Can the "Natural Economy" Afford Bio Fuels?
Environmental concerns may be on everyone’s mind, but until the cold hard facts of a cost/benefit analysis weight high on American’s minds, going green is the way to go. General Motors has put a lot of capital behind building cleaner E85 (also known as Flex Fuel) cars. They promote the cars as being cleaner for the environment and having cheaper fuel costs in hopes of selling more units (also known as their selling proposition). Although in the last 25 years, most Americans say they valued the environment over the economy, that has taken a change with the turn of the American economy (Frank Newport, 1).
In times of a prospering economy, people find it easier to spend more on items they perceive to have greater value. When people value the environment more than the economy (read: their bank account), they can afford to place a higher value on it. When a person is unsure of the macroeconomic situation, it effects their microeconomic situation by them placing greater value on the assets and cash that they have. This creates a deficit in the value they used to place on the benefits of having a cleaner economy, and thus reduces the perceived value of things like lower wattage compact fluorescent bulbs, adding solar panels to their home, and buying a car that uses alternative fuels (all of which involve higher initial outlays of cash before realizing any monetary benefits).
This negatively effects car makers that strive to provide products to consumers based on their changing demands. It nullifies their unique selling proposition, and makes their products harder to sell. I remember in 2007 when I was purchasing my first new car, I was extremely interested in purchasing a Honda Civic hybrid. The cost difference between the hybrid and the 5-speed standard car was about $6000. I did some quick math and realized with the amount I drove I wouldn’t actually be saving any money from buying less gas until year 9-10 of ownership. The hybrid wasn’t worth the additional monthly cash out-flow so I purchased the standard car.
I didn’t value the hybrid the same as the dealership did, so I didn’t make the purchase. As green technology improves and costs are lowered, consumers will flock to greener technology. One might say the problem for car manufacturers that sell vehicles that run on E85 is their selling proposition has been nullified by the weak economy, but I believe the major struggle is to price their goods effectively compared to their other products or shift their selling proposition to be more in-line with their customers no matter the economy.
Gallup. “Americans: Economy Takes Precedence Over Environment” Frank Newport. Gallup 2009, Web. 2/4/2010 <http://www.gallup.com/poll/116962/americans-economy-takes-precedence-environment.aspx>
