million in capital since it’s 2003 founding.  The Silicon Valley automaker has so far delivered about 1,100 of its $109,000 Roadster electric sports cars and hopes to produce its next vehicle, the Model S electric sedan, by the end of 2012.  Tesla also qualified for $465 million in federal loans last year to be used to purchase a factory and get the Model S to market.

The new deal gives Tesla a fresh infusion of capital and a deal to produce a Toyota-branded vehicle with a Tesla electric powertrain by 2012.  This gives the young automaker a vote of confidence from a major global player and a steady stream of revenue until the Model S comes to market.  Investors will no doubt be salivating in anticipation of the IPO.

Tesla also receives a modern factory with a trained workforce that’s eager to return to work.  Tesla has never manufactured a vehicle from scratch – the Roadster’s chassis and body is built by Lotus Cars in England – and Toyota will supply critical engineering support to get the two new models to market.  Toyota’s manufacturing expertise will allow Tesla to overcome an enormous hurdle that may have otherwise delayed the introduction of the Model S by many months.

Global recall scandal notwithstanding, Tesla also stands to benefit from Toyota’s reputation for quality and efficiency.  And since the Toyota-branded product will launch first, Tesla has time to iron out the kinks in their processes before the Model S comes to market.

The Tesla Model S on display next to the company’s $109,000 Roadster

But why would Toyota willingly enable a competitor with such a generous offer?

From a dollars and cents standpoint, the Japanese automaker will gain virtually nothing from this deal.  Toyota saddling up to Tesla is the automotive equivalent of MIT developing curriculum for the University of Phoenix.

Toyota does not need Tesla’s help to develop electric vehicles.  They’ve already proven their basic competency with the RAV4 EV of the 1990’s and are the undisputed market leader in gas/electric hybrid technology.  Toyota also has a joint venture in place to produce battery packs with Panasonic and has shown working prototypes of plug-in hybrids and hydrogen fuel cell vehicles.

Put simply, Toyota already knows how to work magic with electrons.

Is this partnership perhaps motivated by guilt from shutting down the NUMMI plant earlier this year?  Toyota CEO, Akio Toyoda reportedly met with Tesla CEO, Elon Musk for the first time six weeks ago, right around the time the NUMMI closed its doors.  Toyoda, himself, apprenticed at the NUMMI plant years ago and said that he, “learned much about working in America (there) so I feel a personal attachment to the plant.”

Though the CEO is obligated by Japanese business culture to provide for his workers, he must know that a niche manufacturer like Tesla is only capable of hiring a handful of the thousands of workers who were laid off at NUMMI.

The truth may be less about money and more about company culture.

Since coming to power in June of 2009, Toyoda has made it clear that he is unhappy with the trajectory established by his predecessor.  He berated his senior managers for allowing the company to grow too quickly, sacrificing quality and customer satisfaction along the way.  Weeks later, Toyota was drawn into a global recall scandal that has so far affected over 9 million vehicles worldwide.

The partnership may signal the fresh direction that Toyoda has been seeking.  The San Francisco Chronicle reports that Musk and Toyoda spent their time together talking and driving around Los Angeles in a Tesla Roadster.  It was a pivotal day for Toyoda, who said, “Simply put, I felt the wind, the wind of the future.”

“He really sees value in understanding how a fast-moving Silicon Valley startup operates,” Musk revealed of Toyoda. “He’s sort of looking at this and saying, ‘We need to go back and remember what it’s like to be a startup.’”

In a press release, Toyoda referenced his own company’s roots and said that by partnering with Tesla, “my hope is that all Toyota employees will recall that ‘venture business spirit,’ and take on the challenges of the future.”  But if a startup spirit is all that the CEO is in search of, why not just hire some senior managers from Silicon Valley and allow employees to wear jeans every day?

The partnership instead removes an enormous barrier for Tesla, teaching them world-class techniques for how to build cars with impeccable quality.  The student will quickly become master and may soon threaten its own teacher.

For Mr. Toyoda’s sake, let’s hope that the inspiration he feels from this deal will translate to his own company’s products.

It’s a plot worthy of Hollywood: an estranged science fiction writer threatens to derail a quirky industrialist’s plans to design and build electric vehicles.

In the high stakes world of Tesla Motors CEO, Elon Musk, this is reality.  Musk has been involved in bitter divorce proceedings with his wife, Justine, an LA-based author for several months now.  At stake in the divorce is $465 million in government funding that Tesla Motors needs to continue development of the Model S all-electric sedan and to keep their initial public offering on schedule.

Musk is one of the wealthiest Americans under the age of forty with a net worth in excess of $300 million.  He co-founded PayPal and made an early fortune when the business was sold in 2002 to eBay for $1.5 billion.

Musk is best known today as the CEO of Tesla Motors, which manufactures the nation’s only highway-legal, no-strings-attached electric vehicle, the Tesla Roadster.  He is also the CEO and CTO of SpaceX, a commercial space exploration company that holds a $1.6 billion contract with NASA to send low-cost rockets to the International Space Station once the Space Shuttle is retired later this year.

Musk also starred across Robert Downey Jr. with a cameo in Paramount’s Iron Man 2.

Justine Musk has requested 10 percent of her husband’s stake in Tesla Motors as part of the divorce.  But according to Tesla’s filing with the Securities and Exchange Commission, the company could be in default of the $465 million loan if Elon Musk does not continue to hold a minimum amount of stock.  Such a move could require Tesla to modify the terms of its loan and delay plans for an initial public offering.

It is unclear how much stock Musk currently owns because the company is privately held and does not disclose information on outstanding shares.  Spokesperson Ricardo Reyes said that Tesla is not planning to change its IPO filing statement at this time.

In addition to the stake in Tesla, Justine Musk is also requesting 5 percent of Elon’s stake in SpaceX, $6 million in cash, alimony, child support, the couple’s Bel Air home, and a brand new $101,500 Tesla Roadster.  “I really, really want one…” she explains on her personal blog.

At $66,000 CAD, this may have been the most expensive tire change in history.

Madeline Leonard walked into Mazda of Orangeville in Ontario, Canada wanting to replace the tires and inspect the transmission on her 2004 Mazda 3.  Instead, she drove off hours later in a 2010 Mazda 6 sedan that cost her $45,846 CAD, plus thousands in dealer extras.  Finance costs for the 8-year loan would total another $16,000 CAD thanks to a 7.4% interest rate and a final balloon payment of $7,000 CAD.

PHOTO: Steve Russell / Toronto Star

Leonard is intellectually disabled and suffers from osteoarthritis, fibromyalgia, depression, and anxiety.  She claims that she was “on a lot of medication” while at the dealership and that she was unable to concentrate on the deal being offered.  (She also must have missed our post about how to determine whether a deal is fair or not.)

“He started pointing here and said initial this, initial that, sign here,” Leonard said of her salesman, Mohammed “Moe” Shaikh.  “I wished I had never walked into the place,” she added.  “I’ve had a lot of trouble keeping up with these payments. The stress has been terrible.”

Leonard’s loan is structured with biweekly payments of $319 CAD, a tall order considering that she is on disability and has a fixed income of less than $1,900 CAD per month.

The business manager who helped create the lopsided deal, Kien Trung, told the Toronto Star that Leonard was treated fairly.  “We didn’t do anything wrong in the case of this transaction,” he said. “We made a little bit of money on the deal. I guess she was not happy with it.”

“The deal was way over the top regarding pricing,” remarked Carey Smith of the Ontario Motor Vehicle Industry Council, the agency that took Leonard’s case.  Their investigation found that the car’s value was closer to $40,000 CAD and that the salesperson had lied about the car being new when, in fact, it was a used demonstrator vehicle with about 3,700 miles on the odometer.

Sunny Bains, the owner of Mazda of Orangville, has since fired the salesman and the business manager and has pledged to make things right for Madeline Leonard.  “She has been contacted, and we are going to take the car back and pay her the money, whatever she paid,” he told the Toronto City News.

Shaikh and Trung are not off the hook, though.  The OMVIC has charged both men with, “engaging in unfair practice by making an unconscionable representation.”  Under the provincial Consumer Protection Act, the men could face fines of $250,000 CAD each and up to two years in prison.  They may also be held liable for damages.

Laura Halbert, Director of Compliance for the OMVIC notes, “We felt that the circumstances were quite outrageous, the fees and things…and that’s not something we are going to tolerate.”

According to a report from PickupTrucks.com, Hyundai is considering the launch of a full-size pickup truck that would compete with the Ford F-150 and Chevrolet Silverado.

Focus groups were held for truck buyers in Texas and California using a Dodge Ram 1500 that was modified with a Hyundai grille and a handful of other minor changes.  Reports say that the focus groups responded very well to the truck and that Hyundai is moving forward to the next phase of their study.

For its part, Hyundai is staying quiet about the plans.  “We never say never about future products,” a spokesperson explained, “but pickup trucks are not a high priority for us.”

The response was firmer than is typical in the industry and rumors now allege that Hyundai’s American operations are opposed to the truck while the parent corporation in South Korea is in favor and is running the research on its own.

The fullsize truck market represents a lucrative but challenging opportunity for the automaker.  Though the segment covers over ten percent of the total light vehicle market, it is dominated by domestic brands.  Nissan and Toyota have both tried to break into the segment but have met with limited success.  Despite nearly 20 years of selling large trucks in the US, Toyota’s Tundra still accounts for only about 20 percent of what GM and Ford sell.

Hyundai faces a steep uphill battle if it intends to enter the segment.  It’s most likely move, according to a report from Automotive News, suggests that the Korean automaker would partner with Chrysler to sell a re-badged version of the Dodge Ram 1500 rather than create a fresh product on its own.

Nissan had been in talks with to do the same but Chrysler’s bankruptcy proceedings last year nixed the deal.  If Hyundai took over the aborted program, they would save hundreds of millions of dollars in development costs and Chrysler would benefit from the added economies of scale.

While a re-badged product may sound like a win-win scenario for both Hyundai and Chrysler, the chances of such a truck succeeding are slim.  Fullsize pickup truck buyers are a notoriously loyal crowd and they are unlikely to switch brands unless a new entry leapfrogs the competition in terms of price or capability.  Neither are possible with a cloned product.

Similar re-badged trucks like the Mitsubishi Raider, Suzuki Equator, and Isuzu i-Series have all failed in recent years.

A second – very distant – option for Hyundai is to build a new fullsize pickup truck from scratch on a version of the frame that’s currently used by the Kia Borrego sport utility vehicle.  Beyond the enormous expense for such a program, the automaker would most likely have to produce the truck at the Borrego’s home factory in Hwasung, South Korea.  But if built overseas and imported to America, the truck would be hit with an enormous 25 percent tariff left over from the “Chicken War” trade politics of the 1960s.  That tariff will expire for Korean-built products but not until 2017.