We believe that the Progressive Automotive X PRIZE will stimulate radical change. That said, following are some of the most significant economic, commercial, governmental, and social realities that we all face:
- The automotive industry accounts for 10% of the GDP in developed nations. It uses 15% of the world's steel, 40% of the world's rubber, 25% of the world's glass, and 40% of the world's annual oil output.
- To bring a new car (or car company) to market is very expensive. Existing manufacturers can spend hundreds of millions of dollars or more just updating a current model.
- Although some critics suggest otherwise, there has been considerable automotive innovation during the last twenty years. However, the "benefits" have typically been spent by keeping fuel-economy relatively constant, while increasing vehicle power, acceleration, and weight.
- Safety standards in particular have a major effect on a vehicle's cost and weight (and therefore on efficiency).
- United States CAFE standards have not resulted in fuel economy gains comparable to the substantial advances made by NHTSA safety regulations and EPA tailpipe regulations.
- There is considerable merit to the argument that manufacturers are simply doing a good job of meeting their fiduciary responsibilities and market demand within the constraints of government regulations.
- Fierce price competition for new car sales is accompanied by very low margins. This is enabled in part by the price and margin pressure that existing large manufacturers are able to put on their suppliers.
- Since profit typically increases with vehicle size and weight, there is a natural incentive for manufacturers to encourage sales of bigger vehicles (hence, in part, the SUV trend).
- In developed countries (like the U.S.), the industry is suffering from declining growth, and increasing labor and pension costs.
- The "downstream" economy (after the new car sale) is where a very large part of the money is made - parts, maintenance, repairs, financing, insurance, etc. In the United States, dealerships are strong forces, economically and politically. State franchise laws make it difficult to introduce new sales channels.
- Established manufacturers can afford lower margins because of the high value of the downstream economy, which creates an additional barrier for market newcomers.
- Putting super-efficient cars into the hands of consumers requires much more than a technical performance achievement - winners must deal with the realities of manufacturability and post-delivery service. They must also deal with federal and state regulations on emissions and safety.
- Although biofuel, fuel-cell, and plug-in technologies are all promising, current consumer attitudes and transportation infrastructure all but require continued use of gasoline and diesel fuels.
- Fully electric vehicles and plug-in hybrids are conceptually attractive, but the extent to which they shift the energy and environmental costs to other sectors is not well understood. Likewise, it is not clear that long term recyclability and other environmental issues are well-understood.
- Consumer attitudes encourage developments that address personal benefits rather than global or societal benefits. Examples include safety (emphasis on vehicle and occupant safety, rather than the safety of pedestrians and other non-occupants), cost (price of a tank of gas, rather than total societal cost per person per mile), emissions (local immediate air pollution, not including greenhouse gas emissions), and image (the vehicle as self-expression).