Diesel cars cost
efficient and reliable than Hybrid cars
Even with Tesla Motors tasting success with its Model S
luxury electric car by outselling its petrol-powered equivalents since its
launch in 2012, the prospects for battery-powered vehicles generally may never
shine quite as bright as expected with the adaptation of newly designed diesel
powered cars. With all major companies like Mazda, Mercedes, Toyota, Mitsubishi
and Audi entering into diesel
cars production line, Americans at last will have the opportunity to experience
what a really advanced diesel car is like and why Europeans opt for diesels
over hybrids, plug-in electrics and even petrol-powered cars. Part of hesitancy stems from a general lack of understanding among American
consumers about the benefits of modern clean diesel versus the old (loud and
dirty) variety. So what makes diesel cars very attractive that automobile
industry forecasts them competing equally with electric hybrids. The truth is
that while there is a price premium associated with the initial purchase cost
of diesel vehicles, they typically get 30% better gas mileage and flaunt
superior torque numbers and reliability ratings. The automotive analysis firm
Vincentric estimates that driving a diesel car will save $2,117 in fuel costs
over one year assuming annual rate of 15,000 miles and that is not including
the lower ownership costs with diesel cars than their conventional counterparts. GM with its model Chevrolet Cruze diesel will be the latest entrant into the race
for many of diesel-powered cars.
Diesel car
registration is raising by 30% since 2010 and GM forecasts that diesel cars and
light trucks is likely to capture 10% of the US automobile market by 2020. GM,
like any other automobile company, believes that this is the right time to
enter and capture a growing market in diesel cars. GM will be facing huge competition from
hybrid cars. While both, diesel and hybrid cars are economic in terms of fuel
efficiency but each has its own merits and demerits. Fuel efficiency has a
causal relationship in increasing the demand for the hybrid car registration,
which went up by 65% from 2010 to 2013, a similar trend can be expected for
diesel cars as they have shown equivalent miles-per-gallon basis as many of the electric
vehicles available today.
According to me, GM must take into consideration of 5 key
concepts listed in Prater & Whitehead’s article on forecasting, before
entering into this huge race on diesel car industry.
1)
Impact of technology: Whether the technology of
diesel powered engines is better than petrol powered or hybrid car engines in
terms of torque, fuel efficiency? Is there any choice and difference between
auto & manual gears?
2)
Social Issues: Where does the ownership cost of diesel-powered
engines fall compared to other two models? How easily accessible are diesel gas
stations?
3)
Political Issue: What is the government policy
on diesel as fuel availability and natural resources to support it? Are there
any subsidies promoted by government to adopt cleaner –greener fuel driven
cars, and is diesel car is one among them?
4)
Environmental Issues: What its value on air
pollution control and how the government policies view them? How much of the
population really concerned about driving the cleaner fuel driven cars?
5)
Legal Issue: Is there any legal issue such as
patency, safety etc involved with the production of such vehicles?
Accounting all the above concepts, GM should forecast the demand
for the diesel-powered cars using Quantitative, Causal, Time Series and
Simulation methodologies.
While forecasting about the diesel car’s future, I compared
the article on Apple’s failure to keep up the sales forecast for IPhones even
with their adequately supported supply chain management. Similar situation may
arise with GM, if it just believes in the fuel efficiency stand of the diesel
cars and neglect the legal and political issues. The very fact that diesel cars
have been a big hit with customers in Europe and Asian countries for a long
time but never adopted in US shows there are many other political and legal
issues that needs to be factored in. With many big companies, like BMW, Toyota,
Mercedes backing up and lobbying the government to promote diesel cars, GM
needs to follow the quantitative, qualitative and causal approach for an
efficient supply chain management to meet customers demand with adequate tools
& resources. The era
of diesel cars is not far away and with their big advantage will be that they
will come with none of the range anxiety and recharging difficulties to worry
about.
This GM venture poses some of the questions such as :
1)
How will GM handle the competition with hybrid
vehicles market demands?
2)
How will GM able to keep the supply chain
efficient while also keeping their prices low in order to capture the market of
price sensitive customers?
3)
How will GM able to cope with impact of
technology in near future with better passenger vehicle options?
4)
How will it able to capture the market while
also increase their revenues with diesel powered engines?
5)
What are the strategies to reduce the price for
diesel powered engines while keeping up with the quality?
My Sources:
Article by Edmund Prater and Kim Whitehead on Forecasting,
HBS, Feb 2013.
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