Creative destruction in the car industry

The recession and extreme decline in car demand is a blessing in disguise for green innovation. Typically, better new cars are adopted slowly because of slow installed base turn. People in the US keep their cars an average of 6 years, and the cars last 8-10 years on average. Even if a great new car comes on the market, someone who just bought a new car isn’t going to be looking for another six years. Now, people are holding onto their cars for longer, and new car sales were down 30-40% quarter over quarter in late 2008.
Meanwhile, there are some impressive, energy efficient new cars on display at the Auto Show in Detroit. Now on the edge of commercialization, these models have been shown in advancing stages of development over the last several years.
This car is Honda’s new Insight, coming in 2010. Larger than the original Insight, but cheaper and a little smaller than a Prius, it gets 50-60 mpg.

What this means is that when demand for cars returns, more people will be ready to give up their clunkers. And the next generation of EVs and plug-in hybrids will be ready and waiting. When an economic revival will push demand for gas up past supply again, the technology will be there. This is good news for greenhouse gas emissions since lower carbon cars will be able to gain market share more quickly.

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