Shutdown slows but doesn't halt US car demand

DETROIT — The government shutdown dampened — but didn’t stall — Americans’ demand for new cars and trucks.

The 16-day shutdown slowed U.S. auto sales in the first two weeks of October, but they picked up speed in the last two weeks. Sales rose 11 percent to 1.2 million.

General Motors, Ford, Nissan and Chrysler all recorded double-digit sales gains, while Toyota, Honda and Hyundai saw smaller increases. Of major automakers, only Volkswagen’s sales fell.

Stable fuel prices, low interest rates and the increased availability of credit pushed people to buy regardless of the political wrangling, said Kurt McNeil, GM’s vice president of U.S. sales.

“All those things that have been driving the economy? They’re still there,” he said.

Pickup trucks sold well as business improved for contractors and other workers. Sales of the Chevrolet Silverado, GM’s top selling vehicle, jumped 10 percent to nearly 43,000, and Chrysler’s Ram truck was up 18 percent. Sales of Ford’s F-Series pickups rose 13 percent and topped 60,000 for the sixth month in a row.

SUV sales were also strong. Sales of Nissan’s Pathfinder, which was recently redesigned, nearly doubled from last October. Sales of the Chevrolet Tahoe and Suburban large SUVs both jumped more than 50 percent.

The weak spot was small cars and hybrids, which have been struggling to win buyers as gas prices fall. Gas prices averaged $3.27 per gallon at the end of October, the lowest level of the year. The national average has dropped 31 cents since Labor Day, according to AAA.

Toyota Prius hybrid sales fell 7 percent while the Chevrolet Volt plug-in hybrid was down 32 percent. The tiny Fiat 500 fell 36 percent.

Sales of Ford’s Focus small car were down 17 percent, while its C-Max small hybrid fell 20 percent. Ford recently announced plans to idle the Michigan factory where those vehicles are made for two weeks this fall because of weak demand.

U.S. consumers have started to gradually shift from smaller, more fuel-efficient cars to larger vehicles, said Jesse Toprak, an analyst with the TrueCar.com auto pricing web site.

Stable gas prices aren’t the only reason, he said. Cheap financing and sweet lease deals have made larger vehicles more affordable, cutting the monthly payments so people can afford them even if gas prices go up.

“History has shown us that consumers in the U.S. would rather buy a larger vehicle given the choice,” Toprak said.

Here are the October results announced Friday:

— Detroit: GM’s sales rose 16 percent, with increases in all of its brands. GM’s revamped Chevrolet Malibu midsize car was up 64 percent, while sales of the Cadillac ATS small car more than doubled. Ford’s sales increased 14 percent. Sales of the Ford Fusion midsize sedan jumped 71 percent over last October after Ford added a factory shift to handle strong demand. Chrysler’s sales rose 11 percent, led by its two most profitable vehicles, the Ram pickup and Jeep Grand Cherokee SUV, which was up 20 percent.

— Japan: Nissan’s sales rose 14 percent to more than 91,000, an October record for the company. Toyota sales rose 9 percent, while Honda sales were up 7 percent. All three companies redesigned their small cars, so sales rose. Sales of Nissan’s Sentra jumped 50 percent, Honda Civic sales improved by 32 percent and Toyota Corolla sales gained 13 percent. Also for Toyota, sales of the recently revamped Avalon sedan more than tripled. Honda’s sales were up 7 percent, helped by strong sales of the new Acura RLX sedan and MDX SUV. Subaru sales jumped 32 percent as sales of the new Forester SUV more than doubled.

— Others: Hyundai sales rose 7 percent as 2014 models of the Sonata sedan and Santa Fe SUV saw increased sales. Volkswagen’s sales fell 18 percent compared with strong growth last year, as its aging cars struggle against newer rivals.

Steep gas price swings make budgeting hard for drivers

Local gasoline prices are swinging up and down ever more drastically, a result of a national fuel system that is operating with a shrinking margin for error.

Jumps of 20 cents per gallon or more in a single day are becoming more common, for example, according to an AP analysis of daily and weekly price changes at 120,000 U.S. gasoline stations tracked by GasBuddy.com. Sixty-three times this year at least one U.S. metro area has seen such a change. Like the 24-cent increase Decatur, Ill. drivers saw on Jan. 26, or the 24-cent increase in Superior, Wis. on April 30, and the 28-cent increase in Henderson, Ky. on Sept. 19.

Not since 2008 have there been so many 20-cent changes. Last year those happened 58 times. In 2011 they happened just 21 times, and in 2010 just 7 times.

“There’s more and more feast or famine,” says Tom Kloza, chief oil analyst at the Oil Price Information Service and GasBuddy.com.

The problem, analysts say, is a fuel system increasingly vulnerable to short-term shocks. That’s because refiners try to keep stocks of gasoline low to save money, just as other manufacturers aim to operate on a “just-in-time” inventory schedule. The nation has about 26 days’ worth of gasoline demand in storage, compared with 30 to 40 days’ worth during much of the 1980”²s and 1990”²s, according to the Energy Department. Also, there are 143 operating refineries, about half the total from 1980, so, if one has a problem, supplies quickly drop.

That price whiplash has a cost. Spikes in gasoline prices are more damaging to the economy than a slow rise in prices because they undermine consumer confidence, economists say. Drivers may be pleasantly surprised when prices slide lower, like they have recently — the national average is at $3.28, its lowest level of the year. But they don’t know when the price might bounce back up, and increases are almost always sharper than decreases. That makes it harder to budget for the daily commute, or know whether dinner out or a new appliance will be affordable.

These dramatic local price swings are happening despite relatively stable oil prices and a national average gasoline price that has hovered around $3.50 per gallon for three years. In 2008, the last time local prices were this volatile, oil spiked to $145 a barrel in July, then plunged below $40 in late December as the global financial crisis sent energy markets reeling. The national average gasoline price ranged from $1.62 to $4.11 a gallon.

Nowhere is it more frustrating to buy gas than in Kokomo, Ind., a flat, unassuming blue collar city surrounded by farmland 45 miles north of Indianapolis that regularly sees 10-cent or 20-cent price changes in a single day. On average, the price changes 5 cents there every day and 16 cents every week, the highest in the nation, according to GasBuddy.com.

Jim Brooks, who works at a Chrysler transmission plant in town, does his best to fill up elsewhere. “If I don’t have to buy gas in Kokomo, I don’t,” he said recently at Manjas Marathon station in Kokomo during a lunch break. He bought a soda and some chips, but not gasoline.

Gas station owners set their prices based on how much it cost to buy the last shipment of wholesale gasoline, how much the next shipment will cost, and what competitors are doing. Stations typically make very little on gasoline, because they set the price as low as possible to attract people into their more profitable convenience stores.

The price they pay for wholesale gasoline is determined by deals between refiners and distributors that are usually based on benchmarks set on exchanges, such as the New York Mercantile Exchange.

When supplies are quick to rise or fall, it means more of what frustrates drivers: Gasoline prices that seem to jump around a few cents every time they fill up, for no rhyme or reason. This year 57 U.S. metro areas have averaged price changes of at least a dime over a week. Last year just 38 cities did, and in 2011 it was just 29 cities.

Volatility is most pronounced in the four neighboring states of Illinois, Indiana, Ohio and Kentucky. Of the biggest 50 one-day swings in gasoline prices over the past three years, 41 were in those four states. Michigan is also plagued by especially high volatility. Flint, Michigan is second only to Kokomo in average daily price changes this year.

Analysts say a major upgrade underway at BP’s enormous Whiting Refinery in Northwest Indiana that processes 413,000 barrels of oil per day and serves much of the region is partly to blame. Construction has kept output lower, especially during the first half of 2013.

When output at a local refinery falls, fuel terminals must be filled with gasoline from refineries further away. That raises shipping costs, and it lowers supplies throughout the region.

California was a trouble spot in 2012. Prices spiked there last fall to a record $4.67 per gallon after an Exxon refinery in Southern California briefly lost power at a time when a Chevron refinery in Richmond, Calif. was operating at a lower rate following a fire.

Amy Myers Jaffe, an energy policy expert at the University of California, Davis, suggests that refiners should be required by regulators to keep a minimum level of refined fuel in inventory, as is done in Europe, to help protect against sharp price spikes.

That might help people like Mike Barnett, who spends about $250 a day on fuel for his small business in Kokomo installing underground lines for telecom companies. He puts just a quarter or half a tank of gas in his vans and trucks when the price gets high and then waits for a better deal.

“You just can’t come and get gas like you used to,” he said.

AP Business Writer Tom Murphy contributed to this report from Kokomo, Ind.

Rich and powerful cozy up to Tesla Model S

Tesla’s all-electric Model S luxury sedan has become a must-have car, not only for the tech elite but also the regular rich and famous.

According to auto website Edmunds.com, the Model S is the top-selling vehicle in eight of the nation’s 25 wealthiest ZIP codes. Tops among them: tiny and tony Atherton, where the Model S accounts for a stunning 15.4 percent of all new car registrations within its borders. Six of the eight Tesla-heavy ZIP codes are in Silicon Valley; all eight are in California.

“The Model S is the hometown hero for Silicon Valley,” said Jessica Caldwell, a senior analyst at Edmunds.com, in an interview Friday. “For one car to have 15 percent market penetration in Atherton is ridiculously high. National market share is like a 10th of 1 percent. It’s making a big splash.”

California has long been the dominant market for Palo Alto-based Tesla, but the company has declined to break down sales within the Golden State by either region or ZIP code.

From January through August, 403 new vehicles were registered in Atherton, according to the analysis by Edmunds.com. Of those, 63 were Model S sedans.

As of Aug. 31, Tesla has sold 5,631 Model S sedans in California, according to Edmunds.com. The Bay Area, with 2,402 registrations, had a slight edge over the Los Angeles area, with 2,392.

Tesla is now making more than 500 cars a week at its Fremont factory, and delivered 5,150 cars in the second quarter. The company, which reports its third-quarter earnings Tuesday, has told analysts it expects to deliver 21,000 cars this year, and recently began delivering vehicles to Europe.

The Model S has a base price of $70,000 but can cost tens of thousands more with various options. But Californians can qualify for a $7,500 federal electric car tax credit, as well as a $2,500 state tax credit and access to the coveted HOV lane on freeways. The vehicle has become popular with Silicon Valley venture capitalists and technology leaders, and it’s increasingly common to see Model S sedans on the Stanford University campus and on Interstate 280.

“I probably see a Tesla Model S every day,” said Atherton City Manager George Rodericks. “Atherton is 100 percent residential. We don’t have any public charging stations. We don’t even have a grocery store. But driving around town, you sure do see a lot of them. I’d love to see the Model S be used for Atherton’s police cars.”

Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.

Nissan Versa Note 1.6 S is sensible but lacking in thrills

The numbers say the 2014 Nissan Versa Note 1.6 S hatchback, with a base price of $13,900, makes perfect marketing sense. It is all most of us can comfortably afford in a new car.

The numbers, collected from a variety of sources in the automotive and financial industries, are sobering. To wit:

— The average price of a new car sold in the United States in 2012 was $30,500.

— Barely 19 percent of the U.S. population bought the estimated 16 million new cars and trucks sold in this country last year.

— Residents of only one metropolitan area — Washington, with an average household income of $86,680 — could comfortably handle the monthly payments on a new automobile costing $31,000 or more.

“Comfortably” means buyers can make due car notes without jeopardizing rent, mortgage, utility, food or other necessary payments. In the Washington metropolitan area, the home of hundreds of thousands of federal employees, it also means a government that does not periodically shut down to entertain adolescent political squabbles.

— Of the 25 large U.S. metropolitan areas in the 2013 Car Affordability Study, the primary source of this column’s data, produced by Interest.com, a company specializing in personal finance, residents of the last-ranked metropolis in terms of average household income, Tampa, Fla., with $43,832 annually, could comfortably afford a new automobile priced at $14,516.

So, Tampa, the new Nissan Versa Note 1.6 S is for you, as it is for all of us more interested in getting from one place to another than we are in making statements our bank accounts can’t afford.

It’s not such a bad deal. It just requires understanding and significant attitude adjustment. To wit: The Versa Note 1.6 S is a basic subcompact automobile engineered to carry five people and their stuff safely, reliably, efficiently (27 miles per gallon in the city and 36 on the highway using regular unleaded gasoline) without drama, good or bad.

If you approach this car with Walter Mitty racetrack performance fantasies, you are looking at the wrong automobile. The 1.6-liter in-line four-cylinder engine in the Versa Note 1.6 S gets a maximum 109 horsepower and 107 pound-feet of torque — not exactly the stuff of throttle-jockey yore.

The little car’s interior is several steps above mediocre. Hard plastics abound and the cloth seats are, well, cloth — washable, cleanable cloth. Spill, stain, clean, let dry overnight. Drive the next day.

Let none of this mislead you into thinking that the Versa Note 1.6 S is “cheap” in all of the derisive meaning of that word. The subcompact car is well made. Fit and finish are excellent — all the plastic interior pieces fit well. And there are certain options — onboard navigation, electronic keyless entry, high-definition backup camera, sound system with radio data and speed-sensitive volume control — that make the Versa Note 1.6 S feel a tad upper-class.

Credit a growing awareness among global automobile manufacturers that most of the people in the 99 percent earnings group have 1 percent tastes. The trick is to satisfy those askew longings without busting manufacturing or marketing budgets.

Nissan seems to have done a good job of performing that magic with the Versa Note 1.6 S. It is a small economy car that does not make you feel bad about driving economy. It is reasonably attractive and, with front and rear head air bags as standard equipment, reasonably safe.

The Versa Note 1.6 S is not the sexiest ride in the world. But it understands the value of commitment. It will take you home when you’re laid off, help you get to the unemployment benefits office, and bring you back to work when that time comes. In the interim, you should be able to make monthly payments — even if you live in Tampa.

Nuts and Bolts

Bottom line: The 2014 Nissan Versa Note 1.6 S is a very good economy car. Compare with the Chevrolet Spark and Sonic, Toyota Yaris and Corolla, Ford Fiesta, Mazda 3 hatchback, Hyundai Accent, and Kia Rio hatchback.

Ride, acceleration, and handling: It gets decent marks in all three for drivers willing to obey posted speed limits and those who are not the least bit concerned about 0-to-60-mph acceleration times.

Head-turning quotient: Convent-friendly — that is, it reminds me of certain Holy Ghost nuns who taught me in elementary school. I was always happy to see them, but I easily forgot that they were there.

Body style/layout: The Nissan Versa 1.6 S is the hatchback version of the Nissan Versa subcompact sedan, which was revised last year. The Versa Note is a subcompact, front-wheel-drive four-door hatchback offered in three trim levels — base S, mid-grade S Plus and top-of-the-line SV.

Engine/transmission: The car comes standard with a 1.6-liter, 16-valve in-line four-cylinder gasoline engine with variable valve timing (109 horsepower, 107 pound-feet of torque) linked to a five-speed manual transmission. A continuously variable automatic transmission is available.

Capacities: There are seats for five people. Cargo capacity with rear seats raised is 21.4 cubic feet. With rear seats lowered, cargo capacity is 38.3 cubic feet. The fuel tank holds 10.8 gallons of gasoline (regular grade is recommended).

Real-world mileage: Real-world mileage matched or exceeded, depending on driving conditions and load, the Environmental Protection Agency’s rating of 27 miles per gallon in the city and 36 on the highway.

Safety: Standard equipment includes ventilated front disc brakes and rear drum brakes; four-wheel anti-lock brake protection; emergency braking assistance; electronic brake-force distribution; traction control; stability control; and front and rear head air bags.

Price: The base price of the 2014 Nissan Versa Note 1.6 S is $13,990, with a dealer’s invoice price of $13,500. Price as tested is $16,095, including $1,295 in options (interior “mood illumination” package, vehicle tracking and recovery system, compass and home link system) and a $810 factory-to-dealer destination charge. Dealer’s price as tested is $15,484.

Mercedes doubles its dominance on U.S. luxury vehicle market

Daimler AG’s Mercedes-Benz sold 4,895 of its $29,900 CLA coupe in the car’s first full month of availability, helping the brand post a 25 percent October gain and double its U.S. luxury-vehicle lead.

Total sales for Mercedes rose to 30,069 vehicles, as E-Class deliveries climbed 23 percent from a year earlier, Stuttgart, Germany-based Daimler said in a statement Friday. Bayerische Motoren Werke AG’s BMW brand reported selling 27,574 vehicles, a 4.2 percent increase.

The CLA, the lowest-priced Mercedes in the U.S., helped the brand widen its year-to-date lead over BMW to 4,986 vehicles, from 2,491 through September. The tally stands at 245,125 to 240,139 as Mercedes seeks to end BMW’s two-year reign in annual sales. Daimler Chief Executive Officer Dieter Zetsche said in July he expected his company to come up short again in 2013.

BMW’s October gains were aided by its 5 Series sedans, with a 19 percent increase, and the X1 compact sport-utility vehicle, with a 60 percent jump, according to a statement from the Munich-based automaker.

The figures don’t include Daimler’s cargo vans and Smart cars and BMW’s Mini brand, which aren’t luxury vehicles.

BMW’s status as annual leader for 2012 was based on reported sales. By vehicle registrations, Mercedes topped BMW last year, according to researcher R.L. Polk & Co. Through this June, owners had registered 141,724 new BMW vehicles in the U.S., compared with 134,326 from Mercedes, according to Polk.

Toyota Motor Corp.’s Lexus, the top-selling luxury-auto brand in the U.S. for 11 years through 2010, posted a 14 percent increase in October. Deliveries rose to 22,719 for the month and have gained 12 percent to 213,479 for the year, the Toyota City, Japan-based company said in a statement.

General Motors Co.’s Cadillac reported a 9.5 percent sales increase to 14,792, on demand for the new ATS and XTS sedans. Cadillac sales for the year have climbed 27 percent to 148,206, Detroit-based GM said in a statement.

'Cash for clunkers' was kind of a lemon, analysis says

When the Obama administration first proposed its “cash for clunkers” plan in 2009, the reaction was generally favorable. Congress would spend $2.85 billion to encourage drivers to swap their old gas-guzzlers for newer, more-fuel-efficient cars.

The program had something for everyone: It would lend a hand to the ailing U.S. auto industry. It would tamp down oil consumption. And, once launched, the program proved so popular with consumers that it burned through $1 billion in its first five days. Sure, a few critics argued that the program wouldn’t be very cost-effective, but no one was really listening.

But, as it turns out, the critics were on to something. A new analysis from the Brookings Institution’s Ted Gayer and Emily Parker found that the program was fairly inefficient as economic stimulus and mostly pulled forward auto sales that would have happened anyway. It also cut greenhouse-gas emissions a bit — the equivalent of taking up to 5 million cars off the road for a year — but at a steep cost.

“Cash for clunkers” wasn’t good stimulus.

Gayer and Parker find that Americans traded in nearly 700,000 old cars (“clunkers”) through the program between July 1 and Aug. 24, 2009. Vehicle sales did rise during that period. But a detailed study suggests that consumers just bought some cars slightly earlier than they otherwise would have. Cumulative purchases over the year were basically unchanged.

Other studies have reported similar numbers. A 2011 analysis from Resources for the Future compared U.S. car sales under the program with those in Canada (which didn’t have a clunker program) during the same time frame. That study found that 45 percent of cash-for-clunker vouchers went to consumers who would have bought new cars anyway.

Gayer and Parker estimate that pulling these vehicle sales forward probably boosted economic growth by about $2 billion and created about 2,050 jobs. That means the program cost about $1.4 million per job created — far less effective than other conventional fiscal stimulus measures, such as cutting payroll taxes or boosting unemployment benefits.

Why does this matter? It was just one tiny program, after all. Yet inefficient stimulus programs add up. One recent study by economists Gerald Carlino and Robert Inman found that the 2009 Recovery Act could have been fully 30 percent more effective in boosting the economy if it had been better designed (i.e. more focused on things such as aid to states and payroll tax cuts).

What about the environmental benefits?

Now, there were some bright spots. By allowing people to upgrade their vehicles, the “cash for clunkers” program did improve the overall efficiency of the U.S. vehicle fleet and cut carbon-dioxide emissions by 8.58 million to 28.3 million tons, the Brookings study found.

To put that in perspective, that’s equivalent to saving one to three days’ worth of U.S. oil consumption — or taking as many as 5 million cars off the road for a year. That’s hardly going to halt global warming by itself, but it’s not nothing either.

Yet economists usually want to know the costs of these environmental benefits, too. And Gayer and Parker point out that this is a fairly inefficient way to reduce emissions — costing somewhere between $91 and $301 per ton of carbon avoided.

The 2011 Resources for the Future study found that “cash for clunkers” increased average fuel economy in the United States by just 0.65 miles per gallon. Similarly, that study found that there were far cheaper ways to achieve similar savings.

There are a couple of reasons the savings might have been so small. For one thing, the fuel-economy requirements were relatively lax: In theory, a person could have traded in a Hummer that got 14 miles per gallon and got a $3,500 voucher for a new 18-mpg SUV. What’s more, the gain in efficiency would have been partially offset by the energy costs involved in manufacturing the new car.

Defenders of the program could argue that it at least had some impact — and it helped stabilize the U.S. auto industry, which was in an utter tailspin at the time. What’s more, it’s not as if more-cost-effective environmental policies were on the table during the scramble to stimulate the U.S. economy in 2009.

Those are all arguments worth considering. For their part, Gayer and Parker say the lessons from “cash for clunkers” are worth keeping in mind for next time.

“In the event of a future economic recession,” they conclude, “we would not recommend repeating the program.”

Using cruise control to eliminate traffic jams

A researcher’s algorithm breakthrough could mean that we won’t have to wait for car-to-car communication or fully autonomous vehicles before journey times are cut and unnecessary traffic jams eliminated

Berthold Horn, a professor in MIT’s Department of Electrical Engineering and Computer Science was so infuriated by unexplained traffic jams — where cars come to a standstill for no apparent reason — that he developed and tested an algorithm that understands and mitigates unexplained bottlenecks that could be incorporated into existing adaptive cruise control systems — a standard feature on many top-end cars.

Adaptive cruise control uses sensors such as radar and rangefinders to monitor the speed of the vehicle in front in order to keep a safe distance. So if your car is traveling at 100 km/h and the car in front slows down to 80km/h, the system backs off the accelerator or gently applies the brakes to maintain the same safe distance.

Horn’s research shows that if these existing systems were adapted to use his algorithm and to monitor the speed of vehicles behind as well as ahead, that “traffic flow instabilities” could be eradicated.

This is because traffic flow instabilities arise because the actions of the driver at the head of a queue — for instance accelerating or braking hard — create a wave of amplification that ripples through the line of vehicles behind. If, for instance the first car decelerates, each following vehicle would also have to respond more quickly and forcefully in order to match their speed, meaning that the tenth car in the line could be forced to perform an emergency stop, which would in turn bring all traffic from the 11th car onwards to a complete standstill and a traffic jam is born.

“Suppose that you introduce a perturbation by just braking really hard for a moment, then that will propagate upstream and increase in amplitude as it goes away from you,” Horn says. “It’s kind of a chaotic system. It has positive feedback, and some little perturbation can get it going.”

If a system can monitor bilateral distance — i.e., between the car in front and behind — then it will be able to slow down a vehicle at a rate that is fast enough to avoid hitting the car in front but is not so fast or abrupt as to cause the car behind into an emergency stop.

Horn’s algorithm has been thoroughly tested via computer modeling and takes into account a number of real-life traffic flow variables such as drivers’ reaction times and the likelihood that they have a heavy right foot. The only variation in his results was the time taken to smooth out a disruption.

As big a breakthrough as this could be, there is a catch. In order for the system to have the desired effect it would need to be installed on a large percentage of cars.

Thanks to the costs of the sensors involved, forward-facing adaptive cruise control is only a standard feature on cars such as Mercedes, BMWs, Audis, Jaguars, Lexus and Cadillacs, and integrating a second, rear-facing system would double the cost of such systems.

However, Horn points out that a bilateral control system could be built using cameras rather than sensors. “There are several techniques,” Horn says. “One is using binocular stereo, where you have two cameras, and that allows you to get distance as well as relative velocity. The disadvantage of that is, well, two cameras, plus alignment. If they ever get out of alignment, you have to recalibrate them.”