THE FIGURES tell it all: Sales of American-made cars fell 32 percent from last year's levels for the 10-day period April 11-20. Even Volkswagen of America's sales barely held their own with last year's, which indicates that consumers not only are disdaining large cars (which they are, in record numbers), but that they are postponing the purchase of any cars, even fuel-efficient subcompacts.
Instead, they are electing to hold onto their existing older cars, with potentially disastrous effects on the nation's effort to reduce the grip of dependence on foreign oil. The Washington Post has estimated that the 100 million cars now on American roads average only 15 miles per gallon.
And yet both domestic and foreign small cars are generally EPA rated at 25-mpg or better. What then, with gas prices forecast to rise to $2 a gallon by the end of the year, is preventing consumers from trading in their old gas-guzzlers on a gleaming new gas-savers to reap the benefits of 40 percent fuel savings?
Cost. The answer lies in simple economics. Consider a single brief calculation, a comparison of annual fuel costs. At $2 a gallon, using EPA's standard annual comparison mileage of 15,000, it would cost only $1,200 to operate a 25 mpg car versus $2,000 for a 15 mpg gas-guzzler. That's an impressive $800 annual savings.
But most fuel-efficient subcompacts retail for at least $4,500; and such popular models as the Volkswagen Rabbit, Honda Accord and Toyota Celica sell for around $7,000. At these prices, buying a new car to save money (recognizing that there are many other reasons why people buy cars) is a counterproductive, money-wasting approach, even if fuel costs are slashed. Indeed, auto prices are rising so rapidly -- some predict an average of $15,000 in five more years -- that a new car, like a house, may soon exceed the financial reach of many families, who will have little choice but to keep their old cars running as long as possible, to the detriment of national energy policy.
It can be argued, of course, that in the long run buying a high-mpg car will certainly reduce costs and save money. However, significant long-term savings will only result if the high-mpg car is significantly long-lived.
But car replacement, either new or used, every three to five years is a fact of life for many drivers, and there is no evidence to suggest that fuel-efficient modern compacts necessarily last any longer than their brontosaurian forebears. To the contrary, modern pollution-controlled cars are notoriously balky and troublesome compared to older models, much more prone to hard starting, maladjustment and nuisance repairs. There are more parts to wear out in modern cars (catalytic converter replacement alone can cost $300 or more), and wear they do do, along with their owners' patience.
If American drivers are to be firmly and rapidly weaned from their gas-guzzlers, than, it will probably be through legislative action. One such measure has already been tried, another proposed: a gas-guzzler tax on low-mpg cars and a large one-time tax on gasoline, perhaps 50 cents a gallon. But both have drawbacks.
The drawback of the gas-guzzler tax, on the books since 1974, is that it is a farce, a wrist-slap. It mandates 15 mpg for 1980 autos and 27.5 mpg by 1985, when it expires. But so lenient is this standard that only a handful of luxury cars, such as Rolls-Royce, Aston Martin and Maserati, are currently subject to the tax. All of the Big Three's models are already EPA-rated for at least 15 mpg, or about the same gas consumption as many older pre-pollution control cars. As for foreign imports, the bulk of them are already rated 25 mpg or better, nearly the level prescribed for 1980 models. Clearly, the gas-guzzler tax has little effect on consumers' choice of automobiles.
Supporters of the 50-cent gas tax claim it would result in an immediate and significant decrease in discretionary driving, which is probably true. However, the long-term fuel savings are more difficult to gauge, since historically gasoline has exhibited an inelastic demand in relation to price. Already, public transit ridership levels, which peaked late last summer after weeks of long gas lines and rapid price hikes, have fallen to nearly their previous levels, at a time when gas prices are the highest in history. Thus, the effects of a future one-time gasoline tax, however large, will probably not be permanent.
But high gasoline taxes -- a disincentive to waste -- combined with a real incentive to save might be much more effective. My proposal is simple: Why not give a tax break to fuel savers? Congress could make high-mpg, gas-saving cars eligible for Energy Credit Tax savings, right along with storm windows and attic insulation.
It would be a simple measure to administer. Any new car EPA-rated at a particular fuel consumption level -- say, 25 mpg or higher -- would become immediately eligible on next year's 1980 tax returns for a 15 percent tax credit based upon its purchase price, up to some maximum such as $8,000 (to avoid subsidizing the purchase of luxury cars).
The credit would be pro-rated over the period of financing, so that an $8,000 car purchased over four years would generate four annual tax savings of $300 apiece. A person who paid cash would reap a one-time $1,200 savings; but to prevent successive "windfall" tax breaks for those affluent enough to change cars every year, the tax credit would be made available only once per household per five or six years. This would also tend to discourage the purchase of second and third cars by a single family.
Offering cash rebates of several hundred dollars has proven popular with purchasers of mid-sized cars rated 17 to 20 mpg. How much more effective would even larger tax savings be in selling gas-saving compacts? You can almost see the boldface type leaping out of the Sunday classifieds:
"Qualifies for $1,200 IN ENERGY SAVER TAX CREDITS."
To keep pace with inflation and preserve the credit's allure, the eligible purchase price ceiling could be increased annually, in line with the Consumer Price Index. This might even have a deflationary impact on new car prices. If the ceiling were set on Jan. 1 of each year, automakers would have a real incentive to forgo midyear price increases on at least selected high-mpg models, in order to preserve their tax credit eligibility.
Further, to encourage American automakers to improve fuel-consumption levels, the qualifying mpg could be adjusted upward on a biyearly basis -- 25 mpg in 1980, 28 mpg in 1982, 31 mpg in 1984 and so on. The levels would be independent on the minimums mandated by the existing gas-guzzler tax, which do nothing to encourage fuel economy improvements for small cars. Nor would a qualifying 25 mpg work an undue hardship on American manufacturers; the Big Three all have models today which meet or exceed the figure.
As a final refinement, the tax credit could be made applicable only to American-made cars. While this would reduce its effectiveness as an instrument of national energy policy, it would work to the advantage of hard-pressed American automakers -- and auto workers. Volkswagen already manufactures Rabbits in this country, and Honda and Datsun have announced plans to open American plants. Energy Credit tax savings for automobiles might accelerate this trend.
A tax credit plan for efficient cars, then, offers these advantages: It would further national energy goals while actively rewarding thrifty and energy-conscious motorists; it would satisfy Congress' yearning for a tax cut; and, as a logical extension of an existing tax credit program, it could be implemented with a minimum of trouble. And it could be slanted to favor American cars.
But until it happens, the soundest advice to any owner of an old gas-guzzler would have to be: Keep the oil changed, drive it gently and make it last. However unpatriotic, wasting gas puts money in your pocket.